Funding Opportunities for Lombardy’s SMEs: Basket Bond Lombardia

In early September, a significant initiative for small and medium-sized enterprises (SMEs) in Lombardy was launched: Basket Bond Lombardia. 

This funding opportunity is designed to support the development of regional supply chain projects. The program offers a total of €32 million in financial backing, including guarantees and non-repayable grants to cover issuance costs.
Before diving into the deails of this program, let’s take a moment to explain what basket bonds are and why this alternative financing channel is particularly appealing.

Basket bonds are financial instruments that enable companies to raise funding by issuing in amounts below €50 million, known as minibonds. 
The minibonds issued by individual companies are then pooled into a single basket that institutional investors can purchase.
This structure allows companies to access an alternative source of financing. It provides loosens the dependence on bank credit for SMEs and offers a solid return on investment for investors by spreading risk.

The principle behind basket bonds is straightforward: by combining several corporate bonds into a single issuance, it's possible to draw in a larger pool of investors who can spread their risk across a diverse portfolio of different businesses. This approach allows small and medium-sized enterprises (SMEs) -whose bonds are often too small to be appealing for institutional investors - to access capital markets more easily.

However, that's not the only benefit. Basket bonds also:

• Offer flexible financing: each company can choose the issuance size based on its specific needs and debt sustainability analysis.
• Provide medium-to-long-term funding with an amortizing structure: rather than a single lump-sum repayment at maturity, companies repay in installments, avoiding large cash outflows while investments are still generating returns.
• Do not require collateral: although guarantees are welcome, they are not mandatory.
• Reduce issuance costs: Joining a basket bond initiative allows companies to lower bond costs by participating in a shared, guided issuance process. 
• Boost company visibility and reputation: participation in a basket bond is a valuable marketing opportunity for SMEs, enhancing their presence among investors and stakeholders and strengthening market confidence in their financial stability.

Let’s take a closer look at Basket Bond Lombardia.

As we mentioned earlier, this initiative focuses on developing regional supply chains projects among Lombard SMEs. Specifically, it is aimed at funding:

• Projects that foster the development of business networks and clusters;
• Projects that promote the adoption of sustainable production models.

To be eligible, companies must present a shared project in collaboration with a clusters of small and medium-sized enterprises (excluding micro-enterprises) belonging to the same supply chain, that include at least three potential issuers. 

Each company can issue minibonds valued between €1.5 million and €10 million. 

The bond has a term of 7 years and features an "amortizing" repayment structure, which means the debt is repaid in installments rather than as a single final payment. Additionally, there is a 2-year pre-amortization period during which the company is not required to make any repayments.

Interest rates can be either fixed or variable, depending on the company’s credit rating and market conditions. 

This raises an important question: What financial requirements must companies meet to participate?

Companies can participate if they meet the following criteria: 

1. They are incorporated as limited liability companies, joint-stock companies, or cooperatives and have filed at least two balance sheets by the time of the application. 
2. They have an operational base in Lombardy. 
3. They possess a valid credit rating of at least BB (or its equivalent) from an rating agency accredited as ECAI.

In the absence of a credit rating, companies can still apply if they meet the following requirements: 

• They have not incurred in operating losses in more than one of the last two fiscal years;
• They have a minimum turnover of €5 million; 
• The Net Financial Position (NFP)/ EBITDA ratio is below 5. 
• The NFP/Equity ratio is below 3. 
• The EBITDA/Revenue ratio is higher than 4%.  

However, companies must obtain a valid credit rating before issuing a minibond. The costs for certifying the latest balance sheet and obtaining this rating can be covered by a non-repayable grant provided by the Lombardy Region to help offset the structural costs of the issuance.

Basket Bond Lombardia is an ideal collaborative funding opportunity for the development of projects involving multiple companies within the same supply chain, whether they operate in the same sector or are linked through a common production process. For more information on this tool and application procedures, visit the Lombardy Region website, where you’ll find application forms and necessary instructions for submitting your proposal.

There are still 18 months left to plan the project. Applications, complete with a project report presented by the Lead Company, can be submitted until May 29, 2026. 

Time flies, but Lombardy's SMEs are known for soaring even faster.