Meet De facto, a new French startup that wants to improve the credit infrastructure for small and medium-sized businesses. The startup wants to offer credit products using an API. It automatically analyzes your income to give you an answer in real time.
Defacto is an integrated financial product, which means that it does not distribute its credit offering directly to small businesses. Instead, other companies are integrating Defacto into their own products so that their customers can access Defacto’s products. It’s a B2B2B strategy, and integrated finance has been a big trend in fintech over the past couple of years.
The three founders, Jordane Giuly, Morgan O’hana and Marc-Henri Gires, started working on the company in May 2021. They think it is still too complicated to get money quickly to have any more money. money to pay its employees or Suppliers. In France, large customers typically pay an invoice 30 to 60 days after the initial signing.
Instead of reinventing banking from scratch, Defacto tries to reach potential customers where they already are. For example, the company signed an agreement with Personal me, a French marketplace for short-term self-employment. Instead of waiting a month or two to get paid, you can open a line of credit with Defacto and get paid right now.
The fintech startup is already thinking about other potential partnerships with marketplaces for entrepreneurs, freelancers, logistics, freight and more.
In addition to this strategy, Defacto believes that there are other potential distribution channels. If you work for a small business, chances are you are already using a fintech product for accounting, accounts receivable, and accounts payable, like Pennylane, Libeo, or Agicap.
âAll of these companies want to become the financial dashboard for SMEs. They will all want to offer credit, âJordane Giuly told me.
And companies that use these products can see that they are supposed to receive a big check in a matter of weeks. So they could click a button and start applying for a Defacto loan.
You can also imagine deep integration with e-commerce customers. As e-commerce companies acquire goods, they could use Defacto to pay their suppliers directly. With each sale, Defacto could get a reduction to repay outstanding loans.
This strategy reminds me Square’s loan offer. Customers can repay loans with a percentage of daily card sales through Square.
Defacto recently raised a $ 3.4 million (â¬ 3 million) pre-seed round from Global Founders Capital, Headline as well as various business angels, such as Thibaud ElziÃ¨re, Rodolphe Ardant and Arthur Waller. In addition to this traditional round table, Defacto also raised $ 3.4 million (3 million euros) in debt.
âWe start by lending from our balance sheet – that’s why we had to raise a first round of debt and equity financing,â Giuly said.
And because Defacto wants to give you an answer as quickly as possible, the business starts with small, short-term loans. Ultimately, as the product improves and the company improves its risk rating engine, Defacto plans to fund â¬ 100 million in transactions by the end of 2022.