French startup Karmen has completed a successful funding round aimed at enhancing its instant financing solutions. The firm provides short-term loans to small businesses facing challenges with working capital.
The funding totals €9 million in a combination of equity and debt (equivalent to $9.4 million at current exchange rates), with Seventure Partners acquiring a share in the startup. The round is further supported by Financière Arbevel and Bpifrance with additional debt funding.
Karmen is not the sole entity in the instant financing market for SMEs. Notable French competitors include Silvr, Defacto, Unlimitd, and Hero.
The surge in popularity of revenue-based financing is largely due to banks and conventional financial institutions having difficulty servicing SMEs effectively at scale. This sector is notably fragmented and characterised by narrow profit margins. Consequently, technology startups are stepping in to bridge this financing gap using data-driven methodologies.
This announcement follows Karmen’s acquisition of a €100 million debt facility, which underpins its short-term loan offerings. Within six months, numerous businesses have turned to Karmen to address their cash flow challenges.
Approximately 600 companies have utilised Karmen’s services for various purposes such as purchasing inventory, settling supplier invoices, and financing customer-acquisition campaigns. Loan amounts vary significantly, ranging from €20,000 to €3 million, with terms between 2 to 24 months.
On average, Karmen’s typical client borrows €200,000 over a six-month period. However, the range of financing options available is extensive. The smallest clients typically generate just €300,000 in annual revenue, most likely consisting of solo entrepreneurs, while Karmen’s largest client records an impressive €160 million in annual turnover.
Importantly, Karmen boasts a loyal client base, with 80% of customers engaging with the startup multiple times a year to access new lines of credit. Notable clients include Maison Kitsuné, Balibaris, Les Raffineurs, and Almé.
While many clients approach Karmen directly, the startup employs a hybrid distribution model. It collaborates with various fintech firms to enable them to offer Karmen’s financing products to their customers. Platforms such as Qonto, e-commerce marketplaces, and ERPs already integrate with Karmen.
Currently, this embedded financing model accounts for 40% of Karmen’s clientele. The company aims to increase this figure to 75% of new clients by the end of 2025.
Although the majority of clients repay their loans punctually, some can face difficulties meeting their financial obligations.
Karmen’s co-founder and CEO outlined that addressing repayment issues falls within their lender responsibilities, but they mitigate these risks through a data-driven approach that provides clear insights into the financial and operational performance of their clients. He noted that Karmen is also heavily investing in enhancing its risk assessment tools, leveraging artificial intelligence, to reinforce this strategy, which is aligned with the recent funding round.
Karmen evaluates loan applications using around 60 different financial metrics in near real-time. Its embedded financing approach enables smarter decision-making, as valuable performance data is sourced from clients’ bank accounts, accounting systems, ERPs, and invoicing tools.
