Amidst heightened anxiety surrounding rising costs, rising interest rates and those repayments of pandemic loans, there are some concerns in the SME space at the moment. However, instead of getting bogged down in pessimism, it’s important to highlight that there are still elements of growth, and new innovations coming about to facilitate financial resilience. One of them being the fintech space.
Aiming to support SME growth across Europe through instant and embedded B2B lending, Parisian startup Defacto has just scored €15 million in fresh funding. The round was led by Northzone with participation from existing investors, Headline and GFC.
Founded in June 2021 by Jordane Giuly, Defacto provides loans and credit to small companies through an API-based product. It enables third parties such as marketplaces, ecommerce platforms and others to embed its products directly in their own products, integrating seamlessly.
With a tech-first approach, the French startup is providing access to working capital to SMEs – a segment underserved by traditional actors and one that is crucial to maintaining financial growth and optimism in today’s climate.
Morgan O’Hana, co-founder, explained: “Cash flow and access to liquidity are once again reasons for concern due to inflation, repayment of state covid loan and rising interest rates. Traditional banking caters less to SMEs and processes are too slow. An EY study estimates that in France alone, over 40.000 businesses will fail. It was 28.000 in 2021. We are building a product for builders, not bankers. Access to capital should be fair and instant. Banks rely on data that is at least 18 months old and then take 4 months or longer to process loan applications. We move in real-time.”
Already since its launch in France, the young company has built partnerships with over 15 leading B2B marketplaces, fintech companies and ecommerce businesses – distributing over €30 million in short term loans.
Not only is the product pertinent in this financial environment, but it also reflects the constantly accelerating digitalisation of the SME space. B2B transactions have moved online through marketplaces which confirms the embedded lending opportunity. With Defacto fintech’s can offer invoice financing to their customer base, B2B marketplaces can finance invoices and offer BNPL to buyers, and B2C ecommerce companies can better fund their inventories.
Defacto’s co-founder and CTO Marc-Henri Gires, commented: “Businesses are interacting more and more with digital platforms. Those interactions generate a large amount of data in real-time, which Defacto is leveraging to redefine how underwriting should be done. Banking institutions will never have the right information systems to process this flow of alternative data, to reach real-time and tailored lending offers.”
The team of 13 based in Paris are now looking forward to continuing to grow with this new funding boost. Defacto will now roll out its solution to Germany, the Netherlands, Belgium and Spain – helping SMEs across Europe to scale.
Jonathan Userovici, a Partner at Headline, added: “Finance needs to shift towards real-time data and processes. Small and medium businesses make for 99% of all European businesses. Yet traditional banking is increasingly shy in supporting them. Defacto’s Capital by API provides entrepreneurs with forms of credit that not only scale with their needs but are also more fair and transparent. It’s an engine for growth. I have rarely met a team so customer-focused and achieving so much in one short year.”