Brussels, 22/07/2014 (Agence Europe) - Through the budget of €1.3 billion euros for the funding of SMEs as part of the EU Competitiveness of Enterprises and SMEs programme for 2014-2020 (COSME), it will be possible to mobilise up to €25 billion euros for SMEs over the next seven years through leverage geenerated by financial intermediaries. The agreement signed on Tuesday 22 July between the Commission and the European Investment Fund (EIF) will pave the way for SME funding out of own funds and loans in the framework of COSME by the end of 2014.
Immediately after the signing of the agreement, the EIF launched a call for expressions of interest, for which eligible financial institutions (banks, guarantee institutions, funds etc) can apply. After a thorough due diligence process, the EIF will select financial intermediaries which can then make the new finance available to European SMEs across all sectors.
“Through COSME, the EIF will be able to support even more SMEs across Europe over the next seven years. The Competitiveness and Innovation Programme (CIP), COSME's predecessor, enabled SME financing of approximately €20 billion and helped to support more than 1 million jobs”, said EIF Chief Executive Pier Luigi Gilibert, who signed the agreement on Tuesday with new Commissioner for Industry Ferdinando Nelli Feroci.
COSME will operate by way of funding guarantees to the banks in order to help them provide more loans and finance leases to SMEs. The impact as substantial as, due to the the COSME programme leverage, one euro invested in a loan guarantee enables up to €30 of funding for SMEs, the Commission explains. These guarantees will typically help many SMEs which might otherwise not be able to obtain funding due to lack of sufficient collateral. It is expected that up to 330,000 SMEs will receive loans backed by COSME guarantees, with the total value of lending reaching up to €21 billion. Based on the experience of the CIP, 90% of the beneficiaries will have ten or fewer employees with an average guaranteed loan of around €65,000. This is precisely the category of SMEs which currently faces the most difficulties getting a loan.
A part of the COSME budget will also be invested in funds that provide venture capital for the expansion stage of SMEs, in particular those operating across borders. The fund managers will operate on a commercial basis, to ensure that investment is focused on SMEs with the greatest growth potential. It is expected that some 500 firms will receive equity and the overall investment volume could reach up to €4 billion and attract further finance by co-investments from other public and private sources. (EH)