Types of financial instruments
There are various types of financial instruments
- equity and debt
- loan guarantees and venture capital
- capacity building and risk sharing facilities
For example, the EU provides loans to businesses of all types for investment in research and innovation. It also provides guarantees to help beneficiaries to obtain loans more easily or at better conditions from banks and other lenders. The EU may also financially participate in a project by owning parts of it. Financial instruments can also be combined with grants.
Financial instruments are implemented in partnership with public and private institutions such as banks, venture capitalists or angel investors. These ﬁnancial institutions determine the exact ﬁnancing conditions – the amount, duration, interest rates and fees.
The applicant receiving funds through EU financial instruments must allow the intermediary financial institution to conduct their due diligence, including on-the-spot checks and inspections. Failure to comply will result in financing being delayed or denied.
Funding under shared management with Member States
Financial instruments can be provided by the EU through financial intermediaries in Member States (shared management) to support its policies and programmes. Start-ups, micro companies, and larger businesses can all benefit from this type of funding.
Funding under partnership with the European Investment Bank
The European Investment Bank (EIB) offers loans, guarantees, equity investments and advisory services. Also called the “lending arm” of the European Union, it works closely with other EU institutions to support EU policies in over 140 countries around the world.
The EIB Group is also in charge of implementing 75% of the InvestEU programme, which builds on the successful model of the Investment Plan for Europe (the Juncker Plan). It will bring together, under one roof, the European Fund for Strategic Investments and 13 EU financial instruments currently available. By using guarantees from the EU budget to crowd-in other investors, the InvestEU Fund further increases the EU’s potential to support investment.
The European Investment Fund (EIF), which is part of the EIB Group, support Europe's small and medium-sized enterprises (SMEs) by helping them to access finance. Through the EIF, SMEs carry out their activities using either their own resources or those provided by the European Investment Bank, the European Commission, EU Member States or other third parties.
Funding under NextGenerationEU
Under NextGenerationEU – the temporary recovery instrument of €806.9 billion (in current prices) and a novelty in the 2021-2027 EU budget – funds are managed directly by the European Commission, but implemented through Member States. To raise the necessary funds for NextGenerationEU, the Commission will borrow on the capital markets on behalf of the EU.
The majority of funds from NextGenerationEU will be spent through the Recovery and Resilience Facility (RRF) programme. €723.8 billion in loans and grants (in current prices) will be available for Member States to mitigate the economic and social impact of the coronavirus pandemic and make European economies and societies more sustainable, resilient and better prepared for the challenges and opportunities of the green and digital transitions. Member States are working on their recovery and resilience plans to access the funds under the Recovery and Resilience Facility. Due to its exceptional nature, implementation of the RRF will follow specific procedures. Funds will be disbursed directly to the Member States based on the progress in the implementation of national recovery and resilience plans.
The plans should effectively address challenges identified in the European Semester, particularly the country-specific recommendations adopted by the Council. Information about the implementation of the Recovery and Resilience Facility (RRF) by Member States is available for reference.