Access to finance for SMEs Screening Process with Serbia - Chapter 20 SME Access to Finance Directorate-General for Enterprise and Industry Brussels 2 nd April 2014
Why EU intervention needed Action plan to improve access to finance for SMEs SME funding needs and EU opportunities EU financial instruments for SMEs Building on success results achieved COSME / Horizon 2020 financial instruments debt and equity for R&I and growth for SMEs Budget proposed and implementation Advice and support to help SMEs - EEN Serbia current commitments 2
Why EU intervention needed Market failures in debt and equity markets for SMEs Information asymmetry and transactions costs Encouraging more private investment Complementing national and regional schemes Financial crisis and risk-averse of banks and investors Supply/demand gap for loans and guarantees for enterprises growth and RDI Difficulties in accessing start-up/growth finance Need for an integrated European venture capital market Commitments in Europe 2020 Strategy, Single Market Act, Innovation Union Flagship Initiative, Action Plan on SME Access to Finance 3
Why EU intervention needed Pre-seed, technology transfer Seed and start-up Early expansion Expansion Late expansion Likely investors R&D funding, public grants Entrepreneur, family, friends, business angels, public sources Venture capital funds, business angels Strategic investors (IPO), public markets, banks Policy problems Serious lack of outside investors in the early stages VC market fragmented along national lines Too many small illiquid growth stock markets REVENUE Setting up a company Breakeven point Valley of death TIME Graph adapted from Cardullo: Technological entrepreneurism. Note that there are no agreed and fast definitions for most of the concepts used in SME finance. 4
Action Plan to improve access to finance for SMEs Objectives improve framework conditions for the competitiveness of European businesses improve SMEs access to loans, venture capital and capital markets EU Action Plan (adopted December 2011) using regulatory measures to make SMEs more visible to investors and to make markets more attractive facilitating access to finance for SMEs to address the key market failures that limit the growth of SMEs 5
Action Plan: Proposed regulatory measures Regulation on Venture Capital Funds Easy fund raising across Europe by VC / "VC Passport" Set of requirements for "European Venture Capital Fund" Regulation on Social Entrepreneurship Funds Easy fund raising and investing across Europe for social enterprises' funds Regulatory measures to improve SMEs' access to capital markets More visible SME markets (in the Markets in Financial Instruments Directive) and SME shares (in the Transparency Directive). R Reduced cost and the burden for SMEs (Transparency and Prospectus Directive) of reporting requirements 6
Action Plan: cont. CRD IV (Basel III) Review of the Capital Requirements Directive the agreement on Basel III contains a supporting factor equal to 0.76 for SMEs. This will provide credit institutions with an appropriate incentive to increase the available credit to SMEs Late Payments Directive Every year thousands of SMEs go bankrupt waiting for their invoices to be paid. the Late Payments Directive obliges public authorities to pay for goods and services within 30 calendar days. Businesses should pay their invoices within 60 calendar days, unless they expressly agree otherwise 7
SME funding needs and EU opportunities SMEs look for Loans or equity for investment Grants for research, general grants, specific project support Financial instruments = indirect financing through financial intermediaries (CIP and JEREMIE) no grants EU thematic programmes = direct co-financing of projects through calls for proposals (e.g. Life +, FP7 etc.) grants DG ENTR D3 Guide to funding http://ec.europa.eu/growth/access-to-finance 8
SME funding needs and EU opportunities Loans or equity for investment Find out which local banks and equity investors are benefiting from European funding and contact them (1). Competitiveness and Innovation Programme: venture capital and loan guarantees JEREMIE scheme of the regional funds: loan guarantees and venture capital SMEs look for Grants for research, general grants, specific project support Find out about calls for proposals; contact possible partners; fill in the application; wait for the project selection (2). EIB loans Research framework programme grants Other grant programmes Grants from European Regional Development Funds (administered locally) (1) access2finance.ec.europa.eu (2) ec.europa.eu/contracts_grants 9
SME funding needs and EU opportunities Grants Loans Equity Local or regional Local and regional programmes Possibly Jeremie (ERDF) instruments Other programmes Possibly Jeremie (ERDF) instruments Other programmes National National programmes National programmes National programmes European Thematic European programmes based on calls: FP7, etc CIP guarantees for loans; EIB loans CIP and other EIFmanaged venture capital investments Grants from Brussels Access varies Funding through financial institutions 10
EU financial instruments for SMEs Part of the EU toolkit for over a decade Efficient way of spending the EU budget - leverage Broad range of interventions: Guarantees to mutual guarantee societies and banks lending to SMEs Equity participations for early and growth stage investments Common features: Aim to increase access to finance for SMEs Delivered via financial intermediaries on behalf of the European Commission mutual guarantee societies, banks, funds, etc Operated by the EIB/EIF 11
EU financial instruments for SMEs 12
Building on success results achieved Competiveness & Innovation Framework Programme (CIP) With a budget of 1.1 billion, the CIP programme has helped to mobilise over 15 billion for SMEs across Europe SMEG SME Guarantee Facility => Loan Guarantee Facility more than 250,000 SMEs benefited from a guaranteed loan or lease GIF High-Growth&Innovative SMEs Facility => Equity Facility more than 2.4 billion euros mobilised in equity investments Cohesion policy instruments Financial instruments for SMEs through JEREMIE scheme (over 7.5 billion) EIB lending and EIF equity/mezzanine and risk-sharing operations ( 13 billion per year) including Risk Sharing Instrument, Risk Sharing Finance Facility Progress microfinance Seventh Framework Program Grants for EU research projects; goal of 15% SME participation 13
Success stories founded by EU 14
COSME / Horizon 2020 financial instruments COSME in conjunction with Horizon 2020 will support two EU financial instruments for SMEs: Equity instrument for SME s growth and RDI Equity Facility for R&I (H2020) Equity Facility for Growth (COSME) Debt instrument for SME s growth and RDI Loan Guarantee Facility (COSME) SMEs & Small Midcaps Guarantee Facility for R&I (H2020) 15
Equity instrument for R&I and growth of SMEs Equity Facility for R&I (H2020) focus: early stage final beneficiaries: innovative SMEs and small midcaps Equity Facility for Growth for SMEs (COSME) focus: growth stage final beneficiaries: growth-oriented SMEs Multi-stage funds: contribution of resources from COSME and H2020 on a pro-rate basis based on fund investment policy 16
Debt instrument for growth and RDI for SMEs Loan Guarantee Facility (COSME) guarantees for loans to SMEs up to 150 000* * also above 150 000 threshold for SMEs which do not meet the innovation criteria under Horizon 2020 securitisation of SME debt finance portfolios SMEs & Small Midcaps Guarantee Facility (H2020) guarantees for loans over 150 000* for R&I activities * also below 150 000 threshold for R&I-driven SMEs and small midcaps 17
Implementation Budget of COSME financial instruments: EUR 1,4 billion EUR Commission delegates implementation to the so called entrusted entity - EIF Equity and debt facilities may pool resources with Member States willing to contribute part of their Structural Funds Debt and equity funding may be combined Demand-driven; applications to the EIF 18
Current status and next steps Implementation preparations by the Commission are under way Negotiation of terms & conditions / contracts with future entrusted entity EIF First half of 2014: launch of call for expression of interest for debt and equity facility Communication: series of EU Finance Days 19
Advice and support to help SMEs do business in Europe and beyond One-stop-shop for SMEs: Enterprise Europe Network 600 business support organisations in 53 countries Information and advice on EU funding programmes, EU legislation and other matters related to doing business in other European countries Facilitating cross-border business cooperation, R&D and technology transfer Help businesses to take advantage of opportunities to do business on international markets beyond the European Union, in particular via partnership services. The Business Cooperation Centres in the Network based in non EU countries, play a key role in this area. + Feedback to Commission services on EU legislation 20
Future Enterprise Europe Network Mid-January: Publication of call for future network 2015-2021 Deadline for submission: 15 May 2014 End 2014: Completion of evaluation procedure for future EEN Service areas Advice, support & information services for SMEs Cross-border business and technology partnership services SME Feedback activities Services to enhance SMEs' innovation management capacities (Horizon 2020)* Thematic scope of services EU programmes, legislation Advice related to partner search & helping SMEs do business in Europe & beyond Support to enhance SMEs' management capacities (includes innovation support services) Improve financial knowledge of SMEs (funding opportunities, access to finance, coaching/ mentoring) Increase SMEs' access to energy efficiency, climate & environmental expertise; 21
Serbia current commitments EIB loans CIP: EIF: Banca Intesa, Erste bank, Eurobank EFG, Hypo Alpe-Adria-Leasing, Intesa Leasing, KBC Banka, National Bank of Serbia, Raiffeisenbank, Sogelease Srbija, UniCredit Bank, Unicredit Leasing Srbija, Crédit Agricole, ProCredit Bank Loan/ Guarantee:Čačanska banka Equity/ Venture capital: 3TS Capital Partners (Generalist), HBM Partners (Life Sciences) Enterprise Europe Network Belgrade - 5 branches, Nis, Novi Sad 22
More information Portal access2finance.ec.europa.eu Old financial instruments (2007-2013) SMEG and GIF growth/access-to-finance RSFF www.eib.org/products/rsff/ RSI www.eif.org/what_we_do/guarantees/rsi Progress Microfinance Facility Current (2014-2020) COSME ec.europa.eu/cip/cosme Horizon 2020 ec.europa.eu/research/horizon2020 Programme for Employment and Social Innovation (EaSI) Enterprise Europe Network een.ec.europa.eu 23
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