The financing was led by Notable Capital, with participation from Redpoint Ventures. Other investors that participated include Ribbit Capital, Thrive Capital, and GIC.
Parafin’s infrastructure offers financial services for marketplaces, vertical SaaS, and payment platforms, including global players like Amazon, Walmart, DoorDash, TikTok, and Worldpay. With an integration, platforms can launch a full suite of financial products for their small business sellers, including capital, spend management, and savings tools.
This way, SMEs are not only able to access, but also save, store, and spend money via the platforms they transact on. This service provides access to financing and helps businesses grow by leveraging real-time performance data to offer customised financial solutions.
The company aims to grow small businesses via financial services on digital platforms they use daily. By embedding financial services directly into the platforms where businesses already operate, the company helps drive growth, loyalty, and retention for platforms.
Focusing on small businesses that are underserved as incumbent methods are biased against women-owned and minority-owned businesses in the US, Parafin was created to address this problem.
Its machine learning-based risk models train on millions of small businesses’ performance data to determine eligibility, offers, and pricing, as opposed to relying on credit scores or requiring personal guarantees. This enables the company responsible access to small businesses across the region.
This new capital will allow Parafin to scale existing products, ship new products, expand into new regions, and deepen its partnerships with platforms that support the global small business economy.
Parafin has been funding nearly USD 1 billion annually for small businesses in the US and Canada. Since the Series B round in 2022, the company has grown volumes by 400% and expects to reach profitability within six months.
There are several opportunities to be capitalised on via Embedded Finance by SMEs, such as being able to offer better user and payment experiences to customers. They will benefit from better cash flow management, improved financial visibility, and increased flexibility via different working capital tools.
Approximately 85% of SMEs in Accenture’s survey noted they use embedded digital services in their day-to-day operations. These are provided by a range of ecommerce, gig economy, marketplace, payment and social media platforms and include cloud-based accounting, financial management, productivity, and collaboration solutions.
Not only is this easier and more efficient for the SME, but a platform’s Embedded Finance offering may also come with value-added services such as financial management and analytics tools.
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