Brussels, 15/09/2008 (Agence Europe) - Following a request from European Union finance ministers meeting in Nice last Friday and Saturday (see related article), the European Investment Bank (EIB) announced on 13 September that it would modernise and increase significantly its support for small and medium-sized enterprises (SMEs) in Europe. Ministers agreed the Bank should target loans to SMEs totalling €15 billion over a two year period (2008-2009) as part of a global envelope of €30 billion. This level of lending represents an increase of around 50% compared with 2007, when the Bank lent €5.2 billion to SMEs through partner banks from the private sector. In addition, the EIB announced its intention to give a new €1 billion mandate to its European Investment Fund (EIF) subsidiary to provide mezzanine finance to SMEs. The EIB will also diversify its loan products, simplify procedures and ensure increased transparency on funding available to SMEs. The first of the new “European Loan for SMEs” is due to be signed in the coming weeks. “For us, it is not just a question of doing more, but above all doing better,” said EIB President Philippe Maystadt. The reforms come in response to the results of a consultation of the SME lending sector carried out by the EIB in 2007/08 in the context of the “Small Business Act” proposed by the European Commission in July 2008. The aim is to provide companies with the financing necessary for them to fully benefit from the simplification of small business regulations, thereby supporting activity and European competitiveness.
In addition to the increase in the volume of its lending in response to the target set by finance ministers (€15 billion in loans to SMEs over two years), the EIB will relax the definition of eligible investments, opening EIB finance to a wider range of small and medium-sized companies: henceforth, small investments of less than €20,000 will also qualify for an EIB loan, as will intangible investments, such as research and development, acquisition of intellectual property expenditure, the expansion of distribution networks or transfer of ownership of a company. This was not possible previously as EIB loans only supported SME material investment. At the same time, procedures for granting loans by intermediary banks will be simplified and become more transparent: every SME will be informed by the intermediary bank that it is eligible for an EIB loan and of the advantages of this loan.
Subsequently, by the end of the year, the EIB will offer intermediary banks more sophisticated products offering to share part of the risk to boost the segments where commercial banks have difficulty in becoming involved (SMEs seen to represent too high a risk or where guarantees are not felt to be good enough). Three types of measure will be developed: - risk-sharing loans with banks, where the EIB will guarantee part of the total risk taken by the intermediary bank; - loans where the EIB directly takes a risk on the beneficiary SME, alongside the intermediary bank; - so-called “mezzanine” products for fast-growing, or “gazelle” SMEs. Through its subsidiary, the EIF, the EIB will offer capital financing participating loans, considered as quasi-equity capital, which will improve the borrowing capacity of “gazelles” without their having to float the company or provide large guarantees (only if the company cannot make the reimbursements do the participating loans become shares).
The EIB and the European Commission will work together to set up a pan-European micro-credit fund for very small enterprises. This fund will mean that loans will be provided, through some 30 micro-finance institutions in Europe, for the creation, expansion and technical assistance of very small enterprises, particularly those in sensitive areas.
Support for SMEs (which had been provided since 1968) has been one of the EIB's 5 operational priorities since 2005. To further improve its activities, the EIB, for the first time, undertook to consult all the players involved in all 27 member states - SMEs, public authorities, commercial banks, chambers of commerce, professional and management associations. This consultation exercise revealed that, even on our highly developed financial markets, four types of company consistently find difficulty in accessing credit, and in particular: - very small enterprises of fewer than 10 employees have difficulty in finding financial products that correspond to their specific needs; - “gazelles” (or SMEs which are rapidly expanding and/or being transferred) have to manage both own-fund building and medium-term financing needs; - innovative SMEs have problems in financing intangible acquisitions to support their R&D or use new technologies; - SME investment in “eco-technology” or sustainable development (for example, to reduce CO2 emissions) are considered by banks to have an atypical risk profile. The consultation exercise also revealed the need for greater diversification of financial products, depending on the structure and particularities of the banking systems in the various member states. (O.L./transl.rt)