Swedish fintech startup Froda has secured a $22.7 million (€20m) Series B round led by Incore Invest, also based in Sweden, to expand its debt financing platform for small and medium-sized enterprises (SMEs) across Europe. This investment bucks the trend of a slight slowdown in fintech investments and further confirms the long-term trend towards the 'embedded finance' model.

Froda's platform offers debt financing to SMEs, primarily operating in northern European countries from Finland to the UK, and is embedded in verticals such as marketplaces or payment platforms. The company's financing model is based on a cash flow analysis through an SME's bank accounts, enabling lending to take place. This approach allows Froda to provide financing to SMEs on favorable terms, while also offering a seamless user experience.

According to Olle Lundin, co-founder and CEO at Froda, "SMEs are a really underserved sector in Europe… and we're doing that in a way which sets up great terms for the SMEs… and also we are providing a fantastic user experience, which means that an SME will always have access to financing." This focus on SMEs has yielded impressive results, with Froda claiming a 30% year-over-year customer growth in 2024 and adding a new embedded partner every month.

Froda's success is not isolated, as similar SME debt financing companies have emerged globally. For instance, ULend from Brazil, Liberis in the US, and Bankxware in Germany are all targeting the same underserved market. However, Froda's focus on the European market and its embedded finance approach set it apart from its competitors.

The investment will be used to fuel Froda's broader European expansion, as the company looks to capitalize on the growing demand for embedded finance solutions. This trend is expected to continue, with more businesses seeking to integrate financial services into their existing platforms. Froda's platform is well-positioned to take advantage of this shift, providing a seamless financing experience for SMEs across Europe.

In the context of the fintech industry, Froda's Series B round is a significant development, as it demonstrates continued investor confidence in the sector despite the recent slowdown. The investment also highlights the importance of embedded finance as a key trend shaping the future of financial services.

As Froda expands its platform across Europe, it will be interesting to see how the company navigates the complex regulatory landscape and competes with other players in the SME debt financing space. Nevertheless, with its innovative approach and significant investment, Froda is well-positioned to make a meaningful impact in the fintech industry.