Corporate & commercial Law

How to Finance a Business Startup in Italy

When starting a business in Italy, obtaining funding from a bank, organization, or government is often necessary, particularly to cover initial costs. For foreign entrepreneurs venturing into Italy for the first time, securing financing is a crucial step in the development of their new venture.

So, how can you go about obtaining financing?

How to obtain bank or public funding to start an Italian business?

It’s important to note that seeking financing from a bank may involve meeting specific requirements, making it not universally accessible. As an international entrepreneur, it’s crucial to prepare in advance to ensure a proper request. Financing options can vary, including grants, zero-interest loans, or startup funding, among others.

Having a well-defined business plan is equally important when seeking financing. It helps determine the precise amount required to start the business, where to allocate investments, and who to approach for funding. It’s also worth considering that new businesses may be eligible for certain tax incentives or government grants aimed at supporting entrepreneurial ventures.

Starting a commercial business involves various costs, and pursuing your entrepreneurial dreams may necessitate seeking a loan. To request a loan, specific requirements must be met. Additionally, it’s worth noting that in Italy, individuals under the age of 35 and women have access to favorable financing options from both public and private sources.

Starting a Business: A Business Plan as requested by Italian Banks

When requesting financing from a bank or another institution, it is important to start by having a clear understanding of the initial budget required to kickstart the business. This can be achieved through the development of a comprehensive business plan. The business plan serves as a useful tool, prepared by the entrepreneur with the possible assistance of experts, to gain a clear idea of how the business will progress.

At ILF Italian tax advisors, we are ready to assist you in crafting a Business Plan that meets the requirements of Italian banks and institutions.

The financial budget plays a crucial role in determining the type of financing to seek, who to approach for funding, and how to proceed. Therefore, it is essential to evaluate all the business’s starting needs and address key questions such as:

  • Do you require a location to purchase or rent for your business operations?
  • What are the projected costs for employing personnel?
  • What expenses will be incurred for equipment and machinery?
  • What are the anticipated costs for software and computer components?
  • What taxes and social security contributions will the company be responsible for?

These are just a few examples of the questions to consider when starting a business and applying for financing. Having a clear overview of the expected costs is also beneficial in determining the most suitable type of loan to request.

Types of Loans in Italy

Once you have a clear understanding of the budget required to start your business, you can proceed with the loan application. It’s important to consider that there are various types of loans, depending on the specific entrepreneurial project. 

Bank Loans for Opening a Commercial Business

Italian Banks can offer customized loans for those looking to open a commercial business. In certain regions of Italy, there are various incentives available from both the government and banks to support business startups.

Bank Financing for Young Italian Entrepreneurs

Various banks provide favorable financing options for young entrepreneurs who are starting a business, especially those under the age of 35.

Italian Government Financing

New businesses can apply for various types of state-funded financing. These funds are disbursed at the national level and are specifically designed to encourage specific types of projects or to support young entrepreneurs and women in starting a business. This can include grants or targeted financial support with tax benefits.

‘Finanza Agevolata’ refers to the universe of public funding available for businesses in Italy. It encompasses a wide range of financial incentives and support programs provided by the government to promote economic growth and entrepreneurship, especially startups and small and medium-sized enterprises (SMEs), by offering grants, subsidies, low-interest loans, and other forms of financial assistance. ‘Finanza Agevolata’ programs are designed to foster innovation, job creation, regional development, and sustainable business practices. 

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In summary, a foreign entrepreneur looking to start a business in Italy can begin by seeking a loan, but they need to determine the type of loan they require. They can choose to request financing from a bank, apply for funding through programs offered by institutions, organizations, or the government, or explore the possibility of accessing grants or tax incentives provided by the government if they meet certain criteria.

Available State Incentives in Italy 2023-2024

In 2023, new Italian businesses can apply for several interesting state incentives. Just like when requesting a loan from a bank, in this situation, it’s essential to have a detailed business plan and request what the business needs to get started.

To apply for these incentives, in most cases, it’s necessary to submit a document, such as the updated business plan, specifying all the details of the project you intend to launch. Here is a list of state incentives available for starting a business in 2023/24:

Zero-Interest Loans for New Businesses

Prestito a tasso zero per piccole e medie imprese is an incentive for young individuals and women who want to become entrepreneurs. These incentives are valid throughout Italy and involve a combination of zero-interest financing and non-repayable contributions for business projects with expenses up to 3 million euros, covering up to 90% of eligible total expenses. These incentives are primarily targeted at businesses composed mainly of young individuals aged 18 to 35 or women.

Resto al Sud

Resto al sud is an incentive that supports the establishment and development of new entrepreneurial and professional activities in regions such as Abruzzo, Basilicata, Calabria, Campania, Molise, Puglia, Sardegna, Sicily, as well as in the earthquake-stricken areas of Central Italy (Lazio, Marche, Umbria) and the smaller marine, lagoon, and lakeside islands in the Central-Northern region. It is aimed at individuals between the ages of 18 and 55. There are funds amounting to 1.25 billion euros available. These incentives are intended for individuals under 56 residing in the specified regions and areas.

Smart and Start

This is an incentive that supports the establishment and growth of innovative startups. It finances projects ranging from 100,000 euros to 1.5 million euros. Eligible for financing are innovative startups that have been established for no more than 60 months and are registered in the special section of the business register.

The Female Business Fund

Fondo Impresa Donna 2023 is a national incentive that supports the establishment and consolidation of businesses led by women, promoted by the Ministry of Economic Development. It provides funding for investment programs in the fields of industry, craftsmanship, agricultural product transformation, services, commerce, and tourism. The fund allocates 200 million euros for female businesses, both new and already established. The incentives finance investment programs for the initiation or development of female-led businesses to be carried out within 24 months. 

Cultura Crea

is an incentive designed to support the establishment and growth of businesses and non-profit initiatives in the cultural and tourism sector. Funding is available in the regions of Basilicata, Calabria, Campania, Puglia, and Sicily. Applications can only be submitted online starting from April 26, 2021.

Smart Money Phase 2

Smart Money is an incentive tailored for innovative startups in the pre-seed or seed stage that want to leverage the specialized services and expertise of innovation ecosystem actors to realize a development project and prepare for market launch. Phase 2 is exclusively reserved for startups that have completed the previous intervention. These companies can request a second non-repayable contribution if they receive risk capital from qualified entities, as well as from qualified investors or business angels, to finance their development plans.

The Creative Business Fund

is a national incentive that funds projects in the cultural and creative sector proposed by micro, small, and medium-sized businesses, whether new or already established. The fund is promoted by the Ministry of Economic Development, in collaboration with the Ministry of Culture, and managed by Invitalia. Projects up to 500,000 euros are eligible for funding, considering both investment expenses and working capital.

These are incentives provided by the Italian state. All the guidelines can be found on the official website of Invitalia, the Italian development agency with its portal dedicated to all the incentives that new businesses can apply for to access various forms of financial support.

To apply for access to one of these incentives, it’s necessary to adhere to the guidelines of each call for proposals and submit a document containing all the project information. 

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