FrodaEmbedded.com hits $80m Revenue by Lending to 150k SMB's | CEO Oliver Mohseni

Froda generated $57 million in revenue in 2025 by lending to the small businesses traditional banks often overlook. In this episode, Nathan Latka sits down with Froda co-founder Oliver Mohseni to unpack the economics behind the startup bank. Froda has supported 150,000 businesses across seven markets and funded approximately $3.45 billion since launch. Oliver explains how Froda uses retail deposits, automated underwriting, and embedded partnerships with banks, fintech companies, payment providers, and software platforms to scale its lending operation. Listen to learn: • How Froda makes money on an average loan of just $23,000 • Why its banking license and retail deposits create an advantage • How it prices loans at approximately 16% APR while managing credit losses • Why embedded lending helped Froda expand across Europe • How the company built a roughly $500 million active loan book

• 0:00Speaker 00

  Think of us like an enabler of microbusiness lending. What we want to do is to really close the financing gap in Europe, where small businesses, microbusinesses have a really difficult time finding external financing. So for we've supported 150,000 small businesses.

• 0:16Speaker 01

  $23,000 average loan size times 150,000 small businesses funded is 3.45 billion funded life to date.

• 0:25Speaker 00

  So last year we did about 57 million, something like that.

• 0:32Speaker 01

  Oh, this is a crazy growth rate. Congratulations, man. That's amazing.

• 0:36Speaker 00

  I mean, you always want more, right? I would love it to be more than 100% year on year, but.

• 0:44Speaker 01

  So here we go. We're excited to have Oliver with us today. His name is Oliver Mohseni. He's the co-founder of Froda and a leading embedded finance provider and SME lender, active in seven different markets. This is not like the startup guy dropped out of college in his dorm room. He's a PhD molecular biologist turned fintech entrepreneur. He's on a mission to make financing simple, accessible and seamless for small businesses. Oliver, you ready to take us to the top?

• 1:07Speaker 00

  I am. Thanks for having me, Nathan.

• 1:09Speaker 01

  I'm glad you're here. It's very timely. Everyone in SaaS is going, seat-based pricing is dead. We have great customer relationships. How do we launch an embedded finance platform? So tell us what you're selling.

• 1:20Speaker 00

  Yeah, so think of us like an enabler, just like you said, of microbusiness lending. So what we want to do is to really close the financing gap in Europe, where small businesses, microbusinesses have a really difficult time finding external financing, which results in them not being able to enable their growth ideas. And I mean, it's of course sad for them, but it's also a big loss for society because considering that they employ like two thirds of the workforce in Europe, they create 85% of the new jobs in Europe. And still they don't have this kind of basic infrastructure of external financing to grow and do much more.

• 2:03Speaker 00

  So what we do is basically we integrate

• 2:08Speaker 00

  the full embedded lending journey from first origination window all the way down to balance sheet is on us. So we have the full infrastructure layer. We have the balance sheet. We have the whole regulatory framework required being a bank ourselves to enable a partner, whether it's a bank, a neo bank, payment company, ERP software, to provide this as a value-added service to their small business customers.

• 2:35Speaker 01

  I'm asking you to pick your favorite baby here. So Spare Bank, Agaros or Worldline? Who do you want to tell the story on how they're using you?

• 2:40Speaker 00

  Let's go with Spare Bank since they're one of our latest and it's really cool because they're a traditional bank.

• 2:48Speaker 01

  Why would a traditional bank need your software or technology? They already are a bank. They already have consumer deposits to lend out. Why don't they just do it themselves?

• 2:56Speaker 00

  As any business, banks, banks need to focus, right? So considering the ticket sizes that our typical customer would would ask for, which is around $20,000.

• 3:10Speaker 01

  That's the average loan.

• 3:10Speaker 00

  That's the average loan size. So it's quite a small ticket size. We also get requests for all the way down to $500 to do like small, small investments or just bridge working capital challenges from these small businesses. For a bank to onboard such a customer is just as costly as onboarding a large corporation that's requiring several million. So it makes sense for them to focus on that group, right? And not build for these small microbusinesses. Also, I think that what the bank or any traditional lender does is they look for some kind of collateral for the loan. And most of these small businesses lack that. They don't own property. They don't own anything that that could work as collateral.

• 3:53Speaker 00

  So we have a different approach, looking much more at cash flow to make sure that this business actually can repay the loan.

• 4:01Speaker 01

  Okay, so there's a bank, they install Froda so that they can do higher volume of loans at lower average loan sizes, which used to be unprofitable for them. You are opening this line of business to them. Let's just in a hypothetical example, say you're installed in Nathan Latka Bank, right? And I do my first $20,000 loan to a consumer. Is it to a consumer or to a business?

• 4:21Speaker 00

  Only small businesses.

• 4:23Speaker 01

  Okay, so I am Nathan Latka Bank. I do a $20,000 loan to a brick and mortar grocery shop down the street. How do you make money on the $20,000?

• 4:30Speaker 00

  There we're just like any bank. So basically we have retail deposits. So we get deposits from the public and then we lend that money to the small business.

• 4:42Speaker 01

  And you do Froda because you're a bank, you're a regulated bank.

• 4:45Speaker 00

  Exactly. That enables us to act in all European markets. In many European markets, business lending is regulated, so you need a license. It makes it much easier for a bank to cooperate with another bank because we're under the same regulation. We have the same requirements. And I think back to your first question, it's also like as a bank, you have, you have the ambition and the mission to help all the businesses in the society, right? You're part of that kind of infrastructure. And what we're doing with Sparbank One is really complementing them. So they take the larger ticket sizes, they take the larger corporations on their own balance sheet. We take care of the smallest.

• 5:30Speaker 00

  Once they grow and fit the bank's appetite, they can then stay with the bank and just continue to be served by the bank and all the products that they have.

• 5:40Speaker 01

  So Oliver, what's the right question for me to ask you to understand how fast or slow you're growing? Is it number of loans you originated? Is it your net interest margin on an average loan? Is it the GMV going through your platform? Is it number of installed banks? What is the metric you care about?

• 5:54Speaker 00

  So we look, of course, at the number of small businesses that we support. So so far we've supported 150,000 small businesses. And that's, that's one of our, our super important KPIs. We, we have about 30 million small businesses in Europe. And we really want to try to reach as many as possible and serve as many as possible. In terms of growth, it's been a challenging macro the latest come of years, but we still had a growth of about 30% year on year. And I mean, we expect that as macro improves to grow much faster.

• 6:30Speaker 01

  When you say 150,000 small businesses supported, you've done loans to 150,000 small businesses?

• 6:36Speaker 00

  Yeah, we've supported 150,000 ideas. So some of the businesses has used us several times.

• 6:42Speaker 01

  What's that number in a dollar value?

• 6:44Speaker 00

  I mean, the average loan size is $23,000. So yeah, you have to do the math. Current outstanding balance is about half a billion.

• 6:54Speaker 01

  $23,000 average loan size times 150,000 small businesses funded is 3.45 billion funded life to date. And what is life to date? How many years is that? What date to what date?

• 7:05Speaker 00

  It's 10 years. So first five years was very much growing and setting the fundamentals and growing with the direct business only in Sweden. The last five years or four years have been this embedded push where we've scaled outside of Sweden, scaling with partners and built this kind of enable or white label offering.

• 7:29Speaker 01

  You said there's 500 million of active loan tape today. Can I divide 500 million by 23,000 each? So about 21,800 outstanding loans today, something like that?

• 7:39Speaker 00

  A little bit shy of 20,000, I think it is actually.

• 7:42Speaker 01

  How do you manage that? You know, private credit in the US is blowing up right now. I mean, you see Blue Owl limiting redemptions. You see Apollo KKR going crazy. You see Vista Equity launching a private credit fund to go after distressed private credit books. I don't know if you're saying seeing the same patterns in Europe, but are you seeing any sort of non-acquire rates spikes on your outstanding capital balance and borrowers?

• 8:02Speaker 00

  Due to macro and kind of a consumer squeeze on spending, our, our customers are struggling a bit and that affects us, of course, in terms of a little bit higher default rates. But, but we're still doing, we're still profitable. We're still doing well. We have this nice growth, which we think will accelerate as, as macro improves.

• 8:21Speaker 01

  The closest comp I have to this is when you go back and look at OnDeck pre-COVID, they obviously were public. So we could see their, you know, default rates, their, their average gross yield. They're putting dollars out and their net interest margin. You know, they were very comfortable and they could operate profitably with like a 10 to 15% default rate because the margin, what they're putting money out at was, you know, 35, 40, 45% sometimes. Which, look, you could argue it's expensive or not, but the point is no one else was lending to that market, right? So it's either 40% or nothing, right? It's a new product. How do you think about those numbers for at Froda?

• 8:51Speaker 00

  I think it was important for us from the start and still is that we want to be a fair lender. We want to, to be able to offer the best possible terms. The average APR, just to put it into context, OnDeck is with us is 16%. So it's, it's lower than some of the MCA players, but it's, it's still a bit higher than a high street bank. Back to your point, Nate, and I mean, these customers today, they would get a no from the bank, right? So they have no.

• 9:23Speaker 01

  Exactly.

• 9:24Speaker 00

  I, I think that we are really the best alternative for them. And in many cases, the investments they do would give returns that are like threefold or tenfold. So it's, the low interest is a little bit higher. It makes total sense to do that investment.

• 9:41Speaker 01

  And Oliver, I don't know what the regulation is like in Europe, but I know in the US, when you're a bank like this, you've got to have some historical cohort or vintage analysis so that you can use sort of CECL methodology to put together a go-forward loss projection and allowance for bad debt. You know, some folks say we're going to hold back 1.5% of all new originations for a future allowance for bad debt. Others are more aggressive. They say 5%. How do you think about that cushion for Froda?

• 10:04Speaker 00

  It's the same in Europe. So we need to hold some buffer for losses. And basically we take that loss upfront, right? So if we, if we lend to a customer, we have to take a cost for loss as soon as we do the payout. And it's about 3% to 5%.

• 10:25Speaker 01

  What have actual sort of losses been? Has it been like 2, 3, 4, 5% on historical vintages?

• 10:30Speaker 00

  Before this current macro squeeze, we were around like 3, which is a little bit elevated now. But we project that we will go back to around the 3, 3.5%. That's where we want to be. It's a higher risk appetite than, than a traditional bank, but it makes sense considering the segment that we're serving. We think that's a good kind of balanced level.

• 10:53Speaker 01

  Yep. And how do you know that 16% average APR is the right and correct risk-adjusted pricing for a new lender getting a $23,000 loan from you? What does your credit box look like?

• 11:03Speaker 00

  I think we could probably charge more because just as you said, they don't find external financing elsewhere, or at least it's, it's not abundant. We have been coming back to kind of the vision of, of offering the best possible terms. We are kind of.

• 11:21Speaker 00

  The the cost driver or the price driver downwards here because we want to offer as as good loan as possible.

• 11:29Speaker 01

  I know, for example, if a software company has been around for 10 years in business and has more than 7 million of ARR, they're way less risky than a new AI startup with less than one year of history. So the pricing and the effective APR is going to reflect that. I imagine you have some guidance like this internally.

• 11:43Speaker 00

  Oh, yeah, yeah, definitely. So I mean, I mean, from the start, the idea was to to really use transaction data and and other credit data points that we can get to to build, build machine learning algorithms, basically to find patterns and important data points to to to really score these small businesses as well as we can. I mean, what we've seen now with 10 years of experience and and a couple of hundred thousand of businesses sharing data with us is that we can really leverage that that large data set to find patterns that can enable us to understand what's the

• 12:25Speaker 00

  risk in this business going forward. And that would set both the credit volume that we would offer. So the maximum credit line that we can offer and and also pricing that we offer.

• 12:37Speaker 01

  Yep. Tell us more about your history here, right? This stuff's not easy to get off the ground. You've got to obviously raise money to have a balance sheet lending. Then you're, it sounds like, you know, getting consumer deposits now because you're officially a bank. But I'm just going obviously off Google here quickly. It looks like you raised significant capital. Give us the capital story here. How do you fund the business?

• 12:53Speaker 00

  We've raised 49 million to date. We did our latest round last summer. I was the B series of about 23 million.

• 13:04Speaker 01

  So last year, 2025 was the 23 million series B. When was the series A?

• 13:09Speaker 00

  Two years before, before that.

• 13:11Speaker 01

  Okay, so 2023. And how much was that for?

• 13:13Speaker 00

  A little bit less than half the B round, I would say.

• 13:15Speaker 01

  10, 10, 11 million, something like that. When you went out in 2025 and did the 23 million series B, how was a bank like Froda valued? Was it was it a forward looking sort of discounted cash flow on future contracted interest revenues? Or what did it look like?

• 13:28Speaker 00

  I mean, it's always been a bit of a challenge because, as you said, we're a bank. At the same time, we're a tech company, right? And and do we get the tech valuation? Or do we get the bank valuation? I'd say I'd say we're in in between. We got some of the kind of the tech valuation. We definitely didn't get like the 2021 valuations of tech companies.

• 13:48Speaker 01

  I mean, those valuations were like 20, 30x of ARR. You were under a 20x multiple.

• 13:52Speaker 00

  Yeah, definitely.

• 13:53Speaker 01

  Yeah.

• 13:54Speaker 00

  I think now.

• 13:55Speaker 01

  And then how much do you need really future funding or not really? Because now you have consumer deposits, you can lend out with a spread.

• 14:01Speaker 00

  Yeah, and we're doing and we're profitable, right? So so we still need our own equity to a certain extent as we as we grow the portfolio.

• 14:09Speaker 01

  How much? There's a coverage ratio you need. And there's an advance rate. And then you've got your equity. Is it 25% on every dollar?

• 14:14Speaker 00

  No, it's it's about 11%. We are profitable today, so we don't really need to to raise money. If we were to raise, that's an option we're looking at. It's mainly to be able to scale quicker.

• 14:26Speaker 01

  If I take a $500 million loan book today at an average APR of 16% before losses and servicing, et cetera, that would put top line revenue somewhere around 80 million bucks annually, right?

• 14:35Speaker 00

  That's the ARR.

• 14:36Speaker 01

  And what profitability do you try and get to? 10% bottom line, 50, 20?

• 14:41Speaker 00

  The ambition is about 10%.

• 14:43Speaker 01

  Can you quantify the growth if you're around 80-ish million in run rate today? Where were you about a year ago?

• 14:48Speaker 00

  So last year, we did about 57 million, something like that.

• 14:55Speaker 01

  Oh, this is a crazy growth rate. Congratulations, man. That's amazing.

• 14:59Speaker 00

  I mean, you always want more, right? I would love it to be more than 100% year on year, but.

• 15:05Speaker 01

  How are you growing so quickly? We've got about two minutes left here. But how are you growing so quickly?

• 15:09Speaker 00

  The strategic decision five years ago to go for for like this embedded finance play or embedded lending play was was really key. So it's enabled us to scale quicker, both in terms of like the geographical reach. Instead of doing one country greenfield establishment, we've been able to scale into to six new countries or or yeah, seven currently building for France at a much higher pace than we could do if we were doing everything on our own. I think also being like a one product company that we are, we only do SME credit. It makes sense to build your product into a platform where the small business

• 15:52Speaker 00

  is active and and is kind of continuously interacting with that platform, whether it's an accounting software system or a bank, makes sense to have a credit there, right?

• 16:03Speaker 01

  I just can't believe that these banks are willing to give up 80 million bucks worth of revenue to you to come in and service their customers that they're not servicing. I mean, you're a genius negotiator.

• 16:11Speaker 00

  But you also, I think it's also like we touched upon earlier, you need to do this tech investment and and they can make more more money elsewhere, putting that money in in that direction. But also, it only works if you also change your risk appetite, right? If if you keep the bank's risk appetite and build a fantastic product from a tech tech and UX perspective, you're still not going to be able to serve the like 70% that we do. You would be declining 90%. Even though you have a nice tech product, you you need to have the tech and the risk appetite. And I think that's where we kind of can help the banks and and other players.

• 16:50Speaker 01

  Guys, we are wrapping up here with Oliver. He is the co-founder of Froda, a leading embedded finance provider and SME lender active in seven markets. If people want to follow along with your story over the next 12, 24 months, where can they find you online?

• 17:01Speaker 00

  So for the embedded part, please look up frodaembedded.com. You showed it there. That's where you find everything about our products. Please follow us on LinkedIn. Most of our stories are posted there. So so happy to have more followers.

• 17:16Speaker 01

  I mean, this is an incredible story. They are they are serving a market that has historically been underserved. Frodaembedded.com. All of our thanks for taking us to the top.

• 17:24Speaker 00

  Thanks for having me.

• 17:25Speaker 01

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