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COSME financing for SMEs Brussels, 1 st December 2014

COSME financing for SMEs Brussels, 1 st December 2014 Ciprian Cristea Head of Unit SME Access to Finance European Commission DG Enterprise & Industry. 1. Significantly decreased lending in the Eurozone since financial crisis. Up to €1 million. Millions of euro. Up to €250,000.

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COSME financing for SMEs Brussels, 1 st December 2014

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  1. COSME financing for SMEs Brussels, 1st December 2014 Ciprian CristeaHead of Unit SME Access to Finance European Commission DG Enterprise & Industry 1

  2. Significantly decreased lending in the Eurozone since financial crisis Up to €1 million Millions of euro Up to €250,000 Source: ECB monthly statistics of new loans with a maturity of more than 1 year

  3. CIP Programme (2007-2013) • Guarantee facility • 52 financial intermediaries • Supported over 330,000 SMEs • Mobilised over €17 billion loans • 90% of beneficiaries had less than 10 employees • 70% of loans ≤ €50.000

  4. CIP Programme (2007-2013) Lenders SMEs Inter- mediaries CIP

  5. EU debt financial instruments (2014-2020)

  6. How do EU financial instruments work in practice – overview

  7. COSME call for expression of interest: Financial institutions invited to apply by 30 Sept 2020 • Debt facility (to provide guarantees and counter-guarantees to cover loans for SMEs with a particular focus on financing of SMEs up to €150.000) • Equity facility (to invest in SMEs predominately at the growth & expansion stage) • Target beneficiaries: SMEs (less than 250 employees) state aid ok => no need for notification

  8. Details of the Loan Guarantee Facility free of charge, first loss guarantee (Guarantee rate: ≤50%, cap rate: ≤20%) newly originated transactions with a higher risk profile (e.g. start-ups, less collateral, longer maturity) Capped portfolio guarantees Working capital, investment loans, subordinated loans, bank guarantees, leasing Strict focus on additionality min. 12 months (transaction) – max. 10 years (guarantee) Wide range of interventions ≤ € 150,000: for any type of SME > € 150,000: for SMEs not eligible in principle under Horizon 2020 (InnovFin) – verification through checklist Duration Principal amount Guarantee payment upon default, with pro-rata sharing of recoveries Repayment schedule: fixed or revolving Guarantee terms

  9. Possibility to share risk with nat./ regional sources Possibility to combine with EU grants Combination with grants possible for different purposes of expenditure (e.g. Machines, training) => Article 37 (8, 9) CPR • A financial instrument cannot be used to pre-finance EU grants • Grant cannot be used to reimburse support by financial instruments, for example a loan. ≥20% Risk retained by Intermediary Remaining risk Possible combination with nat/ regional sources ≤50% COSME Guarantee Need for state aid consistency • For combination with national/ regional sources • For combination with grants

  10. Options of Loan Guarantee Facility 2) Increase in volumes 1) New product with higher risk

  11. Guarantee coverage • Option 1: Cap rate from first guarantee onwards • Option 2: Coverage depends on volumes:

  12. The Securitisation window • The Commission remains committed to the support of SME loan securitisation via the COSME financial instruments • The COSME Securitisation Window will enable the securitisation of SME debt finance portfolios to mobilise additional debt financing for SMEs • Support for the transactions will be conditional upon an undertaking by the financial intermediary to use a significant part of the resulting liquidity or mobilised capital for new SME lending in a reasonable period of time

  13. Selection process by EIF: First come, first served Pre-selection Quality assessment: capacity to manage risk, experience, quality of implementation proposal Impact assessment: envisaged portfolio (enhanced access to finance, expected loss/ granularity), geographic distribution Due Diligence Business plan: risk management, collection of recovery, compliance with reporting requirements Financial information: funding sources, ownership structure Pricing policy Enhanced access to finance proposal Final selection Final selection and approval

  14. Application: demand driven General information Intermediary’s activity: products offered, geographic reach, branch network Financial standing: Annual reports, public resources Operating principles: credit policy, risk management Debt financing volumes, position in the market, pricing policy Proposal Proposed product to be covered Default/ recovery rates Marketing/ promotion: section on website with information how/ where to apply, inform recipients of COSME support and submission of case studies

  15. Details of Equity Facility for Growth ≥50% into SMEs with headcount: <250 employees Turnover: ≤€50m or balance sheet: ≤€43m Eligible final recipient ≥50% into businesses that already established a product and generate revenues Growth & expansion stage Funds co-operating with business angels are eligible as long as minimum criteria are met Business angels Long-term investments (5 to 15 year positions) Investment period Funds must contribute to the creation of a pan-European VC market Cross-border investments EU contribution: 7.5-25% of total commitment At least 30% private investors EU contribution Possibility of joint investments with the early-stage equity facility of InnovFin (Horizon 2020) into multi-stage funds(pro-rata funding) InnovFin (Horizon 2020)

  16. Selection process by EIF: First come, first served

  17. Reporting requirements Annual report Quarterly reporting • Information about Financial Intermediary • Share of EU contribution (e.g. guarantee/ cap rate or EU investment) • Performance of financial instruments (e.g. volume, leverage) • Called guarantees/ impairment of equity investments • SME transactions (number, size, sector, turnover, scoring) EIF publication requirements • List of (sub-) financial intermediaries (guarantee cap or investment amount) • List of final recipients (for LGF only recipients which receive > EUR 150,000) unless it harms commercial interests

  18. How to apply for EU Finance • Financial institutions invited to apply by Sept 2020 • EU Debt Financial Instruments www.eif.org/what_we_do/guarantees/single_eu_debt_instrument/index.htm • EU Equity Financial Instruments www.eif.org/what_we_do/equity/single_eu_equity_instrument/index.htm • Businesses invited to apply for EU finance • Access to finance portal: www.access2finance.eu • For further information • Enterprise Europe Network http://een.ec.europa.eu/

  19. www.access2finance.eu

  20. www.access2finance.eu

  21. Thank you for your attention! 22

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