SME lender October announced €35 million in backing from the European Investment Fund (EIF) and Invest-NL for their SME V fund today.
This is the fourth time the EIF has shown its commitment to the fintech’s funds.
“This renewed commitment for October testifies not only to the track record of this fund manager but also to the goals that the EIF shares with its clients,” says Marjut Falkstedt, Chief Executive of the European Investment Fund.
“On the whole, investments in SMEs safeguard and create the most jobs per euro invested, making the EIF’s role in the European economy important. I’m glad the EIF can again partner with October to support small and medium-sized companies with alternative financing.”
The EIF seal of approval
October burst into the budding European fintech scene in 2015. Its founders, Patrick de Nonneville and Olivier Goy, came together to provide the prolific European SME sector with alternative means of financing.
Often regarded as the backbone of the European economy, SMEs account for more than half of Europe’s GDP, employing over 100 million people.
As in many jurisdictions, pandemic restrictions and heightened inflation have created a challenging environment for European SMEs. While fears of a recession in the EU have been kept at bay with an economic contraction less than initially predicted, small business owners continue to struggle to maintain long-term growth.
The EIF’s commitment to October is backed by the Invest EU program, an initiative set up by the European Union to safeguard long-term business investment.
Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People, said: “InvestEU is playing an important role across Europe in helping small and medium-sized businesses gain access to the finance they need to innovate, expand and create jobs.”
“I am delighted that, thanks to this agreement, many more businesses will receive the support they need to take their next steps and fulfill their full potential.”
Although the European Investment Bank (EIB) has stated that a strategy for SME access to finance is an utmost priority, many consider alternative lenders, such as October, essential for survival.
A ‘light green’ fund
The €35 million backing from the EIF and Invest-NL closes the SME V fund at €100 million of total commitments after its launch in September 2022. The EIF had previously funded the SME II, III, and IV funds. The SME V fund is October’s first vehicle to be labeled Article 8 SFDR for promoting ESG characteristics.
October CEO Patrick de Nonneville said, “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.”
A commitment to reaching net zero goals by 2030 and 2050 has been integral to the EU’s policy in recent years. The Sustainable Finance Disclosure Regulation (SFDR) and EU taxonomy legislation were introduced as part of a core EU action plan in 2018. Both aim to improve transparency around sustainable business practices.
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The SFDR, in effect since early 2021, requires participants to report their impact aimed at reducing greenwashing in financial products marketed as sustainable. October must meet stringent disclosure requirements to retain this label for the fund.
The taxonomy bill will come into effect for SMEs in 2026. Businesses aligned with the taxonomy must disclose details of their economic activities contributing to at least one of six environmental objectives.
While the extent to which Article 8 funds must comply with the taxonomy criteria in their investments is unclear, it is stated that they must be composed of investments that “promote” environmental or social characteristics.