Preparatory Action: Support for SMEs in the New Financial Environment
- Sep 28, 2005
The facility is particularly targeting micro-lending and will be used for grants to finance Technical Assistance (TA) to small- and medium-sized enterprises (SMEs) which must be coupled with an EIF guarantee or an EIB global loan.
The facility's objectives include:
- that staff from the Participating Credit Institutions (PCIs) should become familiar with the concept of lending to SMEs and its implications for their business;
- that the volume of PCIs loans extended to SMEs should be larger than at present;
- that the loans extended to SMEs should have longer maturities than at present;
- that the number of SME clients of PCIs should be larger than at present.
A PCI is defined as a credit institution, including commercial banks and credit co-operatives. Included are locally registered, licensed or incorporated entities and also subsidiaries or branches of EC banks. Whenever practicable, preference will be given to regionally based PCIs.
EIF and EIB will select PCIs in conformity with their respective internal guidelines and on their assessment of the PCI's capacity to participate in the facility. Criteria taken into consideration will include financial strength, creditworthiness, operational capability, regional presence, and previous record in SME lending.
It should be noted that banks already participating in the European Commission's SME Finance Facility may not, in principle, participate in the Preparatory Action.
In order for potential projects to be assessed, the PCI should contact EIB or EIF (see contacts below), respectively for loan or guarantee applications, and should be ready, at a request, to provide a description of the project, its objectives and its justification.
Funding resulting from an EIB global loan or an EIF guarantee must be used to provide loans to SMEs making investments in fixed assets and long-term working capital. This may involve new projects or the modernisation or expansion of existing businesses within sectors such as manufacturing, agribusiness, hotel, tourism, energy saving and environment, construction, trade and services.
In addition, the following criteria apply:
- Eligible enterprises are SMEs with a maximum of 249 employees, a maximum annual turnover of EUR 50 million and/or a maximum annual balance sheet of EUR 43 million.
- Preference should be given to small (< 50 persons; balance sheet/annual turnover < EUR 10 million) and micro enterprises (< 10 persons; balance sheet/annual turnover < EUR 2 million).
- Eligible SMEs must have majority private ownership and control, or be in the final stage of the process of privatisation. They must not conduct business in the following activities: gambling, real estate, banking, insurance or financial intermediation and the manufacture, supply or trade in arms, or activities on EIF's or EIB's exclusion lists.
- The average size of investments financed under Preparatory Action cannot exceed EUR 25,000.
Technical Assistance (TA) will only be financed in conjunction with an EIF guarantee or an EIB loan. It will be provided by external consultants to PCIs and/or leasing subsidiaries controlled by PCIs to strengthen administrative, credit and management capabilities for loans (in particular micro-loans) or financial leases toward SMEs.
Activities which would be eligible for TA include:
- installation of management information systems specifically geared toward SME portfolios;
- training of PCI staff in supporting SMEs and in the appraisal, supervision and administration of loans extended to SMEs;
- introduction and implementation of the related organisational and managerial procedures and practices involved; or
- circulation of information towards SMEs regarding the Facility and, in particular, micro-lending.
Three key dates are:
|30/06/2007||the latest date by which a contract with PCI may be signed;|
|30/06/2009||the latest date by which all projects must have reached completion;|
|31/12/2009||the latest date by which the Preparatory Action Facility will terminate.|
"Project completion" means that all payments in relation to TA and all disbursements of sub-loans and/or provision of leased assets to SMEs have been made.
The maturity of an EIF guarantee will generally be a minimum of 18 months.
Information for interested consultants
For projects which have been approved for an EIF guarantee or EIB global loan to be combined with Technical Assistance, and where the consultancy fee will amount to over EUR 200,000, service contract forecasts and procurement notices will be published in the Official Journal of the European Union.