Karmen, a French startup specializing in instant financing for small and medium-sized enterprises (SMEs), has raised €9 million ($9.4 million) in an equity-and-debt funding round. The financing includes equity investment from Seventure Partners and debt contributions from Financière Arbevel and Bpifrance. The funds aim to improve Karmen’s data-driven risk assessment tools and expand its reach.
This latest round builds on the €100 million debt vehicle Karmen secured six months ago, enabling the company to provide short-term loans for working capital needs. Since then, Karmen has supported around 600 businesses in addressing cash flow challenges, offering loans ranging from €20,000 to €3 million with terms spanning two to 24 months. On average, clients borrow €200,000 for a six-month term.
Filling the SME Financing Gap
Karmen operates in the burgeoning space of revenue-based financing, addressing a gap left by banks and traditional financial institutions. SMEs often struggle to secure financing due to the fragmented nature of the market and thin margins. Startups like Karmen, Silvr, Defacto, and Unlimitd are leveraging technology to offer tailored solutions at scale.
Clients use Karmen’s loans to manage expenses such as inventory purchases, supplier payments, and marketing campaigns. These loans cater to a broad spectrum of businesses, from sole proprietors generating €300,000 annually to larger firms with €160 million in revenue. Notable clients include Maison Kitsuné, Balibaris, Les Raffineurs, and Almé.
Embedded Financing: A Growing Strategy
Karmen’s hybrid distribution model integrates its financing products into fintech platforms, enterprise resource planning (ERP) systems, e-commerce marketplaces, and business banking services like Qonto. This embedded strategy accounts for 40% of Karmen’s current client base, and the company aims to increase this figure to 75% by the end of 2025.
By accessing financial data through these integrations, Karmen gains granular insights into client performance, enabling smarter lending decisions. CEO Gabriel Thierry emphasized the importance of their data-driven approach, which evaluates 60 financial metrics in near real-time to assess loan applications.
A Focus on Risk and Technology
While most clients repay their loans without issue, Karmen acknowledges that some face repayment challenges. Thierry noted that the startup’s advanced risk assessment tools, enhanced by artificial intelligence, help mitigate these risks. The latest funding will be used to further develop this technology.
“Our data-driven approach allows us to have very granular visibility into the financial and operational performance of our clients,” Thierry said. “In addition, we are investing heavily in our risk assessment technology tool to strengthen this approach.”
Scaling Up Amid Growing Demand
Karmen is positioned to continue its growth, with a loyal client base where 80% of businesses return for additional financing several times a year. As SMEs increasingly turn to alternative financing solutions, Karmen’s blend of direct lending and embedded strategies ensures it remains competitive in this rapidly evolving market.
Featured image courtesy of Medium
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