Commission and European Investment Fund unlock €8 billion in finance for 100,000 small and medium-sized businesses

The European Commission has unlocked €1 billion from the European Fund for Strategic Investments (EFSI) that will serve as a guarantee to the European Investment Fund (EIF), part of the European Investment Bank Group. This will allow the EIF to issue special guarantees to incentivise banks and other lenders to provide liquidity to at least 100,000 European SMEs and small mid-cap companies hit by the economic impact of the coronavirus pandemic, for an estimated available financing of €8 billion. 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. Continue reading “Commission and European Investment Fund unlock €8 billion in finance for 100,000 small and medium-sized businesses”

Digitalisation is a key challenge for SMEs

The benefits of digitalisation for small and medium-sized enterprises (SMEs) are multiple, allowing them to boost competitiveness, expand market access and improve customer relations. The European Economic and Social Committee (EESC) considers it necessary to support the digital transformation of SMEs with measures adapted to the specific needs of different types of companies.

The information report Digitalisation and SMEs in the Mediterranean region adopted by the EESC sets out to analyse the current state of play of digitalisation in northern, southern and eastern Mediterranean countries and highlight specific challenges. One of the main conclusions of the report is the need to establish a “broad policy agenda aimed at strengthening the decisive role of SMEs in the socioeconomic development of the Euro-Mediterranean countries and, most importantly, in the fight against unemployment”.

According to María Helena De Felipe Lehtonen, rapporteur of the report, SMEs’ digitalisation in the EuroMed region is of the utmost importance if they are to increase their competitiveness in the global market.

The availability of digital infrastructure does not automatically lead to the adoption of digital business models and technologies. According to the 2019 Digital Economy and Society Index (DESI) of the European Commission, more than 50% of firms in Mediterranean EU Member States such as Greece, Spain, Italy or France have very low levels of digital intensity, compared to less than 20% in leading countries such as Finland, Denmark or the Netherlands. Continue reading “Digitalisation is a key challenge for SMEs”

The Flanders Participation Company supports SMEs with flexible long-term loans thanks to the EIB

The European Investment Bank (EIB) and the Flanders Participation Company (PMV) have signed a EUR 60 million loan agreement with a view to setting up a new platform, managed by PMV, for loans to Flemish SMEs. This will allow PMV to expand its range of flexible financial instruments with long-term loans for larger SMEs as an alternative to issuing bonds.

PMV is putting up EUR 40 million, which means that initially there will be EUR 100 million available. By collaborating with external financiers the aim is to increase this amount to EUR 200 million. The loans are designed to enable companies to diversify and improve the balance of their debt structure, making them better able to withstand future interest rate rises. The loans (EUR 5-15 million) will have terms of between five and ten years, with a fixed or variable interest rate of between 2% and 4% and repayment in full on the final due date, or with a repayment schedule following a grace period.

PMV intends using flexible long-term loans to provide SMEs with growth or investment plans with the opportunity to further diversify their funding and provide them with solutions supplementing traditional bank loans. “These are very cheap today, but will be less available in the very long term. By diversifying their funding sources, SMEs will become more resistant to future interest rate rises or other market fluctuations. They will also be able to free up working capital to fund further growth. Large companies have been diversifying their funding sources like this for a very long time through debenture loans, which is not so easy for SMEs to do. This partnership with the EIB makes it possible to offer an advantageous interest rate.” says Filip Lacquet, corporate finance group manager at PMV.

EIB Director General Jean-Christophe Laloux added: “The EIB is more than just a bank; it’s a European institution with a very clear purpose: to improve people’s lives through its investments.  SMEs are the driving force of the Flemish economy and are responsible for a very sizeable share of employment.  At a time of geopolitical, economic and climate uncertainty, it’s important for us to give these businesses some support.Continue reading “The Flanders Participation Company supports SMEs with flexible long-term loans thanks to the EIB”