Liquidity decree: here are the measures for businesses

The Liquidity Law Decree (Legislative Decree no. 23 of 8 April 2020), approved by the Council of Ministers and published in the Official Journal on 9 April 2020, gives the go-ahead to all extraordinary economic measures that will support businesses, artisans, self-employed people and professionals. 

After the first economic support measures, launched with Cura Italia Decree (Legislative Decree 17 March 2020, n. 18), and thought of for all those categories in difficulty, due to the Covid-19 emergency, here is a floor which provides broader measures, real social protection tools for ensure liquidity for companies in difficulty.

«Such a powerful intervention for business financing - said Prime Minister Antonio Conte in recent days - has never been seen in the history of our Republic, at a time when we are experiencing not only a health emergency, but also an economic and social one."

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It is important to take into account the fact that the Liquidity Law Decree:
• predicts public guarantees to encourage access to credit for small, medium and large businesses;

• does not foresee loans that can be requested directly, for which it will be necessary to wait for the envisaged system to be put into operation by the banks involved; • predicts, for some measures, authorization from the European Commission, not yet operational.

To restart the Italian production system, among all measurements contained in the Liquidity Law Decree, two are of greatest interest to businesses:
• public guarantees reserved for companies with up to 499 employees (as per art. 13 - Legislative Decree 8/4 2020, n. 23);

Enhanced measures are also for particular business targets:

- Smaller SMEs and natural persons carrying out business, artistic or professional activities;
- SMEs with turnover up to 3,200,000 euros.

• public guarantees for companies of all sizes (as per art. 1 - Legislative Decree 8/4 2020, n. 23).

Public guarantees reserved for companies with up to 499 employees

New rules for the Guarantee Fund for SMEs, which will be valid until 31 December 2020. The Guarantee Fund has been transformed into an instrument capable of guaranteeing up to 100 billion euros of liquidity, thanks to the strengthening of the financial allocation and the extension of its use also for companies, based in Italy, which have up to 499 employees. 

Here's what they are conditions of the Fund for companies based in Italy and which have a maximum of 499 employees:

• access is guaranteed without the use of creditworthiness assessment models and there is no cost to investigate the case;
• the maximum total amount guaranteed per company has been raised from 2.5 to 5 million euros, subject to authorization from the European Commission. Once the 5 million are reached, SMEs, as per the community definition, will also be able to use a reserved ceiling of 30 billion in SACE guarantees;
• access to the Fund is granted for financing up to 6 years and with a maximum amount, for each individual request, which must be lower, alternatively, than:

to) double the beneficiary's annual salary expenditure for 2019 or for the last available year. For companies established on 1 January 2019, the maximum amount cannot exceed the salary costs expected for the first two years of activity;

b) 25% of the 2019 turnover;

c) requirement, to be certified with self-certification, for working capital costs and for investment costs in the following 18 months, in the case of small and medium-sized businesses, and in the following 12 months, in the case of businesses with a number of employees not exceeding 499. This requirement is certified by means of a specific self-certification, made by the beneficiary pursuant to Presidential Decree no. 28 December 2000. 445;

• the coverage percentage for the direct guarantee to the company rises to 80%, and will reach 90% once authorization from the European Commission has been obtained;
• the percentage of coverage for reinsurance represents 90% of the amount guaranteed by Confidi or other guarantee funds, and may increase to 100% once authorization has been obtained from the European Commission, but on condition that

to) the guarantees issued by the Confidi do not exceed 90%;

b) the guarantees issued by them do not provide for the payment of a premium, which takes into account the remuneration for the credit risk assumed by the Fund.

• the guarantee can also be requested on operations already completed and disbursed after 31 January, and no later than 3 months from the submission of the request and, in any case, provided that the financier reduces the interest rate applied to the company and communicates this reduction to the Fund;
• the guarantee is automatically extended in the event of suspension of payment of the principal amount or of the entire installment of loans already guaranteed by the Fund;
• the guarantee does not provide for the payment of the commission for failure to complete the financial transactions (paid by the requesting financiers);
• the guarantee is also granted in favor of companies that have, after 31 January 2020, exposures towards the financier, classified as "unlikely to pay" or "overdue or overdrawn impaired", or which, after 31 December 2019, have been admitted to insolvency proceedings, provided that the conditions specified by the decree are respected.

Enhanced measures for particular business targets

The Fund also provides guarantees for smaller SMEs and for natural persons carrying out business, artistic or professional activities, who self-certify that they are damaged by the COVID-19 emergency and who request new financing with:
to) amounts up to 25% of 2019 revenues and with a maximum ceiling of 25,000 euros;

b) a 24 month grace period and a maximum duration of 6 years. The Fund will guarantee 100% of the financing, free of charge and automatically, allowing the financier to disburse the sum without waiting for the final outcome of the investigation by the Fund;

c) the bank will apply a maximum interest rate to the financial operation (rate not higher than the Rendistato rate, with residual duration from 4 years to 7 months to 6 years and 6 months, increased by the difference between the 5-year bank CDS and the 5-year ITA CDS, as defined by the Framework Agreement for the financial advance as guarantee
pension, pursuant to art. 1, paragraphs 166 to 178 of Law 11/12/2016, n. 232, increased by 0.2%).

Guarantees are also provided for SMEs with revenues up to 3,200,000 euros, which self-certify that they have been damaged by the COVID-19 emergency and which request new funding:
to) with amounts up to 25% of 2019 revenues;

b) which the guarantee can cover from 90% to 100% of the financing, combining it with that releasable by a Confidi.

Public guarantees for businesses of all sizes 

Until December 31, 2020, for “performing” companies of all sizes, SACE issues a guarantee:
• for loans with a duration of less than 6 years, with the possibility of pre-amortization of up to 24 months and intended to support personnel costs, investments or working capital, employed in production plants and entrepreneurial activities located in Italy, as documented and attested by the legal representative of the company
beneficiary;
• the maximum amount of financing backed by a guarantee for the company is determined as greater:
a) 25% of the 2019 turnover of the company in Italy (approved budget or tax return);

b) double the 2019 personnel costs supported by the company in Italy (approved budget or certified data if the company has not yet approved the budget). If the company started its business after 31 December 2018, reference is made to the personnel costs expected for the first two years of activity, as documented and certified by the company's legal representative. If the beneficiary company is part of a group, reference is made to the value on a consolidated basis of turnover and personnel costs. The requesting company is required to communicate this value to the financing bank.

• the guarantee, in equal and proportional competition between guarantor and guaranteed, in losses due to failure to repay the loan, covers:

c) The 90% of the loan amount for businesses with fewer than 5,000 employees in Italy and turnover value up to 1.5 billion euros;

d) the'80% of the loan amount for companies with a turnover value between 1.5 billion and 5 billion of euros or with more than 5000 employees in Italy;

And) The 70% for businesses with a value of turnover exceeding 5 billion.
• for the issue of the guarantee, here are the commissions annual due from companies:
a) for SME financing 25 basis points are paid in relation to the guaranteed amount during the first year, 50 basis points during the second and third years, 100 basis points in subsequent years;

b) for financing businesses other than SMEs 50 basis points are paid in relation to the guaranteed amount during the first year, 100 basis points during the second and third years, and 200 basis points in subsequent years.

The cost of financing covered by the guarantee it must be inferior at the cost that would have been requested by the financier for operations with the same characteristics, but without the guarantee. This condition must be certified by the legal representative of the aforementioned lending entities.
• the company benefiting from the guarantee assumes a commitment to managing employment levels through trade union agreements and undertakes that it, as well as any other company based in Italy and which is part of the same group to which the first belongs, does not approve the distribution of dividends or repurchase of shares during 2020.
All the financial measures previously illustrated remain valid and usable (Cura Italia, ABI Conventions for the moratorium and advance payment of the Redundancy Fund, direct bank loans).