French fintech startup Defacto has raised a $10 million Series A extension from Citi Ventures.
The Paris-based business, founded in 2021, provides short-term loans to small and medium-sized businesses. Companies can plug into Defacto’s API, which connects to third-party marketplaces and e-commerce platforms, where businesses can take on capital to help cover working capital.
SMEs are often underserved by legacy financial institutions because of the costs associated with sourcing and underwriting smaller companies in the low-margin world of lending. However, through integrations with businesses like fellow fintechs Pennylane and Qonto, Defacto wants to lower the cost and administration for smaller businesses.
“The macroeconomic shift with interest rate rises means banks are moving away from riskier assets like SMEs,” Morgan O’Hana, cofounder at Defacto, told Insider.
“By using new digital distribution channels, better credit scoring, and cloud tools alongside Open Banking, we are able to conduct KYC and underwrite businesses at an overall lower cost.”
Defacto has brought in an extension to its Series A round from 2022 in an “opportunistic” move as it pushes towards profitability, O’Hana added. The $10 million in additional funding comes from Citi Ventures, which also provided the startup with a $183 million debt facility earlier this year.
The earlier Series A round was led by Northzone, with additional backing from previous backers Headline and Global Founders Capital.
The new funding will go towards the continued growth of Defacto’s platform as it pushes towards more personalized debt financing for small businesses. Similarly, Defacto, which has retained a small team of 20 staff, will make a few additional key hires in the coming months.
Check out Defacto’s 20-slide Series A extension pitch deck below:
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