Karmen secures $9.4 million for its revenue-based financing products

French startup Carmen has secured a smaller funding round so it can improve its instant financing products. The company offers short-term loans to small companies that face working capital crunch.

It’s a €9 million equity-and-debt round ($9.4 million at today’s exchange rate) with Seventure Partners buying a stake in the small startup. Financière Arbevel and Bpifrance complemented the round with some loans.

Startups are not the only companies operating in this space which can be described as instant financing for SMEs. French contestants included Silver, de facto, unlimited And the hero.

Revenue-based financing has become a hot vertical because banks and traditional financial institutions struggle to tackle SMEs at scale. It is a highly fragmented market with small margins. That’s why tech startups are trying to fill that funding gap with a data-driven approach.

Today’s news comes just months after Carmen secure A €100 million debt vehicle that serves as the basis for the company’s short-term debt. Six months later, it seems that several companies are now relying on Carmen to solve their cash flow problems.

Nearly 600 companies have used Carmen to buy inventory, pay suppliers, pay acquisition campaigns and more. Loans range from €20,000 to €3 million, from 2 months to 24 months.

On average, the typical Carmen client borrows €200,000 over a six-month period. But as you can see, there is a wide variety of financing options. Similarly, the smallest customer generates only €300,000 in annual turnover (they are probably one-person businesses), while Carmen’s largest customer generates €160 million per year.

More importantly, Carmen has attracted some loyal customers, as 80% of the startup’s customers contact Carmen several times each year to unlock a new line of credit. Clients include Maison Kitsuné, Balibaris, Les Raffineurs and Almé.

While most companies approach Carmen directly, the startup has a hybrid distribution strategy. It also partners with other fintech companies to offer Carmen financing products to their own clients. Some ERPs, e-commerce marketplaces and business banks like Conto have already integrated with Carmen.

This embedded financing strategy now represents 40% of Carmen’s clients. But the company says it hopes it can increase that metric to 75% of new clients by the end of 2025.

While most companies repay their debts without any problems, companies can sometimes struggle to repay their debts.

“It’s part of our job as lenders. But we limit these risks through our data-driven approach, which allows us to have very granular visibility into our clients’ financial and operational performance,” said Gabriel Thierry, co-founder and CEO of Carmen.

“Also, we are investing heavily in our risk assessment technology tools (thanks to AI) to strengthen this approach,” he added. So, today’s funding round.

Carmen currently uses approximately 60 different financial metrics to score loan applications in real-time. Its embedded strategy can be used to make smarter decisions — bank accounts, accounting software, ERP and invoicing tools contain valuable data on a company’s overall performance.