French startup Defacto has closed a new securitization fund that will be used to provide short-term loans to small and medium enterprises via an embedded, API-first approach. This is a new fund of up to €167 million ($183 million) with Citi and Viola Credit acting as the lenders.
This is significant news for the startup as it means that it will have more capital to deploy, which will eventually generate more revenue.
As a reminder, Defacto wants to offer credit products using an API in the fintech products that you already use. With this embedded finance strategy, Defacto can leverage the customer base of these existing products.
In particular, Defacto wants to help you get paid more quickly so that you can pay your employees or your suppliers and move faster. For instance, you can submit your receivables to Defacto and unlock some capital right away. You can then repay your loan with a direct debit whenever your clients paid some pending invoices.
Similarly, if you’re moving a lot of goods, you might be restricted by the cost of your stock. Even though you have no issue selling everything you manufacture or resell, you might not have enough capital to pay your suppliers right away.
Defacto can pay your suppliers for you. Your company will then repay Defacto when you have generated enough sales. The startup specializes on short-term loans like that.
The company has rolled out integrations with popular fintech startups and marketplaces, such as Malt, Qonto, Pennylane and Libeo. By integrating Defacto as their financing partner, those companies can provide another service without becoming a credit institution. Defacto can also leverage customer data from these partners as well, which should improve the credit-decisioning engine.
Companies can repay Defacto loans after just one day or can wait up to 120 days. On average, companies repay their loans after 60 days. With a credit fund of up to €167 million, it means that Defacto will be able to lend as much as €1 billion per year.
“We are delighted to secure this facility with Citi, one of the largest banks in the world, and having Viola Credit renewing its trust in Defacto’s team, strategy and product,” co-founder and CEO Jordane Giuly said in a statement. “In the current macro environment, this is an important milestone for enabling our growth with both existing and new partners and answering the financing needs of thousands of SME.”
This is a big step up, as the company has financed €200 million in credit for 7,000 companies. The startup charges some interests on a daily basis.
Silvr, another French startup that offers extra working capital, has recently closed a securitized facility with Channel Capital and Citi as well — Smart Lenders AM is also one of Silvr’s existing debt capital partners. It doesn’t have the same positioning as Silvr focuses on revenue-based financing and can offer 12-month financing plans with fixed repayments or revenue-based repayment plans. Silvr competes with Karmen and Unlimitd.