COSME financing for SMEs
Brussels, 1st 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
Millions of euro
Up to €1 million
Up to €250,000
Source: ECB monthly statistics of new loans with a maturity of more than 1 year
2
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
3
CIP Programme (2007-2013)
€25bn
€17bn
Budget
Guaranteed exposure
€8bn
Loans supported
Investments
€0,52bn
4
EU debt financial instruments (2014-2020)
Programme
Focus
Amount
Social Change
& Innovation
micro-enterprises
<€25k
social enterprises
<€500k
COSME
SMEs
Creative Europe
cultural and
creative sector
InnovFin
(Horizon 2020)
Research,
Development and
Innovation
ESIF
SMEs
Micro
SMEs
Small
mid-caps
<€150k
(and above if in
principle not eligible
under InnovFin criteria)
€25k-€7.5m
5
How do EU financial instruments work in
practice – overview
6
COSME call for expression of interest:
Financial institutions invited to apply by 30 Sept 2020
• Debt facility (to provide guarantees and counterguarantees 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)
7
Details of the Loan Guarantee Facility
Capped portfolio guarantees
free of charge, first loss guarantee
(Guarantee rate: ≤50%, cap rate: ≤20%)
Strict focus on additionality
newly originated transactions with a higher risk
profile (e.g. start-ups, less collateral, longer maturity)
Wide range of interventions
Working capital, investment loans, subordinated
loans, bank guarantees, leasing
Duration
min. 12 months (transaction) – max. 10 years
(guarantee)
Principal amount
≤ € 150,000: for any type of SME
> € 150,000: for SMEs not eligible in principle under
Horizon 2020 (InnovFin) – verification through checklist
Guarantee terms
Guarantee payment upon default, with pro-rata sharing
of recoveries
Repayment schedule: fixed or revolving
8
Possibility to share risk
with nat./ regional sources
≥20%
Remaining
risk
≤50%
Risk retained by
Intermediary
Possible combination
with nat/ regional
sources
COSME Guarantee
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.
• For combination with national/
regional sources
• For combination with grants
9
Options of Loan Guarantee Facility
1) New product with higher risk
Transactions with more risky new
features for SMEs which are not
yet provided by Financial
Intermediary
2) Increase in volumes
Guarantee product: Substantially
increase in SME financing volumes to
which FI has not been actively lending
Counter-guarantee product:
Substantially increase in guarantees
volumes
Applicants need to prove:
How does it differ from existing
products?
Applicants need to prove:
Envisaged volumes & pricing
Envisaged volumes
Debt finance granted past 3 years
Implementation strategy
10
Guarantee coverage
Volume
Minimum Vol.
Reference Vol.
•
Maximum Vol.
• Option 1: Cap rate from first guarantee onwards
• Option 2: Coverage depends on volumes:
COSME Coverage
11
None
Adjusted
Maximum
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
12
Selection process by EIF:
Pre-selection
Due Diligence
Final selection
First come, first served
Quality assessment: capacity to manage risk, experience,
quality of implementation proposal
Impact assessment: envisaged portfolio (enhanced
access to finance, expected loss/ granularity), geographic
distribution
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 and approval
13
Application:
General
information
Proposal
demand driven
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
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
14
Details of Equity Facility for Growth
Eligible final recipient
≥50% into SMEs with headcount: <250 employees
Turnover: ≤€50m or balance sheet: ≤€43m
Growth & expansion stage
≥50% into businesses that already established a
product and generate revenues
Business angels
Funds co-operating with business angels are eligible as
long as minimum criteria are met
Investment period
Long-term investments (5 to 15 year positions)
Cross-border investments
Funds must contribute to the creation of a panEuropean VC market
EU contribution
EU contribution: 7.5-25% of total commitment
At least 30% private investors
InnovFin (Horizon 2020)
Possibility of joint investments with the early-stage
equity facility of InnovFin (Horizon 2020) into
multi-stage funds (pro-rata funding)
15
Selection process by EIF:
Performance
• Management team:
experience
• Information about target
market
• Track record and deal flow
• Investment strategy
(stage, sector, geographic
focus)
• Size of fund and proposed
terms (in line with market)
• Expected returns
• Investor base: pari-passu
First come, first served
Policy fit
• Expected support to eligible
final recipients in Expansion
and Growth stage
• Additionality (avoid
crowding out)
• Investment strategy in
more than one country or
support to recipients to
internationalise
16
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)
17
How to apply for EU Finance
 Financial institutions invited to apply by Sept 2020
o
EU Debt Financial Instruments
www.eif.org/what_we_do/guarantees/single_eu_debt_instrument/index.htm
o
EU Equity Financial Instruments
www.eif.org/what_we_do/equity/single_eu_equity_instrument/index.htm
 Businesses invited to apply for EU finance
o
Access to finance portal: www.access2finance.eu
 For further information
o
Enterprise Europe Network
http://een.ec.europa.eu/
18
www.access2finance.eu
19
www.access2finance.eu
20
21
Thank you for your attention!
22