Pavia, almost four out of ten companies are at risk of 'unbankability' due to accumulated debts with the banking system
The situation of the companies in Pavia shows not only shadows but also lights. From the analysis carried out by the financial consultancy firm Hoshin Corporate Finance, on the financial statements of a sample of 167 companies in the province of Pavia with a turnover of more than ten million euros, it emerges that while on the one hand one side has seen its financial profile improve, on the other hand, many companies have found themselves facing significant drops in margins. Companies in difficulty in 2020, i.e. those with a negative rating and therefore at risk of “unfundability”, represent as much as 38% of the total. And the share of those most struggling, which have a totally negative EBITDA, represents 7% of the total number of companies analyzed.
And yet, are companies in Pavia really in difficulty? Despite the approximately €909.2 million in accumulated debts to the banking system — including €396.1 million in the short term and €513.1 million in the medium to long term — which make their business difficult to finance, these companies have significant “positive” capital to exploit, equal to almost €772.2 billion in loans to their customers. In other words, debts to banks and credits to customers are almost equivalent, and entrepreneurs from Pavia, being able to count on credit resources, would thus have overall the theoretical solution to consistently reduce their exposure to the banking system and improve their financial profile.
How? Through factoring, a tool already historically used by large, more structured companies but which over time is also being transferred to small and medium-sized companies. A solution that allows entrepreneurs to be able to finance themselves at lower costs and regardless of their rating, therefore suitable for all companies, both with positive financial profiles, where factoring is still useful, and negative, where it is necessary.
What does it consist of? Factoring makes it possible to obtain immediate liquidity simply by transferring credits to its customers to a specialized company. And this applies not only to “virtuous” companies with no or few debts (already widely used by them) that want to further improve their financial profile, but also to companies considered “less deserving”, as the value of customer credits is evaluated and not of the company itself, as is normally the case through the banking channel with the advance invoice.
In summary, the bank looks at the company's financial statements, while the factoring companies look at the customer portfolio. But factoring also has other advantages: it often has lower costs, commissions and interest are paid only if the credit line is used and it allows you to lower debts with an improvement in the rating. “The analysis shows the many difficulties that entrepreneurs from Pavia have been forced to face in recent years - said Massimo Boccoli, Founding Partner of Hoshin Corporate Finance. And yet, the financial statements do not tell everything. The size and quality of the credits held by companies tell us that the productive fabric of Pavia still has great potential. To express them, alternative financial instruments are needed that allow access to credit lines without weighing on balance sheets, especially at this time when there is a significant increase in the costs of raw materials and energy that impact on business continuity. Just like factoring, a tool that is starting to spread not only among large companies but also among Italian SMEs, both virtuous and in difficulty. Thanks to factoring, the emphasis is thus shifted from the company's financial indicators, whether positive or negative, to the quality of outstanding loans to customers. Immediate liquidity, no burden on balance sheets, improved ratings, often lower costs, the possibility of eliminating exposure to banks: with this solution, entrepreneurs have an extra weapon to improve their financial profile and be more attractive on the market.”
