Access to
finance for
SMEs
Global scenario and
opportunities
Maciej Otulak
SME Access to Finance
Brussels
28th November 2013
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
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Why EU intervention needed
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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
3
Why EU intervention needed
Pre-seed,
technology transfer
Likely
investors
R&D funding,
public grants
REVENUE
Policy
problems
Seed and start-up
Early expansion
Entrepreneur, family, friends,
business angels, public sources
Serious lack of outside
investors in the early stages
Expansion
Late expansion
Venture capital funds,
business angels
Strategic investors (IPO),
public markets, banks
VC market fragmented
along national lines
Too many small illiquid
growth stock markets
Breakeven
point
Setting up
a company
Valley of
death
TIME
Graph adapted from Cardullo: Technological entrepreneurism.4
Note that there are no agreed and fast definitions for most of the concepts used in SME finance.
SME funding needs and EU opportunities
Loans or
equity for
investment
SMEs
look for Grants for
research,
general
grants,
specific
project
support
•
Financial instruments =
indirect financing
through financial
intermediaries (CIP
and JEREMIE) → no
grants
EU thematic
programmes = direct
co-financing of projects
through calls for
proposals (e.g. Life +,
FP7 etc.) → grants
• DG ENTR D3 “Guide to funding”
ec.europa.eu/enterprise/policies/finance/guide-to-funding
5
SME funding needs and EU opportunities
Loans or
equity for
investment
SMEs
look for Grants for
research,
general
grants,
specific
project
support
Find out which local
banks and equity
investors are benefiting
from European funding
and contact them (1).
Competitiveness and Innovation
Programme: venture capital and loan
guarantees
JEREMIE scheme of the regional funds:
loan guarantees and venture capital
EIB loans
Find out about calls for
proposals; contact
possible partners; fill in
the application; wait for
the project selection (2).
Research framework programme grants
Other grant programmes
Grants from European Regional
Development Funds (administered locally)
(1) access2eufinance.ec.europa.eu
(2) ec.europa.eu/contracts_grants
6
SME funding needs and EU opportunities
Grants
Loans
Equity
Local or regional
Local and regional
programmes
Possibly Jeremie
(ERDF) instruments
Other programmes
Possibly Jeremie
(ERDF) instruments
Other programmes
National
National programmes
National programmes
National programmes
European
Thematic European
programmes based on
calls: FP7, etc
CIP guarantees for
loans; EIB loans
CIP and other EIFmanaged venture
capital investments
Grants from
Brussels
Access varies
Funding through
financial institutions
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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
8
EU financial instruments for SMEs
EU funding
European Investment
Fund (EIF)
Venture capital
investments
Guarantee funds
Other investors
EIF selects its financial
intermediaries based on
competence. The selection
criteria and the list of
intermediaries are public.
Venture
capital
fund
Venture capital
investment
in SMEs
Guarantor
Bank
Lending
to SMEs
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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 Facility
more than 250,000 SMEs benefited from a guaranteed loan or lease
• GIF High-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
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Success stories – founded by EU
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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)
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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
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Equity instrument for R&I and growth of
• Two complementary facilities working
SMEs (2)
together to support access to risk
capital and stimulate the development
of the European VC industry
Equity
Facility
for R&I
Mainly
from
H2020
combined
investment Mainly
in multifrom
stage funds COSME
from start-up/early stage
may make growth investments
Equity
Facility
for Growth
to expansion/growth stage
may make early-stage investments
up to 20% of total EU investment
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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 midcaps
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Debt instrument for growth and RDI for
SMEs (2)
COSME
Loan Guarantees
Type of
Guarantees for
operation
SME loans
< = € 150,000*
Target
group
SME loan
Securitisation
Growth oriented SMEs
Horizon 2020
Loan guarantee facility
Risk sharing or
loans (RSI II)
> € 150,000*
RDI-driven
SMEs & midcaps
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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
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More information
• Existing financial instruments (2007-2013)
• SMEG and GIF ec.europa.eu/enterprise/policies/finance/cipfinancial-instruments
• RSFF
www.eib.org/products/rsff/
RSI
www.eif.org/what_we_do/guarantees/RSI
• Progress Microfinance Facility
ec.europa.eu/social/main.jsp?catId=836&langId=en
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• Proposed (2014-2020)
• COSME
ec.europa.eu/cip/cosme
• Horizon 2020 ec.europa.eu/research/horizon2020
• Programme for Employment and Social Innovation
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Portal on EU finance
• http://access2eufinance.ec.europa.eu/
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• http://access2eufinance.ec.europa.eu/
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• Thank you for your attention!