French startup Karmen has closed a funding round focused on enhancing its instant financing solutions. The firm specializes in providing short-term loans for small businesses experiencing cash flow challenges.
This funding round totals €9 million in equity and debt ($9.4 million based on current exchange rates), with Seventure Partners taking a stake in the emerging company. Financière Arbevel and Bpifrance are also contributing to the round through debt financing.
Karmen is not alone in the space of instant financing for SMEs; it faces competition from French firms such as Silvr, Defacto, Unlimitd, and Hero.
Revenue-based financing has surged in popularity due to traditional banks and financial institutions struggling to serve SMEs effectively. This industry is marked by fragmentation and slim profit margins, prompting tech startups to address the financing void through innovative, data-driven strategies.
This announcement follows Karmen’s recent acquisition of a €100 million debt facility, forming the backbone for the company’s short-term loan offerings. Six months later, Karmen seems to be gaining traction as numerous businesses turn to its services to alleviate cash flow dilemmas.
The startup reports that about 600 companies have utilized its services to fund inventory purchases, pay suppliers, finance marketing campaigns, and more. Loans offered range from €20,000 to €3 million, with terms varying from two months to two years.
On average, a typical Karmen client borrows around €200,000 for a six-month duration. However, the financing options are quite diverse, with the smallest clients recording an annual turnover of just €300,000—likely sole proprietorships—while Karmen’s largest client boasts revenue of €160 million annually.
Crucially, Karmen has developed a loyal customer base, with 80% of clients reportedly returning multiple times a year for new borrowing opportunities. Among its clients are notable names such as Maison Kitsuné, Balibaris, Les Raffineurs, and Almé.
Most clients reach out to Karmen directly; however, the startup employs a hybrid distribution model. It collaborates with other fintech companies to offer Karmen financing solutions to their own customer base. Integration is already in place with various ERPs, e-commerce platforms, and banks like Qonto.
Currently, about 40% of Karmen’s clients are acquired through this embedded financing model, and the company aims to increase this figure to 75% by the end of 2025.
While the majority of clients repay their loans without issues, some may face challenges in fulfilling their obligations.
“This is part of our role as a lender. We mitigate these risks through our data-centric approach, giving us detailed insight into the financial and operational performance of our clients,” explained Karmen co-founder and CEO Gabriel Thierry.
“Moreover, we are heavily investing in our risk assessment technology, enhanced by AI, to further strengthen our methodologies,” he added, highlighting the significance of the latest funding round.
Karmen currently assesses loan applications using around 60 different financial metrics in real time. The company contends that its embedded financing strategy can be optimized for smarter decision-making, as data from bank accounts, accounting software, ERPs, and invoicing tools reveals valuable insights into a company’s overall performance.
Compiled by Techarena.au.
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