Until recently, it was necessary to hold a licence as a bank or financial intermediary to lend in Italy. However the law has changed to allow insurers, alternative investment funds, SACE S.p.A. (Italy's export insurance agency) and securitisation SPVs to also grant loans to corporates, subject to certain conditions and (for insurers and debt funds) prior clearance with the relevant regulatory authority.

Following the financial crisis, the Italian government took steps to improve the regime for debt note issues to provide alternative sources of funding for Italian SMEs which had been largely dependent on bank financing. The subscription of debt paper is generally open to any investor, although certain benefits and tax breaks are only recognised when the notes are subscribed by a 'professional investor' or 'institutional investor', as codified by the Finance Act and secondary legislation. A number of changes in the law have also significantly encouraged the listing of debt securities on regulated markets although the process is subject to additional regulation including rules on regulated exchanges and market abuse.

The requirements for regulatory clearance are fairly demanding, and we would expect that most debt funds would set up an ad-hoc fund or manager entity specifically for the Italian market. Where they are not prepared to adjust their organisation to obtain regulatory clearance, investors can still structure the financing as a notes issuance, involve a bank or licensed intermediary to act as fronting lender, or lend into a holding company established in a less regulated jurisdiction.

A number of recent transactions involving debt funds including Tikehau Capital and Permira Debt Managers suggest that non-bank lending is slowly moving into the mainstream in Italy. Notably, Blackstone has recently cleared with the Bank of Italy a number of alternative investment funds to carry out lending in Italy. This signals increased interest from alternative lenders in the Italian market, while the initial reaction was to regard the requirements for a fund's organisation and structure as too demanding to fit the operations of the more active international debt funds.