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Finance Days initiative: Promoting EU financial instruments
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The EU supports SMEs and other businesses with a range of programmes that facilitate loans, guarantees (including counter-guarantees), venture capital and other equity financing. These financial instruments are implemented by EU Entrusted Entities (mainly the European Investment Bank (EIB) and European Investment Fund (EIF)) and delivered to SMEs by financial intermediaries such as banks, guarantee societies and venture capital funds. To publicise and promote the financial instruments available, the European Commission is organising the EU Access to Finance Days for SMEs, a series of awareness-raising events taking place across the Member States.
‘Initiated by DG Enterprise and Industry, the EU Finance Days initiative aims to raise awareness of the possibilities to access finance for SMEs, including innovative ones, all over Europe,’ says Jean-David Malo, Head of the Financial Engineering Unit at DG Research and Innovation.
Events are being organised in all Member States starting in autumn 2013. The launch event took place in Rome on 18 October, with the next one happening in Vilnius on 5 November. Invitations to the events will be sent to organisations representing SMEs, financial institutions and potential intermediaries of EU programmes, policy makers representing national and/or regional authorities, chambers of commerce and business associations. As well as publicising and promoting the current and future financial instruments, these events will also disseminate best practice and improve the dialogue between the EU institutions and SME finance stakeholders.
There are two primary sources of financial instruments for SMEs at EU level: the Programme for the Competitiveness of Enterprises and SMEs (COSME) and Horizon 2020.
COSME, which will run from 2014 to 2020, is the first programme of the European Commission exclusively dedicated to supporting SMEs, and its main aim is to improve access to finance for SMEs, support their internationalisation and improve their access to markets. 60% of COSME's estimated budget of EUR 2.3 billion will be dedicated to financial instruments, providing guarantees and venture capital, and encouraging the flow of credit and investment into the SME sector. In this way, it will help to bridge the market gap in the provision of SME financing as well as providing EUR 3.5 billion of additional funding for SMEs each year.
COSME support will be delivered to SMEs via reputable financial intermediaries, such as banks, leasing companies, mutual guarantee societies or venture capital funds. This support will be delivered in one of two ways. First, COSME will provide a guarantee facility for loans of up to EUR 150 000, targeting in particular SMEs that would otherwise have difficulty accessing finance. It will also provide an equity facility, which will stimulate the supply of venture capital, with a particular focus on the expansion and growth phase of SMEs.
COSME is the successor of CIP (2007-2013), the Competitiveness and Innovation Framework Programme. It will largely continue the successful activities of the current CIP programme.
COSME is complemented by Horizon 2020, the programme for research and innovation, which will also run from 2014 to 2020. It has a budget of just over EUR 70 billion, and is the successor of FP7, the European Institute of Health and Technology (EIT) and an important part of CIP.
Horizon 2020 will also provide access to finance to SMEs in its programme ‘Access to Risk Finance’ (ARF). Under this programme, a budget of around €2.5 billion will be dedicated to debt and equity financial instruments, with a particular focus on SMEs and small mid-caps. Like in COSME, a debt facility and an equity facility for innovative / RDI-driven SMEs and small mid-caps will be provided. The debt facility will provide uncapped guarantees and counter-guarantees to reputable financial intermediaries such as banks and guarantee societies, in order to allow them to provide loans to innovative / RDI-driven SMEs and small mid-caps of a nominal value range from €25,000 to €7.5 million. The equity facility will stimulate the supply of venture capital with a particular focus on the early stage phase of SMEs. Both facilities are expected to be launched in early 2014. In addition, a technology transfer facility pilot and a co-investment pilot with business angels are foreseen to be launched later on.
Mr Malo highlighted that at least one-third of the budget dedicated to financial instruments within the ARF is expected to be devoted to support access to finance for innovative / RDI-driven SMEs and small mid-caps, especially because those enterprises are generally considered high risk by financial institutions, making it harder for them to get the financing they need to thrive. Mr Malo says: ‘with our debt facility for innovative / RDI-driven SMEs and small mid-caps, our objective is to deliver a minimum of €6 billion of additional loans for this key target group’.
During the EU Access to Finance Days, the Commission will present the achievements of CIP and FP7 and invite financial institutions to become intermediaries for COSME and Horizon 2020.
The European Commission also has a portal, EU finance, to help SMEs obtain the required financing. As opposed to the Finance Days initiative, which is primarily an awareness-raising scheme, the portal provides easy, complete and up-to-date information on how entrepreneurs and SMEs can access EU financing via one of approximately 1 000 banks and other financial institutions. Mr Malo stresses that this portal is evolving: ‘What we will do within Horizon 2020, but also in very close cooperation with COSME, is building various synergies in order to develop further the EU Finance portal – not only to develop something on the basis of the existing EU instruments, but also to take into account demand on the side of the SMEs in order to create a platform in which the demand and supply can meet.’
Mr Malo emphasises the complementarity of the instruments proposed by COSME and Horizon 2020: ‘It is a perfect illustration that synergies between EU policies are possible in practice.’ But he also added that although financial instruments for SMEs operating at the European level are important, they must be complementary to existing instruments at the national and regional level, which should not be overlooked. Another aim is to elicit a change in behaviour of financial intermediaries, especially to make them more open to supporting innovative SMEs. ‘What we are doing is important because it may have a catalytic effect, but it is not sufficient. The involvement of Member States, the involvement of financial intermediaries – banks, guarantee societies, and so on – are crucial if we want to improve the ecosystem, tackle the barriers, ease the access to finance for SMEs in Europe and therefore contribute to the objective of more growth and jobs within the Union.