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Access to finance for. SMEs. Global scenario and opportunities Maciej Otulak SME Access to Finance. Brussels 28 th November 2013. Why EU intervention needed SME funding needs and EU opportunities EU financial instruments for SMEs Building on success – results achieved

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slide1

Access to finance for

SMEs

Global scenario and opportunities

Maciej Otulak

SME Access to Finance

Brussels28th November 2013

slide2
Why EU intervention needed

SME funding needs and EU opportunities

EU financial instruments for SMEs

Building on success – results achieved

COSME / Horizon 2020 financial instruments

debt and equity for R&I and growth for SMEs

Budget proposed

Implementation

why eu intervention needed
Why EU intervention needed
  • Market failures in debt and equity markets for SMEs
  • Information asymmetry and transactions costs
  • Encouraging more private investment
  • Complementing national and regional schemes
  • Financial crisis and risk-averse of banks and investors
  • Supply/demand gap for loans and guarantees for enterprises’ growth and RDI
  • Difficulties in accessing start-up/growth finance
  • Need for an integrated European venture capital market

Commitments in Europe 2020 Strategy, Single Market Act, Innovation Union Flagship Initiative, Action Plan on SME Access to Finance

why eu intervention needed1
Why EU intervention needed

Pre-seed,

technology transfer

Seed and start-up

Early expansion

Expansion

Late expansion

R&D funding,

public grants

Entrepreneur, family, friends,

business angels, public sources

Venture capital funds,

business angels

Strategic investors (IPO), public markets, banks

Likely

investors

Serious lack of outside

investors in the early stages

VC market fragmented

along national lines

Too many small illiquid

growth stock markets

Policy

problems

Breakeven

point

REVENUE

Setting up

a company

TIME

Valley of death

Graph adapted from Cardullo: Technological entrepreneurism.

Note that there are no agreed and fast definitions for most of the concepts used in SME finance.

sme funding needs and eu opportunities
SME funding needs and EU opportunities

Financial instruments = indirect financing through financial intermediaries (CIP and JEREMIE) → no grants

  • DG ENTR D3 “Guide to funding”
  • ec.europa.eu/enterprise/policies/finance/guide-to-funding

Loans or equity for investment

SMEs

look for

Grants for research,

general grants,

specific project support

EU thematic programmes = direct co-financing of projects through calls for proposals (e.g. Life +, FP7 etc.) → grants

sme funding needs and eu opportunities1
SME funding needs and EU opportunities

Competitiveness and Innovation Programme: venture capital and loan guarantees

Find out which local banks and equity investors are benefiting from European funding and contact them (1).

Loans or equity for investment

JEREMIE scheme of the regional funds: loan guarantees and venture capital

EIB loans

SMEs

look for

Grants for research,

general grants,

specific project support

Research framework programme grants

Find out about calls for proposals; contact possible partners; fill in the application; wait for the project selection (2).

Other grant programmes

Grants from European Regional Development Funds (administered locally)

(1)access2eufinance.ec.europa.eu

(2)ec.europa.eu/contracts_grants

sme funding needs and eu opportunities2
SME funding needs and EU opportunities

Grants from Brussels

Access varies

Funding through financial institutions

eu financial instruments for smes
EU financial instruments for SMEs
  • Part of the EU toolkit for over a decade
  • Efficient way of spending the EU budget - leverage
  • Broad range of interventions:
    • Guarantees to mutual guarantee societies and banks lending to SMEs
    • Equity participations for early and growth stage investments
  • Common features:
    • Aim to increase access to finance for SMEs
    • Delivered via financial intermediaries on behalf of the European Commission
      • mutual guarantee societies, banks, funds, etc
    • Operated by the EIB/EIF
eu financial instruments for smes1
EU financial instruments for SMEs

EU funding

European Investment

Fund (EIF)

Venture capital

investments

Guarantee funds

Other investors

Venture

capital

fund

Guarantor

EIF selects its financial intermediaries based on competence. The selection criteria and the list of intermediaries are public.

Bank

Venture capital

investment

in SMEs

Lending

to SMEs

building on success results achieved
Building on success – results achieved
  • Competiveness & Innovation Framework Programme (CIP)

With a budget of € 1.1 billion, the CIP programme has helped to mobilise over € 15 billion for SMEs across Europe

    • SMEG SME Guarantee Facility => Loan Guarantee Facilitymore than 250,000 SMEs benefited from a guaranteed loan or lease
    • GIFHigh-Growth&Innovative SMEs Facility =>Equity Facility

more than 2.4 billion euros mobilised in equity investments

  • Cohesion policy instruments
    • Financial instruments for SMEs through JEREMIE scheme (over €7.5 billion)
  • EIB lending and EIF equity/mezzanine and risk-sharing operations (€13 billion in 2012) including Risk Sharing Instrument, Risk Sharing Finance Facility
  • Progress microfinance
  • Seventh Framework Program
    • Grants for EU research projects; goal of 15% SME participation
cosme horizon 2020 financial instruments
COSME / Horizon 2020 financial instruments
  • COSME in conjunction with Horizon 2020 will support two EU financial instruments for SMEs:
    • Equity instrument for SME’s growth and RDI
      • Equity Facility for R&I (H2020)
      • Equity Facility for Growth (COSME)
    • Debt instrument for SME’s growth and RDI
      • Loan Guarantee Facility (COSME)
      • SMEs & Small Midcaps Guarantee Facility for R&I (H2020)
equity instrument for r i and growth of smes 1
Equity instrument for R&I and growth of SMEs (1)
  • Equity Facility for R&I (H2020)
    • focus: early stage
    • final beneficiaries: innovative SMEs and small midcaps
  • Equity Facility for Growth for SMEs (COSME)
    • focus: growth stage
    • final beneficiaries: growth-oriented SMEs
  • Multi-stage funds: contribution of resources from COSME and H2020 on a pro-rate basis based on fund investment policy
equity instrument for r i and growth of smes 2
Equity instrument for R&I and growth of SMEs (2)
  • Two complementary facilities working together to support access to risk capital and stimulate the development of the European VC industry

combined investment in multi-stage funds

Equity Facility for R&I

Equity Facilityfor Growth

Mainly from H2020

Mainly from COSME

from start-up/early stage to expansion/growth stage

may make growth investments may make early-stage investments

up to 20% of total EU investment

debt instrument for growth and rdi for smes 1
Debt instrument for growth and RDI for SMEs (1)
  • Loan Guarantee Facility (COSME)
    • guarantees for loans to SMEs up to € 150 000*

* also above € 150 000 threshold for SMEs which do not meet the innovation criteria under Horizon 2020

    • securitisation of SME debt finance portfolios
  • SMEs & Small Midcaps Guarantee Facility (H2020)
    • guarantees for loans over € 150 000* for R&I activities

* also below € 150 000 threshold for R&I-driven SMEs and small mid-caps

debt instrument for growth and rdi for smes 2
Debt instrument for growth and RDI for SMEs (2)

COSME

Horizon 2020

Type of

operation

Loan Guarantees

Loan guarantee facility

Guarantees for

SME loans

< = € 150,000*

SME loan

Securitisation

Risk sharing or

loans (RSI II)

> € 150,000*

Target

group

Growth oriented SMEs

RDI-driven

SMEs & midcaps

implementation
Implementation
  • Budget of COSME financial instruments: EUR 1,4 billion EUR
  • Commission delegates implementation to the so called entrusted entity
  • Equity and debt facilities may pool resources with Member States willing to contribute part of their Structural Funds
  • Debt and equity funding may be combined
  • Demand-driven; applications to entrusted entity
more information
More information
  • Existing financial instruments (2007-2013)
    • SMEG and GIFec.europa.eu/enterprise/policies/finance/cip-financial-instruments
    • RSFFwww.eib.org/products/rsff/RSIwww.eif.org/what_we_do/guarantees/RSI
    • Progress Microfinance Facility ec.europa.eu/social/main.jsp?catId=836&langId=en
  • Proposed (2014-2020)
    • COSMEec.europa.eu/cip/cosme
    • Horizon 2020ec.europa.eu/research/horizon2020
    • Programme for Employment and Social Innovation
portal on eu finance
Portal on EU finance
  • http://access2eufinance.ec.europa.eu/
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