French fintech startup Karmen has secured a €9 million equity-and-debt funding round to improve its instant financing products for small and medium-sized enterprises (SMEs). The round, led by Seventure Partners, with participation from Financière Arbevel and Bpifrance, will enable Karmen to further develop its short-term loan offerings for businesses facing working capital crunches.

Karmen is not the only player in the instant financing space for SMEs. The company operates alongside French competitors such as Silvr, Defacto, Unlimitd, and Hero. However, the startup's data-driven approach has allowed it to carve out a niche in this highly fragmented market, where traditional financial institutions struggle to address SMEs at scale.

The funding round comes just a few months after Karmen secured a €100 million debt vehicle, which serves as the basis for its short-term loans. Since then, the company has seen significant traction, with around 600 businesses using its platform to address cash flow issues. These loans range from €20,000 to €3 million, with terms spanning from 2 to 24 months.

The typical Karmen client borrows around €200,000 with a six-month term. However, the company's financing options are diverse, catering to businesses with annual turnovers ranging from €300,000 to €160 million. Notable clients include Maison Kitsuné, Balibaris, Les Raffineurs, and Almé. Moreover, 80% of Karmen's customers return to the platform multiple times per year to access new debt lines, indicating a high level of customer loyalty.

Karmen's hybrid distribution strategy involves partnering with fintech companies, ERPs, e-commerce marketplaces, and business banks like Qonto to offer its financing products to their clients. This approach currently accounts for 40% of Karmen's clients, with the goal of increasing this metric to 75% of new clients by the end of 2025.

While most businesses repay their loans without issue, Karmen acknowledges that some may struggle to repay their debts. To mitigate these risks, the company employs a data-driven approach, leveraging around 60 different financial metrics to score loan applications in near real-time. Additionally, Karmen is investing heavily in its risk assessment technology, which utilizes artificial intelligence to strengthen its lending approach.

The latest funding round will enable Karmen to further enhance its risk assessment capabilities, ensuring that its financing products remain accessible and effective for SMEs. As the company continues to grow, its innovative approach to instant financing is likely to have a significant impact on the SME market, addressing the financing gap that traditional institutions have struggled to fill.

In conclusion, Karmen's €9 million funding round marks an important milestone in the company's mission to provide instant financing solutions to SMEs. With its data-driven approach and hybrid distribution strategy, Karmen is well-positioned to continue addressing the financing needs of small businesses, driving growth and innovation in the sector.