Today’s announcement fulfils the commitment in the Commission Communication of 13 March to bring immediate relief to hard-hit SMEs, with money able to flow already in April. It is part of the package of measures announced by the EIB Group on 16 March designed to rapidly mobilise support for Europe’s SMEs and mid-caps.
One of the immediate economic consequences of the coronavirus pandemic is the sudden lack of liquidity affecting small and medium-sized businesses. These companies are typically the most affected in a crisis, and it is essential to support them with adequate liquidity so they can survive the crisis. However, in a situation of liquidity crunch banks are not incentivised to lend SMEs money due to the sudden increase in perceived risk. That is why EU guarantees supporting these loans are necessary. As of today, the EIF is offering to the market dedicated EFSI-backed guarantees to contain the impact of the pandemic on small and medium sized enterprises and small mid-cap companies.
European Commission Executive Vice-President for An Economy that Works for People, Valdis Dombrovskis, said: “Across Europe, our businesses are struggling. The EU is responding quickly to help cushion the blow and to help small and medium-sized companies, which are especially vulnerable. Today, the Commission and the European Investment Fund are making available €8 billion in financing, bringing immediate cash relief to SMEs in Europe affected by the coronavirus pandemic. Money will be flowing already this month via local banks and lenders to help those most hard-hit by the crisis.”
The €1 billion unlocked from the EFSI under the COSME Loan Guarantee Facility and the InnovFin SME Guarantee under Horizon 2020 allows the EIF to provide guarantees worth €2.2 billion to financial intermediaries, unlocking €8 billion in available financing. The guarantees will be offered through the EIF to the market, via a call for expressions of interest issued today to several hundred financial intermediaries, comprising banks and alternative lenders. Key features of these guarantees will be
- Simplified and quicker access to the EIF guarantee
- A higher risk cover – up to 80% of potential losses on individual loans (as opposed to the standard 50%)
- Focus on working capital loans across the EU
- Allowing for more flexible terms, including postponement, rescheduling or payment holidays
The new features will be accessible to new as well as existing financial intermediaries already working with EIF, who will extend special conditions to more than a hundred thousand companies benefitting from guarantees under the COSME LGF and the InnovFin SMEG programmes.
Following today’s call for expression of interest, financial intermediaries with existing EIF agreements under these COSME and InnovFin programmes will be able to access the new guarantees immediately upon their request. Other financial intermediaries can access the guarantees following a swift application process. In that way new money can already start flowing to hard-hit businesses in April. SMEs will be able to apply directly to their local banks and lenders participating in the scheme, which will be listed on the access to finance website.
The Commission and the EIB Group will continue to work on additional measures and will use all the tools at their disposal to help contain the coronavirus pandemic and address its economic consequences.
- 6 April 2020
- Generaldirektoratet for det Indre Marked, Erhvervspolitik, Iværksætteri og SMV’er