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.
The InvestEU programme boosts investment, innovation and job creation in Europe over 2021-27, aiming to trigger a new investment wave (€372 billion) using an EU budget guarantee. Under the SME window of InvestEU, the Commission will support a single integrated guarantee facility implemented by the EIF. It will target SMEs perceived as high risk or having insufficient collateral, including innovative businesses, those in cultural and creative sectors, the SMEs transitioning from resource and energy-intensive models towards more sustainable ones, and SMEs adopting digital business practices.
The Programme for the Competitiveness of Enterprises and Small and Medium-sized Enterprises (COSME) financial instruments ran between 2014 and 2020. Thanks to the combined efforts of the COSME Loan Guarantee Facility and the European Fund for Strategic Investments, more than 800,000 SMEs received over €50 billion of financial debt support (loans, leases, etc.) in total. Under the COSME Equity Facility for Growth, almost 350 businesses received equity financing, with overall investment reaching more than €2.5 billion. The latest information on the implementation status of the COSME financial instruments is available on the EIF website.
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.
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.