The European Commission announced on Monday 6 April that it has unlocked one billion euros from the European Fund for Strategic Investments (EFSI), which will serve as a guarantee for the European Investment Fund (EIF), part of the European Investment Bank (EIB) group.
This will enable the EIF to issue special guarantees to incentivise banks and other lenders to provide liquidity to at least 100 000 SMEs affected by the economic impact of the COVID-19 pandemic, for an estimated available financing of eight billion euros.
This announcement fulfils the commitment made in the Commission’s Communication of 13 March to bring immediate relief to hard-hit SMEs. The money will be available to SMEs from April onwards.
One of the immediate economic consequences of the coronavirus pandemic is the sudden lack of liquidity affecting SMEs. These companies are typically the most affected in a crisis “and it is essential to support them with adequate liquidity”, says a press release. However, in a situation of liquidity crunch banks are not incentivised to lend SMEs money due to the sudden increase in perceived risk.
This is why EU guarantees supporting these loans are necessary. The EIF is offering to the market dedicated EFSI-backed guarantees to contain the impact of the pandemic on SMEs. (Original version in French by Lionel Changeur)