Get financing with minibond: how to 

More attractive than a bank loan, minibonds are a great opportunity for SMEs.

The 2020 crisis is not comparable to any of the previous ones. Among the reasons, there is at least a positive one: never before have companies been able to benefit from such a variety of financing channels.

Crowdfunding, direct lending, invoice trading, minibond...each of these channels offer financing solutions suited to the specific needs of companies (here and here a brief guide to the channels operating in Italy). While, for instance, invoice trading improves the daily cash management, the issue of minibond is a viable alternative to bank loan to obtain financing.

Minibond vs. bank loan

By issuing bonds of small denomination (hence the name minibond, although the amount can reach 500 million), companies can obtain financing from private and qualified investors outside the banking system, who become holders of debt securities against the issuing company.

Compared to bank financing, minibonds enjoy some advantages:

  • they are not recorded in the Central Credit Register; hence, they do not hamper the access to other credit funds. On the contrary, credits granted by the banking system are registered by the Bank of Italy and may hinder the granting of further financing;
  • collaterals are not required: guarantees are welcome, but not mandatory;
  • the repayment of the principal can occur in a single payment at maturity (bullet mode): in this way, during the life of the loan, issuers can reimburse only the interest on the loan, avoiding large money disbursements at a time when the investment has not generated returns yet;
  • they can have a medium-long term maturity (even up to 7 years, against the average 5 of bank loans): this means credit stability for a longer period, without the risk of early refund.
Souce: Epic SIM SpA

However, the rules of the game are more complex than bank loans, starting with the admission requirements: only unlisted companies belonging to the SME category can issue minibonds. Moreover, the issuing procedure necessarily requires the assistance of some key players: advisors, arrangers, legal consultants, rating agencies, and servicers investors.

If the difficulties of a solo issue can discourage, there are, however, two alternatives.

The online issuance

The Italian Budget Law 145/2018 extended to crowdfunding platforms the possibility of placing debt securities. Translated: SMEs issuing minibonds can quickly raise capital online through authorized crowdfunding platforms.

Among the initiatives currently active, it is worth mentioning the application campaign launched by CrowdFundME for companies with a minimum turnover of 5 million per year. In addition to being guided and supported in the issuance, at the end of the capital-raising process CrowdfundME also supports SMEs in listing the security on ExtraMOT PRO3, the Italian Stock Exchange's segment dedicated to the minibond market.

Basket Bond operations

A second way to cut down the cost of a minibond issue is to apply for a basket bond operation. A basket bond is a portfolio of debt securities that collects the minibond issues of a group of companies. In this way, SMEs can issue securities of small denomination, economically sustainable, and in line with cash flow forecasts.

We had already talked about basket bonds in relation to Garanzia Campania Bond, which has recently successfully concluded the first issue made by eight SMEs by collecting € 21.5 million (and others are expected to be issued in order to meet all 124 application received).

Among the most interesting initiatives, it’s worth mentioning the Basket Loan project launched by Elite, which allows SMEs with a rating equal to or higher than BB- to obtain financing from a minimum of € 500 thousand to a maximum of 3.5 million within 30 days. The company called to verify the rating of the candidate companies is modefinance; to know your admission chance, you can then refer to the credit score of your company provided by s-peek.

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