Paris-based October, an online marketplace that helps investors lend money directly to SMEs, announced on Thursday, January 19, that it has raised €35M in funding for its recent debt fund, October SME V.
According to a statement, the fund’s closure makes it the first vehicle of October to be designated as an Article 8 SFDR – Sustainable Finance Disclosure Regulation (fund promoting Environmental, Social, and Governance, ESG, characteristics).
Investors supporting October
The investment came from the European Investment Fund (EIF) and Dutch impact investor Invest-NL.
Invest-NL is providing €15M under the Dutch Alternative Credit Instrument (DACI) mandate, and the EIF is committing the remaining €20M backed by an EU budget guarantee via the InvestEU programme.
Following its introduction in September 2022, the October SME V fund was able to attain €100M, thanks to the EIF’s contribution. The EIF’s backing will help October draw in more public and private investors for the fund. The fund will target small businesses in France, the Netherlands, Italy, Germany, and Spain.
This funding is a continuation of the EIF’s prior investments in the October SME II, III, and IV funds. In addition, October benefited from an earlier EIF investment supported by the predecessor programme of InvestEU, the Investment Plan for Europe, and its “Private Credit Tailored for SMEs” initiative.
Marjut Falkstedt, Chief Executive of the EIF, says, “On the whole, the money we make available for SMEs safeguards and creates many jobs, making the EIF’s role in the European economy an important one. I’m glad that the EIF can again partner with October to support SMEs with alternative financing.”
What to expect from the October SME V fund?
Over the course of the next two years, the October SME V fund, with a lending goal of €400M, is anticipated to provide over 3000 loans to small enterprises throughout Europe.
Investors will have access to a detailed and diverse portfolio that is spread over many European Union countries, including France, Spain, Italy, the Netherlands, and Germany, across more than 15 distinct industries. A €130K average loan size is expected, with loan amounts ranging from €10K to €2M.
The company claims to have a ‘unique’ risk/return profile that targets borrowers at the lower end of the market while providing investors with competitive returns. All steps have been taken to safeguard investors and their profits from inflation with a brief term, monthly dividends, and price evaluation on a monthly basis.
CEO Patrick de Nonneville says, “With this investment, the EIF continues to support European SMEs via the October platform. Key to this new fund is our data-driven ESG X-Ray module, to integrate ESG criteria in our investment process without burdening SMEs with additional paperwork.”
October’s investment strategy supports the creation and protection of jobs and positive environmental and social outcomes. The company says “Our ESG X-Ray reporting encourages SME managers to become more aware of sustainable development and to take concrete actions that are taken into account when establishing this score. This can include job creation, diversity in recruitment, initiatives to minimise environmental impact, and better governance practices.”
Founded in 2014 by Olivier Goy and Patrick de Nonneville, October is a fintech company that aims to finance businesses better. It allows private lenders and institutional investors to directly finance SMEs across the continent. With an 8-year track record, October has lent more than €965M to 3,800 European SMEs to date.
With its neo-lending business platform October Connect, financial service providers can choose between a module or an end-to-end solution depending on their requirements. “Whether you are looking to accelerate your risk analysis and management, reduce your fraud exposure or add lending as a new product, we have a solution for you,” says the company.