Financing sources for SMEs: an overview - part 2
A short guide on the sources of liquidity for SMEs - Part 2
In the first part of this guide, we've mentioned some sources of financing to which companies can resort to to quickly obtain liquidity.
Since our last blog post, the situation hasn't changed that much. Some businesses were authorized to reopen, but for many others the closing will last a few more weeks. Not to mention the unavoidable consequences that the lockdown will have on the financial statement at the end of the year. In this part of this guide, we'll therefore examine other alternative financing solutions the market provides.
Lending crowdfunding falls into the category of peer-to-peer lending, a term used to define the loans granted by individuals to other individuals. Crowdfunding lending platforms raise funds from lenders interested in investing in the real economy and use them to finance companies applying for credit. Funds are disbursed promptly, usually within a week from the application. The main crowdfunding lending platforms in Italy are BorsadelCredito.it and October.
However, since financing comes as loan, it's recorded among the company's liabilities and affects the leverage values. In the event the solvency ratios in s-peek already reveal a high level of indebtedness, it's better focus on other funding sources.
An alternative solution to lending crowdfunding is equity crowdfunding, which is particularly suited for start-ups. With equity crowdfunding, investors provide funds in return for shares in the company proportionally to the investment made. The financing is conditioned to the achievement of a minimum threshold, but the raising of capital can also continue once the target has been reached. In Italy, there are over 35 platforms authorized to launch equity crowdfunding campaigns, including CrowFundMe, Mamacrowd, and 200Crowd.
Direct lending actually is a category under which falls different funding sources, including crowdfunding itself. Following the classification adopted by the Osservatorio Entrepreneurship & Finance of the Politecnico di Milano, with this term we refer to loans granted to companies by investment funds subscribed by qualified investors. Sometimes, the application can be submitted through specialized Fintech platforms. Credimi, for example, recently launched a direct lending service covered by the Italian public guarantee provided through the Covid-19 Extraordinary International Emergency Fund issued by Banca Generali.
Before choosing the solution that best suits your needs, always remember to check your economic-financial situation, with or without s-peek. This is the only way to make economically sustainable decisions in the medium to long term.
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