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Further Below: Our Guide To Business Loans in Italy, Everything you need to know.
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Business Loans in Italy, All You Need To Know:
We explain everything you need to know to finance your business, from types of credit or grants to which documents to submit, and how to get the best business loans at the moment:
Visit our general loans in Italy ranking & guide.
What economic measures has the Government implemented for companies through Covid-19?
Following the conversion into law of Decree Law no. 23 of April 8, 2020 “Liquidity”, there are new methods of access to credit assisted by the guarantee of the Guarantee Fund for SMEs (FGPMI), available depending on the characteristics and size of the company:
- financing up to 30,000 euros with 100% FGPMI guarantee, for SMEs and individuals engaged in business, arts or professions, Third Sector entities;
- financing of a significant amount, with an FGPMI guarantee of up to 90%, for SMEs, companies with up to 499 employees, Third Sector entities registered in the Companies Register and professionals registered with the professional associations;
The maximum guaranteed ceiling of the FGPMI, per individual company, is equal to 5 million euros.
The guarantee is granted free of charge until December 31, 2020.
Below are the characteristics of the available loans.
Loans of up to 30.000€
Loans up to 30,000 euros are 100% guaranteed by the Central Guarantee Fund for SMEs.
It is possible to request new loans with the following characteristics:
- maximum duration up to 120 months;
- pre-amortization 24 months;
- capped interest rate within the limits provided for by law;
- amount not exceeding 25% of the turnover of the beneficiary subject (as resulting from the last balance sheet or tax declaration or from self-certification for beneficiary subjects established after 1.1.2019) or alternatively, twice the annual salary expenditure of 2019 (or alternatively of the last year available) and in any case up to a maximum of 30 thousand euros.
It is aimed at micro, small and medium enterprises, individuals engaged in business, arts or professions. It will be possible to submit the request even if you are an insurance, insurance subagent or broker or a Third Sector Body in possession of the tax code.
It is granted through simplified modalities with documents sent by simple email:
- Attachment 4 is accompanied by a copy of an identification document;
- Declarations for additional information for the guarantee request on bank format.
- If you are YouBusiness Web enabled you can enter the request for financing directly from your internet banking.
The time in which the Bank is able to provide feedback to the request for financing is a maximum of 18 days. This refers to the maximum time estimated for the processing of the file, excluding the time of stipulation and disbursement, and is understood to start from the receipt of the loan application, accompanied by all the required and formally correct documentation.
What if I already benefited from financing of up to 25,000 euros?
In this case it will be possible to request an increase in the amount financed, an extension of the duration of the financing or both.
Does your business belong to the agricultural sector? In this case it will be possible to request up to 30.000 euro 100% guaranteed by ISMEA.
Financing for Large Amounts
The loans are guaranteed up to 90% by the Guarantee Fund for SMEs.
It is possible to request such new financing with the following characteristics:
- maximum duration of 72 months;
- amount not exceeding one of the following parameters, alternative to each other:
- 25% of 2019 turnover;
- twice the annual wage bill (including social security charges and the cost of personnel working on the company’s site but formally on the payroll of subcontractors) for 2019 or the last available year;
- the requirement for working capital costs and investment costs over the next 18 months, in the case of small and medium-sized businesses, and over the next 12 months, in the case of businesses with 499 or fewer employees. In this case it is necessary to present a self-certification attesting to this requirement;
- for companies, characterized by ultra-annual production cycles, to revenues from sales and services, added to changes in inventories of work in progress, semi-finished and finished products for the year 2019.
Distinguishing types of company profiles
In order to obtain financing for our company it is important to take into account that each type of business will be able to access a different type of financing. The characteristics of each company will define the way in which we can get money. These are the different forms of business that exist:
- Entrepreneurs: this is an idea, technically they do not exist and require financing to start. By having only one “idea” that supports them, this type of profile can access a type of funding very focused on their characteristics
- Start-ups: we refer to companies that already exist, but are not very consolidated. This means that they have hardly any seniority and, therefore, a changing and probably low income. They are in a growth phase and the type of financing they will be able to obtain must be towards that goal.
- Consolidated companies: it does not matter if they are micro-SMEs, SMEs or large companies. These are companies with a longer history and a fixed income, that is, stable and guaranteed companies that give the lending institution another type of security.
- Large companies: these are companies that operate nationally or internationally and have a turnover of millions of euros. Companies like Telefónica, Endesa or banks whose financing needs are in the millions.
- As legal entities: they are professionals who work on their own account and who may require financing for their business. Depending on their income, they will also be treated as “start-ups” or “consolidated companies”, but with loans whose characteristics are adapted to a single person.
- As natural persons: they are considered people with an income that comes from another source than that of an employee. This implies that they can get personal loans to finance their particular projects such as buying a car or renovating their house.
Characteristics of business loans
Every business loan is a world and its characteristics will vary greatly depending on the type of credit and profile of our company, as well as our negotiating power. Although the parameters to be watched to know if we are facing a good offer will always be the same:
- Cost. According to the latest data published by the Bank of Spain in November, the average cost of loans to companies of up to 250 thousand euros is 1.89% APR according to the latest data published by statista.com in June 2020 on a sinking trend, although the cost may vary depending on the type of credit company and our profile.
- Amount. This is one of the most complicated parameters to justify, as it will depend on the purpose and growth prospects of each company.
- Purpose. We can find different purposes such as working capital to have liquidity, investment to grow the business, obtaining goods, paying suppliers or collecting invoices among others.
- Linkage. Especially in banks, financing always comes with related products such as insurance, business accounts or other products of mandatory recruitment.
- Term. The terms may range from 3 months to 48 months on average. Depending on the type of credit (loan, credit line, renting…) the term will vary.
- Grace period. It is a period, generally initial, by which the payments are “paused”. It is useful when we expect that the money from the financing will bring us benefits at a certain time.
- Guarantee. Depending on the amount we request and our profile as a company, entities may require “payment insurance” with a guarantee or collateral.
- Speed. Sometimes some entities may take up to three months to grant us the money, in others only two weeks. To know the times of concession of each lender also is important to know when we will be able to begin to move.
- Repayment. Depending on the type of loan, we can find funding that is repaid each month in installments or at the end of the term all together plus interest, so it is important for our finances to take this information into account.
Where to get business loans
The evolution of technologies applied to finance, known by the English term fintech, has favoured the creation of new companies that grant loans to companies with all kinds of financial products. These are the different current alternatives to which we can turn if we want to apply for a loan to revitalize or launch our business:
- Banks: this is the most popular option for finding loans for companies. Generally, in order to obtain this type of financing we will need a high level of solvency. However, there is a new trend among banks to offer loans for SMEs by improving conditions and accelerating the granting process.
- Companies and private capital lenders: these companies have the advantage of offering their products with a processing through the Internet. This speeds up the process considerably. In addition, the price of their financial products compete directly with those offered by banks, often surpassing their offers.
- Alternative financing platforms for crowdlending: these platforms are companies that will put us in contact with private investors who will decide whether to contribute working capital to our requests for business loans. These investors will receive benefits according to our level of risk, which we will pay them in the form of interest. All the processing of these credits is done online and in 48 hours we will be able to obtain an answer.
Many factors influence the decision to opt for one lender or another, especially those specific to our business and its peculiarities. An analysis of our capital needs and our payment capacity will allow us to compare between the loans for companies that fit our profile.
Business loan conditions
The requirements for obtaining financing will not only vary with the type of loan we go to, but also with the entity with which we decide to apply for the credit. However, there are some basic conditions that all companies must meet in order to obtain loans:
- National registration: it is important that the company has its fiscal headquarters in Spain. This is because the products offered by these financial institutions are regulated by Spanish law and are in line with the conditions of our financial market.
- Annual income: it is very likely that we are required to have a minimum income to ensure that the company has solvency and can afford the debt to which it commits. Sometimes, we will also be asked for a document with a history in which we certify that we have made profits during certain years.
- Seniority of the company: most of these products are designed to make our business grow, so they require the company to be consolidated and at least 12 months old. However, there are some new business loans that we can access even if our business has been in operation for a short time or we are just starting up.
- Not appearing on RAI: our company cannot appear on RAI, the list of companies’ defaults. If this is the case, the only way to obtain financing for our company will be through secured loans or to pay off the debt to get out of the file.
These conditions may be more or less strict, i.e. annual income must be more or less high depending on the entity or type of credit, and there may also be additional requirements for contracting financing.
Documents needed to get funding
In the case of loans that are applied for in the name of a legal entity (a company), the documentation that lenders will ask for will be different. The entities will ask us for certain documentation that shows how our business is financially:
- VAT return from the previous year and the current year.
- Income tax return.
- Bank statement (if in another bank).
- Updated balance sheet of the company’s turnover.
- Proof of payment of Corporate Tax.
Depending on the entity, the delivery of these documents may be online or in person, although more and more entities allow sending the documentation through a courier. Likewise, more documentation can be requested in accordance with the analysis and risk policies of each lender.
Other forms of financing for companies
1. Business credit lines
Unlike loans, lines of credit give us an amount we can freely dispose of, paying only the interest on the principal we have used. This financial tool is very common among companies. In this way, we can have a reserve fund in case we need financing at times when we do not have working capital.
The ICO credit lines were created to promote the financing of companies by the banks, since, during the years of recession, these decreased the concessions considerably, although currently with the improvement of the economic situation the ICO lines are gradually disappearing.
It is a new form of financing for the self-employed and SMEs by which we can pay the invoices of one or more suppliers later. In this way it will be the lender who pays our supplier and we will pay the lender either in full later or in monthly installments the amount of the supplier’s invoices along with the interest generated.
3. P2B or crowdlending loans
In this case it will be private investors who decide whether to invest in our project or not. The amount that we can obtain depends on the crowdlending platform we go to, although it is usually around 100,000 euros. The term in which we will pay the credit also depends on the company we go to and the amount of our application.
It is exactly the opposite of factoring, that is, if we are suppliers we can, through this product of financing for companies, collect an order before delivering it in order to have liquidity and, once we collect the order when delivering it, we will return the money that the lending institution advanced to us.
5. Loans with mortgage guarantee
These products offer us financing for our company if we have a property that we can use as a guarantee of payment. In the case of loans with mortgage guarantee for businesses, we can obtain a maximum percentage amount of the appraisal value of the property that we deposit as a guarantee. The time of analysis and granting of these loans is longer than the previous ones due to the appraisal processes involved.
Products to invest in our company
1. Equity crowdfunding
They are platforms that have become popular in recent years thanks to the advance of new technologies. These types of platforms allow private investors and professionals to invest in our project. In return, these investors will get a share of our company and will get profits according to the benefits of our business. This is a way to obtain economic resources without having to go into debt.
2. Business Angels
Similar to equity crowdfunding, but with the difference that it is the managers of the Business Angels who decide as a group where they will invest and not each investor on a personal basis. This type of income generation for the company usually occurs in large projects and we must take into account that these investors will be part of our company.
3. 3F (Friends, Family, Fools)
In its English acronym, the 3 F’s (Friends, Family & Fools) could be translated as Family, Friends and Fools who help us invest in our business. The conditions of each investment will be agreed upon in a particular way with each one.
4. Issuance of debt
This is a measure to which more and more companies are resorting. With this method the company issues securities that would be equivalent to a piece of a loan with a return that will be given when it is “repurchased” at the end of the agreed term. This is known as fixed income investment and can be issued through banks or, if the company is large enough, through the stock market.
Aid for the financing of companies
1. Capitalization of unemployment
This alternative is only possible for self-employed people who want to start a business and consists of collecting all the unemployment benefit that we are entitled to if we use the capital to create a new company.
2. Subsidies: European, national, regional or local
There is a lot of government support to start or grow the business. On the website Portal Pyme of the Ministry of Industry, Trade and Tourism they have a list of all current aid for companies.
These are platforms that help companies and entrepreneurs to find sponsors interested in our project. With this type of funding for companies, we will be able to publish our projects for sponsors to invest in. In exchange, we will reward the collaboration with a symbolic gift, which is usually greater the more money they contribute.
About this page and our methodology
What is this page for: on this page we explain the different types of loans for companies that are available on the market, which entities and platforms can offer us financing and what we have to do to obtain liquidity without overpaying.
Source: the information obtained about the new providers of loans for companies has been obtained from the online portal of the Spanish Confederation of Small and Medium Enterprises (CEPYME).
Methodology: all the information about the financing products has been collected through online research and mystery shopping.
About FUNDGECKO: this online financial comparator aims to provide relevant information on personal finance. Through this website all users can, free of charge and without any obligation, compare and choose between the best current financial products, know all the significant information to be able to contract the product that best suits their economic situation in a responsible and informed way.
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