Making SME financing workable for Greece
The crisis hit many EU Member States hard, but few were so deeply impacted as Greece. Local and international factors combined to leave the Hellenic Republic in the throes of the most severe economic crisis in almost 30 years and undermine international confidence in Greece’s ability to repay debts. Throughout the past six years of economic unrest the EIB has been a loyal partner for investing in Greece, even if that has been a lonely position at times..
Whilst we have continued to invest across all sectors in Greece, the country’s high unemployment rates – 30%, rising to over 60% for the under 25 year olds – have pushed the EIB Group to place special emphasis on the financing of SMEs with the potential to stimulate growth and create jobs especially in the youth segment. In the last five years we have signed loans worth almost EUR 2.3bn in favour of Greek SMEs.
Secure and tailor-made finance
To complement our traditional lending mechanisms, the EIB has been working with the Greek authorities to build innovative instruments which provide additional liquidity to the Greek banking sector. This not only allows for a reduction in the cost of financing for the country’s small businesses, it has the added benefit of creating jobs, including for Greece’s young people. From 2011-2012 two guarantee instruments – the State Guarantee Facility followed by the Guarantee Fund for Greek SMEs – enabled a total of EUR 645m of finance benefiting over 850 SMEs, midcaps and small infrastructure projects, and an additional EUR 100m is expected to follow very shortly.
In June 2013 the EIB signed its first ever Trade Finance Facility to ensure local businesses could remain global players. One year later the facility received a Trade Finance Magazine Deals of the Year 2013 award for providing a lifeline to Greece. One recipient of this lifeline was Sabo S.A., a Greek company involved in the production of turnkey factories for bricks and roof tiles as well as general industry. The company is very export and youth-oriented, with an average employee age of 27. It has sold and installed factories on nearly all continents, and has done business in Belgium, Russia, Saudi Arabia, Mexico and Brazil. Eurobank supported Sabo in issuing a EUR 200 000 letter of credit as payment for machinery, essential for its business, at a time when the Greek trade finance market has been affected by the economic crisis. The letter of credit was confirmed by Commerzbank thanks to the EIB Trade Finance Facility.
Accessing affordable finance
But the primary concern for Greek SMEs remains access to finance. Septona received an EIB loan for SMEs from the National Bank of Greece in 2013. The company, which manufactures personal hygiene products for the Greek and export markets, came across a financing stumbling block with the onset of the crisis. Business demand was continuing as normal but the company’s ability to source raw materials from sceptical markets abroad was diminished. Since receiving an EIB loan in 2013, the company has been granted a state award for its export activities of which some 50% goes to private labels of top international retailers.
The EIF has also made a lasting difference to the ability of SMEs to access finance in Greece. In the words of Nicos Moraitakis, Founder and CEO of Workable, a hiring software company, “the EIF made enough funds available to a start-up like Workable to be able to not just start, but also graduate to a level where the big venture capital firms in Europe are willing to take it further.” Workable started life as two recruiters convinced that hiring software should be as agile as the fast-growing companies employing them. Initially the founders were not planning to get funding, but traction in the markets presented itself as an opportunity to accelerate growth. 18 months later, with 20 talented employees, over 300 customers, 60% of whom based in the USA, and 30% revenue growth month-on-month, it is clear that Workable made the right choice by reaching out to available financing opportunities at a time when seed funding was hard to come by.