Italy’s small businesses scrap for survival
Three years ago, this owner of a small business in Italy’s industrial Veneto region lost his life savings, when two regional banks failed after the European debt crisis and were wound down, wiping out shareholders. Today, he is struggling with a new torment: the outbreak of coronavirus in northern Italy that has devastated lives and shut businesses across the region since mid-March. His company’s revenues have dried up even as his overheads remain unchanged.
“I am scared for the future,” he said.
Many companies rely on local banks for funds and do not have bonds or investors to draw on
Northern Italy is home to more than 2m businesses, according to Prometeia, a research and consulting firm. Lombardy, the region around Milan that has been in lockdown since mid-March, has more than 900,000 of them.
Andrea Guerra, a former chief executive of Italian eyewear multinational Luxottica and government adviser who is advising small business owners, said the sector was suffering a “balance sheet crisis”.
This is a particular problem for the average Italian business, he said, because they generally relied on one local bank for funding — via short-term loans of a few months based on their revenue flows — and did not have bonds or institutional investors to draw on. By contrast in the UK, for example, the average business has “cash in hand” to keep paying their operating expenses for 18 months, according to analysts’ estimates.
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