Between 2020 and 2021, in the midst of the pandemic, banks guaranteed loans to Italian companies amounting to around EUR 200 billion. This is the result of a lot of hard work and the guarantees offered by the government (moratoria, guaranteed loans, a freeze on redundancies, and a reinforced redundancy fund), which have allowed companies to continue to access credit from banks and financial institutions. However, Europe has already shown signs of impatience and the end of this indiscriminate support seems to be near. With what consequences? It is difficult to say for sure at the moment.
The spectre of a new credit crunch
The new squeeze on bank credit will take the form of higher interest rates, a progressive tightening of the assessment criteria and a tightening of the conditions required to access credit.
Meanwhile, a new definition of non-performing loans has come into force. According to the new rule, if the amount of the arrears is significant, more than 90 days' overdraft on a single obligation is enough for the company to be declared in default. In order to be considered 'significant', the debt must at the same time be more than EUR 100 (for exposures up to EUR 1 million and EUR 500 for those beyond that) and more than 1% of the total exposure to the bank.
The rules for repayment are also stricter, as the company must be monitored for a further 90 days before it can recover its 'solvent' status. This means that companies with clear plans and a solid structure will once again be rewarded over IMOs and start-ups that cannot provide the same level of security.
Another cause of the possible credit crunch is the lack of knowledge and mutual trust between banks and SMEs. This is in fact one of the reasons why SMEs and start-ups often suffer from these restrictions. However, it is also important to remember that (paradoxically) if the loan is small, it is not convenient for the bank, which will therefore be less inclined to grant it. Due to articulated and poorly digitised processes, the contribution margin on the granting of credit is very low. A report by the KPMG network showed that loans below EUR 50,000 represent a loss for traditional banks.
Alternative finance as a way out
The only way to survive the credit crunch, therefore, is to diversify funding sources. Fortunately, there is no shortage of possibilities. The Italian crowdfunding and crowd investing markets are growing steadily, and observers assure us that 2022 will be another boom year for alternative finance.
It is also a very positive fact that companies, and SMEs in particular, are increasingly relying on alternative finance tools. According to the 4th Report on Alternative Finance for SMEs produced by the Politecnico di Milano, in 2021 these instruments financed SMEs to the tune of more than EUR 4bn, an increase of almost 60% on the previous year.
The various forms of alternative finance taken into consideration include venture capital, private equity, invoice trading, minibonds and crowdfunding.
And it is precisely in the area of crowdfunding that a number of interesting facts emerge that are definitely worth exploring. The report takes into account all funding data up to the first half of 2021 and the trends are significantly upwards. Starting from the overall figure, the different types of crowdfunding generated a fundraising volume of around EUR 504 million in the period July 2020 to June 2021, a growth rate of 172% compared to the previous 12 months.
Non-property equity crowdfunding raised EUR 93.3 million, up 63% on the same period. In addition, more than EUR 34m (+76%) was raised by specialised real estate portals, bringing the total to a record EUR 126m.
There appear to be some possible solutions to the credit crunch and it is excellent to see that companies are increasingly aware of them.