Financing working capital through financial instruments: an opportunity to be seized immediately

Written By Michele Alessandrini
Publishing 11 May 2020

The COVID -19 emergency is creating heavy pressure on liquidity for Italian companies. The first estimates for the whole of 2020 vary from €30 billion in working capital requirements to a peak of €138 billion in the most pessimistic scenario depending on the forecasts by the end of the emergency, which still difficult to determine.
 
Moreover, additional factors also impact on liquidity of Italian entrepreneurs and companies. These include the trends for demand, debt and payment delays from public administrations as well as the availability of credit from financial institutions. All this could seriously limit the effectiveness of support for numerous companies already in obvious difficulty. It could also transform a liquidity problem into a high risk of insolvency, triggering a vicious circle that could quickly lead the Italian economic system from an emergency crisis to a long period of recession, as experienced only a few years ago.
 
The opportunities offered by the new EU Regulations, in particular 2020/460, to finance working capital through financial instruments with ESIF are significant for the Regions. For those who already activated financial instruments in the 2014-2020 programming period, as illustrated by the Sardinia Region case, it would also be an immediate way to very quickly provide financial support to local businesses that addresses high liquidity requirements.
 
Supporting the liquidity needs of enterprises, especially SMEs, means avoiding in the worst-case scenario that they fail or, at best, drastically reduce investments. In both cases, an immediate brake is needed to stop a potential negative spiral that could produce unpredictable effects on growth and employment.
 
To explore these points and the opportunities that derive from the new regulatory framework, you can read the entire article written by Michele Alessandrini and Clarissa Amichetti (t33) together with Marco Naseddu (referent of Financial Instruments of the ERDF ROP Sardinia 2014-2020).