Small businesses are very important.
Lots of people work in small businesses.
The economy is strong
only if small businesses do well.
Most businesses in Europe
are small or medium-sized.
These businesses are also called SMEs.
SME stands for small or medium-sized enterprise.
How we invest in small and medium-sized enterprises
Many small and medium-sized enterprises
have new ideas or products.
Their ideas and products
can help other people or protect the environment.
These small and medium-sized enterprises
can create more jobs for people.
But because they are small
banks often do not want
to lend money to them.
The banks think small and
medium-sized enterprises are too risky.
Without a loan from a bank
small and medium-sized enterprises
cannot make their ideas
into real products.
Even if they have a product,
they cannot make enough of it
to become a big company.
Loans
Sometimes small and medium-size enterprises
need more money
to make their products.
One way to get more money
is to borrow it from a bank.
This is called
taking out a loan.
Banks sometimes decide it is too risky
to give loans to small and medium-sized enterprises
because small and medium-sized enterprises
are often new companies.
They do not have a lot of experience.
They cannot show banks
that they already know how to make a profit.
Banks also find small and medium-sized enterprises risky
because small and medium-sized enterprises usually
do not have a lot of money of their own.
This money is called equity.
Our job is to
take a risk by lending to small
and medium-sized enterprises
because we are owned by the European Union (EU).
We support EU policy and the EU economy.
We do not aim to make a profit.
We make loans to small and medium-sized enterprises
even when other banks will not make loans,
because small and medium-sized enterprises
are important to the economy.
When we make loans to small and medium-sized enterprises,
other banks join in and also give loans to them.
Small and medium-sized enterprises pay a fee
when they take out a loan.
This fee is called an interest rate.
When we make a loan
our interest rate is very low.
We do not want to make a profit.
We are a non-profit organisation.
We just want the small and medium-sized enterprises
to make a profit.
We want people to have jobs
at the small and medium-sized enterprises.
Guarantees
Sometimes we guarantee
the loans a bank makes
to small and medium-sized enterprises.
If the small and medium-sized enterprises
cannot pay the loan back,
the bank loses money.
We pay the bank
as much money as it lost.
The bank takes less risk
when it makes a guaranteed loan,
so it will be happy to make lots of loans.
That is good for the economy.
Funding
Most of the time we support
small and medium-sized enterprises
by making loans.
Sometimes we also buy part of a
small and medium-sized enterprise.
This is called funding.
Our funding supports
small and medium-sized enterprises
that cannot take a traditional bank loan.
But most of the time,
we do not buy part of a
small or medium-sized enterprise.
Instead, we invest in a fund.
The fund invests in
small and medium-sized enterprises.
A fund puts together money from other investors
to invest in different things.
When we give money to a fund,
we usually invest
for more than ten years.
The fund manager
decides what to do with the money.
The manager chooses which
small or medium-sized enterprise to invest in.
We do not decide.
This is called a hands-off approach.
