Alternative finance has become increasingly important in the Italian credit landscape in recent years, especially for SMEs seeking new sources of flexible and diversified financing.
However, in Italy the weight of traditional banks remains important, accounting for 51% of the total sources of financing, compared to 38% of the European average.
In a context characterised by high interest rates and consequent uncertainty in launching new or renewing investment plans, the role of alternative finance seems to be strategic, especially when combined with classic credit.
Alternative finance grows but Italy is still lagging behind
The first quarter of 2023 in the field of Italian equity crowdfunding was characterised by a number of interesting and promising developments. The industry continued to grow compared to the same period of the previous year, both in terms of number of campaigns and amounts raised, despite global economic challenges, offering new investment opportunities and providing Italian companies with wider and more democratic access to funding. In the first three months of this year, Italian equity crowdfunding raised more than EUR 18 million for a total of 2,401 investors and a year-on-year increase of 68.22%.
Venture capital and private equity also recorded very positive results. In 2022, Italian private equity and venture capital raised €5,920m (of which €5,084m was raised on the market), up 3% from €5,725m the previous year. There were 49 operators that carried out fundraising activities in 2022 (44 the previous year).
Despite the growth of the private equity and venture capital market, Italy still lags behind other European countries. In fact, investments in this sector account for 0.21% of the country's GDP, far from the UK's 1.39% or France's 0.72%.
The Capital Bill reforms the definition of SMEs
With the aim of attracting more international investment and simplifying investment procedures, the Council of Ministers launched the Capital Bill. To achieve this aim, the bill includes some important changes to the admission procedures for trading, reducing the burdens on companies wishing to list themselves and expanding the definition of 'small and medium-sized enterprises' issuing listed shares and raising the maximum capitalisation ceiling from €500m to €1bn.
According to consultancy firm McKinsey, fund investments in companies that fall under this new definition of SMEs are 4% of the total invested and it is estimated that around 350 companies could benefit from this extension, 10% of which are listed on stock exchanges and another 10% in fund portfolios.
Supporting Italian SMEs to support the economy
The current limitations of the traditional banking system in the provision of credit to support SMEs can be overcome thanks to a so-called ''alternative'' source of capital raising compared to bank credit. Venture capital, private equity, but also equity crowdfunding and minibonds, are becoming increasingly important within the Italian credit landscape, especially as regards financing SMEs, which are often under-served by the traditional banking channel.
Providing diversified sources of capital to SMEs means substantially supporting their growth path and contributing concretely to the general economic development of the continent and the creation of new jobs. The alternative finance market therefore represents a relevant channel in supporting SMEs, providing them with timely, fast and simple instruments that can improve liquidity management and facilitate their business development.
Sources:
https://www.startupswallet.com/news/it/startupswallet-news/report-primo-trimestre-2023/