The EIB Group is broadening the way it supports small and medium-sized enterprises (SMEs), making its funding mechanisms simpler, more transparent and more targeted to the individual needs of small businesses across Europe and beyond.

More than 160,000 SMEs benefited from EIB Group support last year, be it through the EIB’s lines of credit or the venture capital and loan guarantees provided by the European Investment Fund (EIF) (1).

After a major consultation exercise with its banking partners, public authorities and SMEs themselves, the EIB Group is updating this support to make it as accessible as possible, and to ensure that the benefits of EIB Group financing are passed on tangibly to the final borrower.

The SME sector accounts for 99 percent of all European enterprises, providing over 100 million jobs as well as being a key generator of innovation and entrepreneurial skills. As the EU’s policy-driven lending institution, the EIB is dovetailing its improvements with the new Small Business Act for Europe, which the European Commission is due to announce in the coming weeks, and which will include a chapter on how to improve SMEs’ access to finance. The main lines of the new EIB Group approach, presented today by President Philippe Maystadt at the annual meeting of the EIB’s Board of Governors (2) involve broadening the kinds of financial support on offer while tailoring them more specifically to local conditions and particular companies’ needs.

The EIB’s long-established Global Loans – lines of credit provided to banks that pass the funding on to individual businesses – will be modernised to cut red tape for both the banks and the SME borrowers. In return, the EIB will require banks to make very clear to their customers that they are benefiting from EIB funding, and to pass the advantages of that funding on to the borrower, be they in terms of longer loan maturities, more flexible disbursements, different currencies or simply lower interest rates.

The EIB and EIF will reinforce their cooperation to ensure an integrated approach. New instruments will be developed in areas such as mezzanine finance, guarantees and microcredit, to simplify conditions and respond to SMEs’ needs at different stages of growth. They will target specific segments of the market that face the most difficulty in raising finance, and develop ways of sharing with partner banks the risks of lending to small businesses.

The EIB will also broaden its support beyond the traditional focus on fixed assets to finance “intangible” aspects of a firm’s growth, such as research and development, building up distribution networks or ensuring that business continues after the current owners retire. 

“It is clear that the market alone is unable to provide sufficient and appropriately priced finance for SMEs, in particular for high growth, innovative businesses,” said EIB President Philippe Maystadt. “The EIB Group will seek to address gaps in the market by broadening the scope of its financing.”

Further details of the new measures will be announced later this year. The EIB made a total of EUR 5 billion available last year for medium- and long-term credit lines for SMEs, while the EIF provided EUR 1.4 billion in guarantees and EUR 521 million in venture capital funds.

To qualify as an SME, a company must be independent and have fewer than 250 employees.

The EIB Group’s SME consultation ran from June 2007 to January 2008 in all EU Member States. It is the first time the Bank has engaged in such a wide consultation process on its support for SMEs, a key objective of its mandate, and how it should shape this support in the future. Approaches were made to more than 100 respondents, ranging from banks and banking associations to SME associations, government bodies and the European Commission. Three quarters of those approached took part in the consultation, and the lively response underlines that SME finance remains a key topic in Europe. 

Notes:

  1. The EIB has a majority (66 percent) shareholding in the EIF, the specialist venture capital and loan guarantee arm of the EIB Group. The European Commission holds 25 percent and other European financing institutions 9 percent.
  2. The Board of Governors is made up of the Finance Ministers of the EIB’s shareholders, the 27 Member States of the European Union.