Boom-like increase in applications for loans to the Fondo Centrale di Garanzia. NSA’s time saving advices.

by Isidoro Trovato – translated for NSA

A river in flood. Applications for loans guaranteed by the Fondo Centrale di Garanzia amount to 5.000 daily. 90%, equal to 430.625 applications, placed from March 17th to May 28, 90% of which for loans up to 25.000 euros. The picture has been taken by NSA, the leading Italian credit broker as to billing. In the midst of the pandemic, NSA launched “NSA contactless financing”, a fully digital service to access loans directly from home, no need to meet with either the bank representative or the advisor from NSA.
Nevertheless, entrepreneurs feel the access to credit for SMEs is still difficult. According to a survey that Italian accountants conducted on their clients, entrepreneurs claim distrust from banks, too many guarantees requested and a financial assessment than is not actually required by the Fondo Centrale di Garanzia.
“Although loans up to 25,000 euros are automatically guaranteed by the Fondo Centrale di Garanzia, banks are responsible for a preliminary investigation that includes a credit worthiness assessment” says Gaetano Stio, Chairman of NSA. “Entrepreneurs may expect the FCG to be a purse full of money meant to be distributed to anybody. But this is not how it works.”

Big amounts
Applications for loans over 25,000 euros amounted to 40,792 in the period March 17-May 28, 65.48% of which, equal to 2,712 proceedings, were approved. The average amount requested was 295,000 euros, the average amount approved 265,000 euros.
“In our experience the number of proceedings has increased fourfold. Most loans applications are under 25,000 euros, yet there are many requests for higher sums. Between the latter are entrepreneurs who choose to work with us in order to ease the relationships with both the Fondo di Garanzia and the bank. Our intervention is time saving and time is crucial under certain conditions. 75% of the procedures we are handling turn out to be successful, which means they are approved with a gurarantee for 80%-90% of the total amount.
The choice of the bank is a key factor. I would suggest entrepreneurs to choose banks who know them and are aware of their asset position. This may ease and push through procedures that are often seen as a barrier by entrepreneurs.”

Credit worthiness assessment may be a setback, causing capital guarantees, life insurance policies and more collateral to be required.
“Let’s talk about balance-sheets: 50% of Italian companies have no audited financial statement for 2019, which may cause the proceeding to be slowed. The Fondo di Garanzia takes around 8/10 days and banks developed more analytical approached for credit worthiness assessment in order to protect the unguaranteed portion of the loan. Banks’ response usually takes 21 days.
Guarantees will be an issue as banks are required to adjust their assessment systems for next year. 2020 forced companies into 3 months lock-down, which sums up with the forthcoming summer holidays and respective production slowdown. Then Christmas time and New Year will stress productivity even further.
It is crucial to understand how the Fondo di Garanzia will work next year, its role being more and more essential.”