New guarantee facility for innovative SMEs to help them access finance from banks
This builds on the success of the Risk-Sharing Finance Facility (RSFF), launched in 2007, that has so far helped 75 companies benefit from over €7 billion in EIB loans to projects enhancing European growth and competitiveness. The new risk-sharing instrument for SMEs will be managed by the European Investment Fund (EIF). In addition, the EIB and the European Commission are to provide extra resources for research infrastructures.
The Risk-Sharing Finance Facility
If the EU is to reach its target of investing 3% of its GDP in research, it needs to boost private sector investment in R&D and innovation. An important pre-condition for achieving this is mobilising finance. However, financial markets and institutions are often reluctant to back research- or innovation- intensive companies or projects due to the relatively high levels of uncertainty and risk inherent in their activities. The RSFF, launched in 2007, was a direct answer to this challenge. It improves access to debt financing for promoters of research and innovation investments by sharing the underlying risks between the EU and the EIB. Together, the European Commission and the EIB are providing up to €2 billion for the period 2007-2013 (up to €1 billion each). These contributions translate into billions of additional financing available to innovative companies and the research community.
RSFF for SMEs: the Risk-Sharing Instrument (RSI)
The RSI aims to encourage banks to provide loans and leases of between €25 000 and €7.5 million to SMEs and smaller mid-sized firms undertaking research, development or innovation, with loan periods of from two to seven years, and with the risk finance covering investments in assets (tangible or intangible) and/or working capital.
The EIB will mandate the European Investment Fund (EIF) to manage the RSI. The EIF, in turn, will enter into individual guarantee agreements with banks following the submission of applications to the EIF under an open call for expressions of interest, which will be launched in early 2012. Applicant banks will be treated on a first-come, first-served basis, subject to their meeting the requirements of the EIF's standard screening and due diligence procedures.
Under the terms of each agreement, the EIF will provide, in return for a fee, a guarantee to the bank concerned against loan defaults. For each default, the bank would receive 50% of the amount of the loan outstanding. Some 10 or so banks are likely to be involved, and the RSI plans to reach up to 500 beneficiaries with a total loan volume of up to €1.2 billion.