“You don't learn a thing from failure”. This says Peter Thiel, business owner (Co-founder of PayPal) in the interview with Timothy Ferriss: “… Bankruptcy is vastly overrated. When a business fails it often does not teach anything, because you can fail for many and for the most diverse reasons. In the end, it turns out to be a very damaging and discouraging experience and I believe that the end of any business is a kind of tragedy.”
The state as a guarantee for a loan
In times of health and economic emergency from Coronavirus, the Italian government has intended 400 billion state guarantee to the banking system to incentivize it to provide loans to businesses. If the companies at maturity fail to repay the loan, the banks will get the money back from the government. Therefore, for them the credit risk is zero or almost zero.
In “Liquidity Decree” the rules useful to SMEs are described, self-employed and professionals to access this loan of up to 25 thousand euros (maximum guaranteed amount equal to 25% of certified revenues in the last year available) lasting 6 years with first installment after at least 18 months from accreditation, always if you are not in a status of reported as a "bad payer" to the CRIF / Central Risks.
As for the interest rate to be applied, the same decree states that banks will have to take into account the average conditions applied by the banking system in transactions of this type. While for the commissions there is a charge of 0,25% The first year, the 0,50 the second and third year and 1% the fourth, fifth and sixth year.
And after the public guarantee?
In the short term, these measures are essential to prevent liquidity shortages from turning into insolvency situations. However, after the emergency, policies will be needed to help reduce the debt burden. The researchers of the Bank of Italy Gobbi talk about it, Palazzo and Segura, in the article “Post-COVID-19 financial support measures and their medium-term implications”.
Alex Gaetani