Context: fast, simple business financing
Karmen is a fintech company specializing in business lending. Where traditional banks require collateral, Karmen lends to French businesses through short-term loans (1 to 24 months) and factoring, based on their accounting and banking data. Speed is the point: Karmen releases up to €5 million within 48 hours. That model requires infrastructure that can handle instant disbursements and thousands of monthly repayments without friction.
Challenge: end-to-end automation with no compromise on regulatory requirements
Our model involves very high transaction volumes, with tight constraints on timing and liquidity. At some point, we needed a banking partner that could keep up with us.
To refinance its loans and fund its growth, Karmen set up an FCT (securitization fund), the regulated vehicle it needs to raise debt from institutional investors.
But Karmen ran into the limits of traditional banks and Banking-as-a-Service (BaaS) providers:
- Volume constraints: direct debit limits could not keep pace with rapidly growing repayment volumes.
- Technical gap: the traditional custodian banks an FCT requires do not offer a complete API to manage payment flows day to day.
- Operational risk: reconciling collections with the securitization vehicle through batch file-based exchanges (EBICS/XML) was not a suitable option.
Solution: Memo Bank as the fund's account bank
We've gained operational peace of mind. Our payment flows are under tighter control, and it shows immediately in our relationships with investors and clients alike.
Memo Bank acts as the transaction bank managing the fund's payment flows. The fund's custodian retains its oversight, safekeeping and cash flow monitoring duties.
- Segregated payment flows: two client accounts were opened within the fund’s management company's environment, with shared visibility for Karmen and the custodian. This structure ring-fences repayment collections while keeping them API-driven, and lets the custodian monitor the FCT's cash in real time.
- End-to-end automation: Memo Bank's API runs all payment flows : Payment collections: automated SEPA direct debits to collect borrower repayments.
- Disbursements: SEPA credit instant transfers to fund businesses in real time.
Memo Bank's teams took part in meetings with legal counsel and adapted the banking agreements to the chosen structure.
"What struck us was how hands-on the teams were. They didn't just execute. They worked through it with us." Gabriel Thierry, CEO of Karmen
Results
This setup removed the barriers to Karmen's growth:
- Credibility: the legal structure reassures debt investors that funds are secure.
- Scalability: Karmen can process ten times as many loans without hiring additional resources to manage payment flows.
- Customer experience: Karmen keeps its 48-hour funding promise thanks to instant payment execution via API.