What kind of support has the fintech sector given to enterprises that have been in trouble since the lockdown? And what role can it play in the economic recovery of the country? We asked Antonio Lafiosca, COO of Borsadelcredito.it, a very active fintech since the first weeks of the pandemic to support SMEs, for an opinion.
You just launched Cash Anti-Covid Phase 2. Who is it aimed at and what advantages does it give?
Cash Anti-Covid Phase 2 is the first BorsadelCredito.it project designed to support businesses in Phase 2. Thanks to this product, in fact, we want to start thinking about the restart of Italian SMEs – with particular reference to those with turnover under 10 million euros – that need to redesign business models and strategies to move forward and recover lost turnover. It is therefore a long-term loan: the amount of the individual loan varies from 100 thousand to 600 thousand euros and the duration is set at a maximum of six years, of which the first 12 months are of total pre-amortization. This is done through a fast and entirely digital tool: the companies are evaluated through the use of proprietary algorithms of artificial intelligence, followed by the verification of the credit analyst and finally the resolution: all within 48 hours. In addition, the loan is guaranteed up to 90% by the Central Guarantee Fund for SMEs, which is an important risk mitigation factor for investors, together with the possibility for senior investors to subscribe to a security plan with an adequate profitability profile against limited risks and capital absorption.
It is a fintech “product” that falls under the Liquidity Decree. In your opinion is there any unexpressed fintech potential excluded from the Decree, which could instead support SMEs in this period? If so, which and what should be changed?
The Italian Fintech can contribute with additional resources to those of the traditional banking channel: resources that would be transferred quickly, effectively, safely and at competitive costs. Our proposals to integrate the Liquidity Decree are those we expressed together with ItaliaFintech during the parliamentary hearing at the Joint Finance and Productive Activities Committees. In short, we propose the extension of the measures envisaged for traditional intermediaries (guarantees, institutional liquidity, etc.) to all investors and alternative intermediaries. This would allow the immediate release of investments by large institutional investors (e.g. insurance companies, pension funds, family offices) who are willing to finance, but who obviously need the same guarantees granted to the banking system to do so.
In detail, it is required that the accessibility of the SACE guaranteed to companies in the fintech sector providing financing is made explicit. In addition, social lending and crowdfunding platforms are covered as entities eligible for the guarantee of the Central SME Guarantee Fund, but in fact they cannot operate with the Fund because the relevant implementing decree has not yet been issued by the Ministry of Economy and Finance and the Ministry of Economic Development. Together with ItaliaFintech, we have requested that their eligibility for the Fund’s guarantee be made explicit in the Decree.
Finally, there is the question of interest. Under the current regulations, interest payable on loans is not fully deductible in the determination of business income. Given that the Liquidity Law aims to help companies overcome the Covid-19 emergency and its consequences, we consider that companies should benefit from a full deduction of payabable interest. It is also likely that many companies will make operating losses in 2020 and in the coming years, so the deduction of interest on loans taken out under the Liquidity Law would help not to further dilute such losses.
You launched Cash Anti Covid-19 in March, what was it (in short) and what feedback did it get?
With Cash Anti Covid-19 we wanted to take a first step at a time when Italy was in the midst of a health emergency and the Government was still working on the current amendments to deal with the crisis. In this specific case it is a 6-month bullet financing designed to cover 100% of the current expenses of SMEs for the next six months (wages and salaries, rents, utilities): companies with a turnover of up to 10 million can access a loan of up to 300 thousand euros; and those with a turnover above the threshold of 10 million have the possibility to obtain liquidity of up to 500 thousand euros. The product has much appreciated by companies, and also for this reason, in March alone, the requests compared to March 2019 have increased by 230%.
There are those who believe that the lockdown has brought advantages to the fintech sector, do you agree? If so, for which subcategories in particular?
The lockdown has increased the need for companies to receive liquidity quickly, and fintech, by its nature as a fast and flexible tool, was the first to respond to this request. In this sense, the corporate lending sector was certainly the one that provided the most support in the shortest time, creating ad hoc financing channels.
Moreover, this crisis has highlighted the need for digital tools on behalf of companies that found themselves having to continue their activity remotely. Fintech has also been one of the sectors that has been able to respond better to this need, and this is true for all its sub-categories: since it is based on entirely digital procedures, it has allowed operating in full respect of social distancing.
Imagine the Italian fintech sector in 12 months, how?
We see an increasingly close and widespread collaboration with traditional credit institutions. Covid-19 has in fact highlighted the gap in the distribution model of banks and will make many of them even more inclined to accelerate the path of digital transformation through partnerships with fintech. Collaboration responds to a real market need: more and more companies and professionals are looking for an alternative solution to traditional banks for their specific needs in terms of daily financial activities and access to credit. The trend will therefore be to merge several digital services into a single platform, in banking as a service mode: this will allow companies to have a higher quality customer experience.
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