Internal Market, Industry, Entrepreneurship and SMEs

Loans and guarantees

Loans and guarantees

Most businesses in Europe rely on bank loans for external financing. Borrowing can be difficult for small and medium-sized enterprises (SMEs) however, particularly if they lack collateral or have a short track record or credit history. To help small businesses obtain loans from banks, guarantees (provided by public, private, or mutual guarantee institutions) can help compensate for lacking collateral or creditworthiness by reducing the banks’ risk.

Since 1998, the EU has used financial instruments to increase the finance available for small businesses. 

Where there are market gaps, the programme for the Competitiveness of Enterprises and Small and Medium-sized Enterprises (COSME) improves small business' access to loans through the Loan Guarantee Facility. The programme started in 2014 and will expectedly leverage more than €20 billion in loan guarantees by the end of 2020. See our flyer on EU support for SMEs – Loans, guarantees, equity (1 MB).

The competitiveness and innovation framework programme (CIP), COSME's predecessor, mobilised more than €17 billion in loans to over 340,000 small businesses in Europe. 

Related legislation

The EU Capital Requirements Directive is an important piece of legislation. It defines the capital that banks must set aside against lending and requires them to provide information for both banks and their customers.