EU Financial Instruments for SMEs

Samuel MAENHOUTPolicy Officer/Information and

Dissemination

"68% of companies consider the lack of financial resources as the main obstacle to the commercialisation of innovative products or services."Source: European Commission, 2014 Innobarometer survey “The role of public support in the commercialisation of innovations”

• Source: European Commission and European Central Bank, SMEs’ Access to Finance Survey 2013, Analytical Report.

Why EU Financial Instruments for SMEs?

SME Key challenges

EU Policy Response

• Part of the EU budget is invested not in grant funding but in the form ofrisk-sharing (loans and guarantees) and by providing risk finance (equity)

• Goal: Stimulate more investment in the EU economy, notably by theprivate sector

• Leverage effect: Attract additional finance and multiply EU budgetresources, notably for innovation (Horizon 2020) and growth (COSME)

• Addressing financing gaps: Intervention only if there are financing gaps inthe delivery chain (e.g., due to high risk)

• Building a bridge to the market: Effective and cost-efficient way tocomplement grant funding (e.g. under Horizon 2020) and achieve marketintroduction of innovation or expansive company growth

Financial Instruments for Innovation & Growth: How Does It Work?

Mainly Larger Midcaps and

large corporates*

European Investment Bank (EIB)

SMEs and small midcaps

SMEs and small midcaps

European Investment Fund (EIF)

*All entities are eligible also PPPs, universities, research infrastructures etc., provided they can borrow**Bank or a financial institution selected on the basis of the call for expression of interest that signed an agreement with the EIF*** Fund selected on the basis of a call of expression of interest that signed an agreement with the EIF

EIF

Financial intermediary**

Financial intermediary***

Loans Loan guarantees Equity

EIB

Financial intermediary**

Midcaps: Loan guarantee up to

€25 m

Helping Businesses at every Stage of their Development

5

SME Development StagesDEVELOPMENT

HIGHER RISK LOWER RISK

Public Stock Markets

Business Angels,Technology Transfer

Microcredit

VC Seed & Early Stage

Portfolio Guarantees & Credit Enhancement

Formal VC Funds & Mezzanine Funds

PRE-SEED PHASE SEED PHASE START-UP PHASE EMERGING GROWTH

Social Impact Funds

EU Financial Instruments Helping Businesses at Every Stage

6

SME Development StagesPRE-SEED PHASE SEED PHASE START-UP PHASE EMERGING GROWTH DEVELOPMENT

HIGHER RISK LOWER RISK

Public Stocks

SME Initiative

InnovFin SME Guarantee

ERASMUS+ Student loans

Cultural and Creative Sector Guarantee Facility

Guarantees & Debt Programmes

Equity ProgrammesCOSME Equity Facility for Growth

InnovFin Tech TransferInnovFin Business Angels

InnovFin Venture CapitalInnovFin Fund-of-Funds

EaSI (Employment & Social Innovation)

EIB InnovFin products*

COSME Loan Guarantee Facility

* InnovFin MidCap GuaranteeInnovFin MidCap Growth FinanceInnovFin Large Projects

= family / brand name of the financial instruments developed under Horizon 2020

Equity

http://www.eib.org/products/innovfin/index.htm

Finance for Innovation for SMEs

Nota bene: Thanks to support from the European Fund for Strategic Investments (EFSI), InnovFin SME Guarantee is already close to enable its Horizon 2020 overall target amount of EUR 9 billion of financing to benefit innovative SMEs and Small Mid-Caps. More is to come in the coming years, thanks to EFSI II …!

• Based on Risk-Sharing Initiative (RSI) under FP7 - managed by EIF - to improve access to debt finance of innovative SMEs and Small Mid-Caps (< 500 Full-Time Employees)

• EIF provides guarantees and counter-guarantees to selected financial intermediaries, thus allowing them to provide loans, financial leases and loan guarantees to innovative SMEs and Small Mid-Caps with reduced risk and regulatory capital consumption.

• Deployed in 33 EU Member-States & Horizon 2020 Associated Countries (Sept 2016)

• EIF's call for Expression of Interest to which interested financial intermediaries across Europe is still out!

https://ec.europa.eu/programmes/horizon2020/sites/horizon2020/files/EFSI_infographic_OK_03b.jpghttp://www.eif.org/what_we_do/guarantees/single_eu_debt_instrument/innovfin-guarantee-facility/index.htm

Austria MSBelgium MSBulgaria MSCroatia MSCzech Republic MSDenmark MSEstonia MSFinland MSFrance MSGermany MSGreece MSIreland MSItaly MSLatvia MSLithuania MSLuxembourg MSMalta MSPoland MSPortugal MSRomania MSSlovakia MSSpain MSSweden MSUnited Kingdom MSAlbania ACBosnia and Herzegovina ACIsrael ACMacedonia ACMoldova ACNorway ACSerbia ACTurkey AC

Finance for Innovation for SMEs -ImplementationCoverage – 24 Member-States + 9 Associated Countries (… and counting)

41%18%

12%

8%

6%

6%

4%

6%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Innovation support/grants criteria (4c)

Innovation products/processes (criteria 1)

Venture Capital investment (criteria 4f)

R&I expense 20% (criteria 4a)

R&I costs 10% (criteria 4h)

Technology right (criteria 4e)

Fast growing enterprise (criteria 2)

Other

SME loan eligibility – inclusions & innovation criteria

Over 80 financial intermediaries in Europe!e.g. in Estonia: AS LHV Pank, http://www.lhv.ee> EUR 40 million loan portfolio for innovative enterprises

http://www.eif.org/what_we_do/guarantees/single_eu_debt_instrument/innovfin-guarantee-facility/innovfin-smeg_signatures.pdfhttp://www.lhv.ee/

Finance for Innovation for SMEs and small midcaps – Equity products

• Via InnovFin Equity, EIF provides equity investments and co-investmentsto or alongside funds focusing on companies in their pre-seed, seed, andstart-up phases operating in innovative sectors covered by Horizon 2020,including life sciences, clean energy and high-tech.

• The Horizon 2020 budget supports EUR 430m in direct investments intocompanies established in EU MS or Horizon 2020 associated countriesthat are in the pre-seed, seed, or start-up phase mostly; limited growth-stage finance also possible

• Investments managed through selected fund managers

• Focus on Horizon 2020 objectives (e.g. ICT, life sciences, clean energy,high-tech)

• Investment size up to EUR 30m up to 50% of total commitments

Finance for Innovation for SMEs and small midcaps – Equity products

■ Operation with Early-stage Financial Intermediary : Bullnet Capital III SCR - http://www.grupobullnet.com/

Target fund size € 40m, € 19.0m out of IFEICT technologies

■ Operations with Multi-stage Financial Intermediaries: Set Fund II - http://www.setventures.com/

Target fund size € 50m€ 6.7m out of IFE and € 6.7m out of EFGCleantech

Panakés Fund I - http://www.panakes.it/Target fund size €80m€ 12.8m out of IFE and € 6.2m out of EFGLifesciences

CapHorn 2, FPCI - http://www.caphorninvest.fr/Target fund size € 100m€ 14.3m out of IFE and € 14.3m out of EFGICT technologies

Finance for Innovation for SMEs and small midcaps –Examples of InnovFin VC deals concluded

http://www.grupobullnet.com/http://www.setventures.com/http://www.panakes.it/http://www.caphorninvest.fr/

Finance for Innovation for SMEs and small midcaps – Accompanying measures (examples)

• InvestHorizon is a programme designed to increase investments made in Innovative European SMEs through Investment Readiness development and Investor sensitization. The project aims to defragment the SME investment market, helping both SMEs and investors to make better deals by increasing their knowledge about each other, on the crossroads of finance and innovation.

• ACCESS4SMEs is a 30-month coordination and support action directed at National Contact Points in the domains of access to risk finance and SMEs, fostering the use of financial instruments (incl. through exchange of best practices) and including the establishment of a community of practice facilitating access to cross-border finance.

• Progress TT: Public Research Organisation GRowing Europe through best practice SolutionS for Technology Transfer (TT) is a three-year pilot initiative promoting good practice for the commercialisation of Intellectual Property. Supported TT Offices improve skills in targeted areas of the TT process, increase the Return on Investment and accelerate Technology Readiness Levels (TRLs) of the R&D projects they handle.

http://investhorizon.eu/http://www.progresstt.eu/

Links with EFSI - SME Window

EFSI SME Window Objectives

EUR 2.5bn provided by EIB

EUR 2.5bn guarantee cover provided by EFSI

- Accelerated and additional financing

support to SMEs and mid-caps

- Removing market gap

EUR 75bn of investments at

SME and mid-caps level

EFSISMEW

EUR 5bn

EUR 2.5bn EIB contribution

EUR 2.5bn increase of Equity mandate

New capacity to invest into Private Equity /

Venture Capital funds

With enlarged scope to better meet current

market needs

Expected > EUR 30bn of investments at SMEs and mid-caps level

EUR 2.5bn EU contribution

SecuritisationUncapped Guarantee

InnovFin SMEGuarantee Facility

COSME LoanGuarantee Facility

Equity window(including a National Promotional Institutions platform)

0

1,250

750

2,250

2,500

Enhancement of2016-2020 budget

Guarantee products

New guarantee products

EUR M

Expected > EUR 45bn of investments at SMEs and mid-caps level

500

1,000

100150

New equityproducts

More information Horizon 2020

http://ec.europa.eu/programmes/horizon2020/en/area/smes http://ec.europa.eu/programmes/horizon2020/en/h2020-

section/access-risk-finance http://ec.europa.eu/programmes/horizon2020/en/h2020-

section/innovation-smes

Financial Instruments

https://ec.europa.eu/programmes/horizon2020/en/h2020-section/access-risk-finance

InnovFin – EU Finance for Innovators: http://www.eib.org/products/blending/innovfin/products/index.htm

EU Access to Finance – http://www.access2finance.eu

Investment Plan for Europe http://ec.europa.eu/priorities/jobs-growth-and-

investment/investment-plan_en http://www.eib.org/efsi/

http://ec.europa.eu/programmes/horizon2020/en/area/smeshttp://ec.europa.eu/programmes/horizon2020/en/h2020-section/access-risk-financehttp://ec.europa.eu/programmes/horizon2020/en/h2020-section/innovation-smeshttps://ec.europa.eu/programmes/horizon2020/en/h2020-section/access-risk-financehttp://www.eib.org/products/blending/innovfin/products/index.htmhttp://www.access2finance.eu/http://ec.europa.eu/priorities/jobs-growth-and-investment/investment-plan_enhttp://www.eib.org/efsi/

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