To further refine its lending strategy, Karmen is investing in AI-driven risk assessment tools, as highlighted by co-founder and CEO Gabriel Thierry.

This embedded strategy enhances financial decision-making by leveraging data from clients' bank accounts, accounting software, and invoicing tools.

French startup Karmen has successfully raised €9 million (approximately $9.4 million) to enhance its instant financing products aimed at small and medium-sized enterprises (SMEs) facing working capital challenges.

This funding follows Karmen's earlier acquisition of a €100 million debt vehicle designed to support its short-term loan offerings.

The demand for revenue-based financing has surged as traditional banks struggle to meet the needs of SMEs, which often operate in a fragmented market with narrow profit margins.

Karmen has provided financing solutions to around 600 businesses, with loan amounts ranging from €20,000 to €3 million and terms varying between 2 to 24 months.

On average, Karmen clients borrow €200,000 for six-month terms, with the smallest clients generating €300,000 in annual turnover and the largest reaching €160 million.

Notably, about 80% of Karmen's clients return multiple times a year for new loans, including well-known brands like Maison Kitsuné and Balibaris.

Karmen employs a hybrid distribution strategy, partnering with fintech companies, e-commerce marketplaces, and business banks to integrate its financing options.

Currently, 40% of Karmen’s clients are sourced through its embedded financing strategy, which the company aims to increase to 75% by the end of 2025.

Karmen implements a data-driven approach to minimize repayment risks, utilizing around 60 financial metrics for real-time loan application assessments.

Operating in a competitive market for instant financing, Karmen faces rivals such as Silvr, Defacto, Unlimitd, and Hero.