Guizzetti: “The operations guaranteed by fintech platforms facilitate SMEs’ access to alternative finance by allowing them to use these instruments in an entirely digital way. And by facilitating quick access to liquidity.”
Invoice assignment allows small and medium-sized enterprises to assign their receivables through fintech operators (such as CrescItalia), obtaining the liquidation of their portfolio of active invoices issued to debtors
First the pandemic. Then the Russian-Ukrainian war, political uncertainty, the energy crisis, and rising commodity, utility, and transportation prices. In recent years, all factors have fueled the thirst of Italian small and medium-sized businesses for liquidity. By creating, among other things, what Rossella M. Guizzetti (head of MT/LT lending products at CrescItalia interviewed by We Wealth) calls “a vicious circle”: the more cash flows dry up, the more extended payments get, the more the need for liquidity continues to grow. And accessing traditional channels, such as banking, becomes complex. Here are three alternative solutions to get liquidity quickly.
These are solutions provided by alternative financing channels through fintech platforms, where Italian small and medium-sized businesses can access the liquidity they need to finance their business. Guizzetti explains that these range from short-term instruments, such as the assignment of trade receivables, to more structured, medium-term instruments, such as lending and minibond issues. ” The expert recounts, “The operability guaranteed by fintech platforms facilitates SMEs’ access to alternative finance, allowing them to use these instruments in an entirely digital way,” the expert recounts. “The process, which is simple and transparent, encourages quick access to liquidity and flexible and customizable ways.”
3 Alternatives to banking: how they work
Invoice assignment, in particular, allows SMEs to assign their receivables through fintech operators (such as CrescItalia), obtaining the liquidation of their portfolio of active invoices issued to debtors. “Thanks to the reverse process, called reverse factoring, companies can also offer liquidity to their supply chain, optimizing their supply chain,” Guizzetti continues. “As far as medium-term financing is concerned, fintech also offers the possibility of access to lending solutions that allow companies to access new liquidity.”
Trade receivables assignment: a practical case study
These solutions appeal across the board to every production sector, especially small and medium-sized businesses. Unlike banking institutions that “only assess the creditworthiness of the assigning sme,” the expert explains that fintech also assesses the debtor company, thus enabling small businesses to access the liquidity they need. “CrescItalia, for example, worked with a very small Italian company that does maintenance work for a large company in the energy sector. This small company had liquidity problems due to its large contract with the utility and the payment of personnel, vehicles, and materials, but it did not qualify to access traditional financing channels. The solution came from fintech: the small company was able to assign its trade receivables owed by the large energy company due to the high quality of the borrower.”
Finally, looking at the market, according to ItaliaFintech data retrieved by Guizzetti, in the first six months of 2022 €2.3 billion in medium- to long-term financing was provided to businesses thanks to fintech platforms (compared to €1.5 billion in the same period last year). Factoring also saw an 8.1 percent increase in the first quarter of 2022 compared to the same period in 2019, according to the annual analysis of aggregate data on specialized lending by Assifact, Assilea, and Assofin. “2022 will see a big increase in demand for liquidity from businesses, but given the current global political and economic situation, it is difficult to predict what the supply will be,” notes Guizzetti. Then he concludes, “At this stage, we are watching investors, especially foreign ones, waiting to assess developments. Certainly, however, this is an important asset class for the country, given the great need for SMEs at the current stage.”
