The European Commission has unlocked €1 billion from the European Fund for Strategic Investments (EFSI) that will serve as a guarantee to the European Investment Fund (EIF), part of the European Investment Bank Group. This will allow the EIF to issue special guarantees to incentivise banks and other lenders to provide liquidity to at least 100,000 European SMEs and small mid-cap companies hit by the economic impact of the coronavirus pandemic, for an estimated available financing of €8 billion.
This step is part of the Commission’s commitment to help hard-hit SMEs and is part of the package of measures announced by the EIB Group earlier in March. The Covid-19 pandemic has triggered devastating economic consequences on small and medium sized businesses, typically the most affected in any crisis, causing a vacuum in their liquidity. This fund aims to providing immediate relief to these businesses, which make up a large part of the EU’s economy.
The EU guarantees supporting these loans are necessary as they incentivise banks to lend to SMEs in such a period when loans are usually considered as perceived risk. This should help to mitigate the impact of the pandemic on small and medium sized enterprises.
The €1 billion has been released from the EFSI under the COSME Loan Guarantee Facility and the InnovFin SME Guarantee under Horizon 2020. Therefore, the EIF is in a position to provide guarantees worth €2.2 billion to financial intermediaries, unlocking €8 billion in available financing. The guarantees will be offered through the EIF to the market, via a call for expressions of interest.
Key features of these guarantees will be:
– Simplified and quicker access to the EIF guarantee;
– A higher risk cover – up to 80% of potential losses on individual loans;
– Focus on working capital loans across the EU;
– Allowing for more flexible terms, including postponement, rescheduling or payment holidays
The new features will be accessible to new as well as existing financial intermediaries (comprising banks and alternative lenders) already working with EIF, who will extend special conditions to more than a hundred thousand companies benefitting from guarantees under the COSME LGF and the InnovFin SMEG programmes.
SMEs will be able to apply directly to their local banks and lenders participating in the scheme, which will be listed on http://www.access2finance.eu.
The Commission and the EIB Group will continue to work on additional measures and will use all the
tools at their disposal to help contain the coronavirus pandemic and address its economic
consequences.
Background
The European Investment Fund (EIF) is part of the European Investment Bank group, aimed at supporting Europe’s micro, small and medium-sized businesses by helping them to access finance.
COSME is the EU programme for the Competitiveness of Enterprises and Small and Medium-sized Enterprises (SMEs) running from 2014 to 2020 with a total budget of €2.3 billion. At least 60% of the programme is devoted to improving access to finance for SMEs in Europe, with two financial instruments.
Horizon 2020 is the EU programme for Research and Innovation running from 2014 to 2020 with a total budget of €77 billion. Under Horizon 2020, InnovFin – the EU Finance for Innovators – financial instruments aim to facilitate and accelerate access to finance for innovative businesses across Europe.
The European Fund for Strategic Investments (EFSI) is the financing pillar of the Investment Plan for Europe, which was launched in November 2014 to reverse the downward trend in investment levels and put Europe on the path to economic recovery. Its innovative approach based on the use of an EU budget guarantee provided to the EIB Group enables substantial public and private sector funds to be mobilised for investment into strategic sectors of the European economy. The Investment Plan for Europe has already generated more than €460 billion of investment and supported 1.1 million
