This alternative to the bank loan which hopes to find a place with companies

Posted Apr 19, 2022, 7:04 PMUpdated on Apr 19, 2022 at 7:11 PM

By moving into corporate finance, payments giant Adyen is pushing the line between banks and payment specialists a little further. The group implements a method of financing that is very different from the traditional bank loan, and which is starting to gain momentum: “revenue based financing”. This method of financing, already practiced in Anglo-Saxon countries, consists of lending according to the company’s current or future income, and not its balance sheet.

Adyen only offers this service to merchants who sell their products through marketplace platforms such as eBay or Etsy. But start-ups want to address companies in the digital sector directly, such as e-merchants, publishers of subscription software (SaaS) or mobile applications, or even marketplaces.

The promoters of this new type of loan believe they are meeting a currently poorly addressed need. “Despite the record fundraising that we hear about regularly, it is not easy to obtain financing today from investors who, in reality, are looking for the champions of tomorrow, pleads Nima Karimi, the founder of Silvr, the first French fintech to have launched on this niche, in 2020. Besides, bank financing does not work well for the tech sector whose banks sometimes have difficulty understanding the business model”.

Data-driven financing

In addition to Silvr, other companies have similar proposals, such as the French Karmen, Morino and Unlimited or the Spanish Ritmo. At Silvr, loans range from 10,000 to 10 million euros and are disbursed within 24 hours. Karmen, which is just a year old and specializes in the recurring digital economy, offers to finance up to 40% of a company’s annual recurring revenue in 48 hours. All entirely online, without going through the time-consuming box of filling out a loan file.

How do they achieve this result? The answer lies in one word: data. To be eligible for a loan, companies must indeed provide access to their bank statement, their transactional data but also to a certain number of other information such as traffic on their website, the rate of “churn” (turnover of customers ), customer acquisition, etc. Information that fintechs “suck up” through the software used by the company requesting it.

By aggregating all this data, the algorithm developed by these revenue based financing fintechs performs a credit analysis almost instantaneously. “By seeking information at the source, we greatly reduce the risks, which allows us to offer very competitive interest rates, assures Gabriel Thierry, co-founder of Karmen. It is a revolution in corporate financing”.

Some investors actually seem to believe it. Ritmo has just completed a fundraising of 200 million dollars of debt (sum used to finance the loans). Silvr, for its part, raised 130 million euros, including 118 million in debt. Sign of the growing interest of the traditional sector, BpiFrance is one of the investors. In addition, discussions are underway between several French fintechs and traditional banks that could distribute this type of product.

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