Monday, May 9, 2016
Investment Plan for Europe: favourable loans for 1,100 Slovenian SMEs!
We talked to Zoran Stančič, Head of the European Commission Representation in Slovenia, about the goals and concrete projects of the European Investment Plan for Slovenian SMEs. “The agreement between the European Investment Fund and Slovene Enterprise Fund is currently the first and so far the only project signed. It will ensure 180 million euros of bank loan guarantees for small and medium-sized companies in Slovenia or, in other words, support additional financing under favourable conditions for more than 1,100 Slovenian companies,” said the Head of the European Commission Representation in Slovenia, which will also present the importance of the Investment plan for Europe at this year’s PODIM as a conference partner.
Mr Stančič, could you first explain what exactly is the Investment Plan for Europe meant for and what is the main motive for its launch?
The financial and economic crisis claimed a sharp drop in investments in Europe. At the very start of its mandate in November 2014, the Juncker Commission launched an initiative for encouraging strategic investments in key economic sectors which consequently meant reviving growth, creating new jobs and strengthening the global competitiveness of the European economy.
What are the goals of the Investment Plan for Europe?
The goal of the Investment plan for Europe is to release public and private investments in infrastructural and innovative projects in the amount of at least 315 billion EUR until mid-2018. The European Fund for Strategic Investments (EFSI) ensures the guarantee of the EU budget which is a big advantage. EFSI largely takes over the risk and consequently allows supporting riskier projects. The plan thus allows SMEs to grab further investment opportunities and enables easier access to risk financing for companies.
Is the Investment Plan for Europe focused only on big infrastructural projects, or will it also support small and medium-sized companies?
The money is not pre-divided either by country or by sector. However, it is estimated that at least a fourth of planned investments (75 billion EUR) will be in the sector of SMEs and the so-called mid-cap companies which are employing up to 3,000 people. The implementation of the SME window of the Investment Plan is coordinated by the European Investment Fund which has a lot of valuable experience with various types of risk financing such as risk capital, guarantees and microfinance.
How does the procedure actually work in practice?
The European Investment Fund signs agreements with national financial intermediaries, such as banks, enterprise funds or venture capital funds, which then offer various products to companies – guarantees, loans or equity financing.
What are the conditions for application and funding?
All SMEs with up to 250 employees and mid-cap companies with up to 3,000 employees can apply for financial products supported by the European Fund for Strategic Investments. The companies may have their headquarters in one of the EU member states or outside of the EU. However, the projects proposed by companies outside the EU have to be part of cross-border projects in which EU member states are also participating.
And what are the conditions for financing higher risk innovative projects, characteristic for start-up companies?
With the Investment Plan for Europe, we mainly wish to support particularly innovative projects that usually carry higher risks. The guarantee of the European budget, ensured by the European Fund for Strategic Investments, enables financial providers and intermediaries to take bigger risks than they would be prepared to take otherwise, without such help. This gives SMEs better and bigger opportunities for financing projects.
Are there any limitations or preferences for financing individual sectors?
The Investment plan is mostly focused on economic sectors that are of key importance for achieving positive effects on the European economy. This includes transport, energy and digital infrastructure, education and training, health, research and development, information and communication technologies, renewable energy sources and resource efficiency, as well as environmental, urban and social projects. These are also the sectors in which many high-impact start-up companies work. However, unlike big projects (implemented by companies with more than 3,000 employees), small and medium-sized companies and mid-caps also receive financial support for projects outside the mentioned sectors, so there are practically no limitations for start-ups regarding the sector.
What are the first results of the SME programmes coordinated by the European Investment Fund?
The results show an incredibly good response, especially for SMEs, proving that the Investment plan addressed the right market gap and financing need of SMEs. Up until April 2016, 165 agreements for access to finance for SMEs were signed with financial intermediaries. Based on these agreements, 3.4 billion EUR will reach more than 136.000 European companies.
How can Slovenian SMEs access the funds?
Small and medium-sized companies and mid-caps can get financial resources for their projects through national promotional banks and local financial intermediaries who are authorized for lending. In Slovenia, that is the Slovene Enterprise Fund, which signed an agreement with the European Investment Fund at the end of 2015 as part of the European programme for the Competitiveness of Enterprises and SMEs called COSME, which is supported by the European Fund for Strategic Investments. The Slovene Enterprise Fund is therefore the right address for Slovenian companies wishing to get more favourable financing enabled by the EFSI guarantee.
Has any other project with the EFSI guarantee been authorized for Slovenia?
The agreement between the European Investment Fund and the Slovene Enterprise Fund is the first and so far the only project authorized for Slovenia. Slovenia is one of the 19 EU countries that already have an approved project for small and medium-sized companies.
What forms of favourable financing will the Slovene Enterprise Fund ensure with the EFSI guarantee?
The agreement will ensure 180 million euros of loan guarantees for small and medium-sized companies in Slovenia. The EFSI guarantee ensures counter guarantees and thus enables the Slovene Enterprise Fund to support additional financing under more favourable conditions for more than 1,100 Slovenian companies. The guarantee issued by the Slovene Enterprise Fund provides additional insurance of the bank loan taken by the SMEs in one of the participating banks. This gives micro, small and medium-sized companies easier, faster and cheaper access to loans with lower demands for additional loan insurance, which usually burdens the entrepreneur.
This year, you will also actively present the importance of the Investment Plan for Europe at the PODIM Conference. What is the relation between the EFSI projects and equity financing forms, needed by innovative start-up companies in their early development stages as they are not ready for debt financing?
EFSI is designed as a flexible instrument and supports both bank loans and equity financing. The agreement signed by the Slovene Enterprise Fund foresees only bank loan guarantees, because guarantees for insuring bank loans are still considered as one of the most important incentives for SME financing. However, financial intermediaries in some other countries, for example in Sweden and Estonia, have recently signed agreements for equity financing in early development stages of companies. I hope that one of Slovenian financial intermediaries will also contact the European Investment Fund as soon as possible and encourage such forms of financing which would effectively address specific needs of start-ups in Slovenia.
The European commission also started a special European Investment Project Portal. What is its purpose and what do you wish to achieve with it?
The European Investment Project Portal is one of the key elements of the Investment plan. It has been established as a direct response to the needs of private sector or financial investors who claim they do not have an overview of numerous investment opportunities that exist in Europe. They would like to have at their disposal an interactive map covering all member states with descriptions of interesting projects worth more than 10 million euros, looking for a private co-investor.
So it's mostly about ensuring a higher transparency...
Yes, the purpose of the portal is to increase the transparency of existing projects and thus give their leading partners the opportunity to introduce their investment projects or ideas to potential investors from the whole world, not only Europe. It's a big opportunity especially for smaller countries, such as Slovenia, which are not often on the radar of global investors. On the other hand, the latter can use the portal to gain access to a wide range of credible investment opportunities in the EU. If you want it in simpler terms: it could also be called “investment dating”, since publishing the project on the portal does not necessarily mean the project will actually get financing. I hope Slovenian companies will take advantage of the opportunities offered by the portal.
More information about the Investment plan for Europe at: http://ec.europa.eu/slovenia/news/2015/2015-0728_evropski_sklad_za_strateske_nalozbe_sl.htm
Mr Stančič, could you first explain what exactly is the Investment Plan for Europe meant for and what is the main motive for its launch?
The financial and economic crisis claimed a sharp drop in investments in Europe. At the very start of its mandate in November 2014, the Juncker Commission launched an initiative for encouraging strategic investments in key economic sectors which consequently meant reviving growth, creating new jobs and strengthening the global competitiveness of the European economy.
What are the goals of the Investment Plan for Europe?
The goal of the Investment plan for Europe is to release public and private investments in infrastructural and innovative projects in the amount of at least 315 billion EUR until mid-2018. The European Fund for Strategic Investments (EFSI) ensures the guarantee of the EU budget which is a big advantage. EFSI largely takes over the risk and consequently allows supporting riskier projects. The plan thus allows SMEs to grab further investment opportunities and enables easier access to risk financing for companies.
Is the Investment Plan for Europe focused only on big infrastructural projects, or will it also support small and medium-sized companies?
The money is not pre-divided either by country or by sector. However, it is estimated that at least a fourth of planned investments (75 billion EUR) will be in the sector of SMEs and the so-called mid-cap companies which are employing up to 3,000 people. The implementation of the SME window of the Investment Plan is coordinated by the European Investment Fund which has a lot of valuable experience with various types of risk financing such as risk capital, guarantees and microfinance.
Zoran Stančič: ”The agreement between the European Investment Fund and the Slovene Enterprise Fund is the first and so far the only project authorized for Slovenia.”
How does the procedure actually work in practice?
The European Investment Fund signs agreements with national financial intermediaries, such as banks, enterprise funds or venture capital funds, which then offer various products to companies – guarantees, loans or equity financing.
What are the conditions for application and funding?
All SMEs with up to 250 employees and mid-cap companies with up to 3,000 employees can apply for financial products supported by the European Fund for Strategic Investments. The companies may have their headquarters in one of the EU member states or outside of the EU. However, the projects proposed by companies outside the EU have to be part of cross-border projects in which EU member states are also participating.
And what are the conditions for financing higher risk innovative projects, characteristic for start-up companies?
With the Investment Plan for Europe, we mainly wish to support particularly innovative projects that usually carry higher risks. The guarantee of the European budget, ensured by the European Fund for Strategic Investments, enables financial providers and intermediaries to take bigger risks than they would be prepared to take otherwise, without such help. This gives SMEs better and bigger opportunities for financing projects.
Are there any limitations or preferences for financing individual sectors?
The Investment plan is mostly focused on economic sectors that are of key importance for achieving positive effects on the European economy. This includes transport, energy and digital infrastructure, education and training, health, research and development, information and communication technologies, renewable energy sources and resource efficiency, as well as environmental, urban and social projects. These are also the sectors in which many high-impact start-up companies work. However, unlike big projects (implemented by companies with more than 3,000 employees), small and medium-sized companies and mid-caps also receive financial support for projects outside the mentioned sectors, so there are practically no limitations for start-ups regarding the sector.
What are the first results of the SME programmes coordinated by the European Investment Fund?
The results show an incredibly good response, especially for SMEs, proving that the Investment plan addressed the right market gap and financing need of SMEs. Up until April 2016, 165 agreements for access to finance for SMEs were signed with financial intermediaries. Based on these agreements, 3.4 billion EUR will reach more than 136.000 European companies.
How can Slovenian SMEs access the funds?
Small and medium-sized companies and mid-caps can get financial resources for their projects through national promotional banks and local financial intermediaries who are authorized for lending. In Slovenia, that is the Slovene Enterprise Fund, which signed an agreement with the European Investment Fund at the end of 2015 as part of the European programme for the Competitiveness of Enterprises and SMEs called COSME, which is supported by the European Fund for Strategic Investments. The Slovene Enterprise Fund is therefore the right address for Slovenian companies wishing to get more favourable financing enabled by the EFSI guarantee.
Has any other project with the EFSI guarantee been authorized for Slovenia?
The agreement between the European Investment Fund and the Slovene Enterprise Fund is the first and so far the only project authorized for Slovenia. Slovenia is one of the 19 EU countries that already have an approved project for small and medium-sized companies.
What forms of favourable financing will the Slovene Enterprise Fund ensure with the EFSI guarantee?
The agreement will ensure 180 million euros of loan guarantees for small and medium-sized companies in Slovenia. The EFSI guarantee ensures counter guarantees and thus enables the Slovene Enterprise Fund to support additional financing under more favourable conditions for more than 1,100 Slovenian companies. The guarantee issued by the Slovene Enterprise Fund provides additional insurance of the bank loan taken by the SMEs in one of the participating banks. This gives micro, small and medium-sized companies easier, faster and cheaper access to loans with lower demands for additional loan insurance, which usually burdens the entrepreneur.
This year, you will also actively present the importance of the Investment Plan for Europe at the PODIM Conference. What is the relation between the EFSI projects and equity financing forms, needed by innovative start-up companies in their early development stages as they are not ready for debt financing?
EFSI is designed as a flexible instrument and supports both bank loans and equity financing. The agreement signed by the Slovene Enterprise Fund foresees only bank loan guarantees, because guarantees for insuring bank loans are still considered as one of the most important incentives for SME financing. However, financial intermediaries in some other countries, for example in Sweden and Estonia, have recently signed agreements for equity financing in early development stages of companies. I hope that one of Slovenian financial intermediaries will also contact the European Investment Fund as soon as possible and encourage such forms of financing which would effectively address specific needs of start-ups in Slovenia.
The European commission also started a special European Investment Project Portal. What is its purpose and what do you wish to achieve with it?
The European Investment Project Portal is one of the key elements of the Investment plan. It has been established as a direct response to the needs of private sector or financial investors who claim they do not have an overview of numerous investment opportunities that exist in Europe. They would like to have at their disposal an interactive map covering all member states with descriptions of interesting projects worth more than 10 million euros, looking for a private co-investor.
So it's mostly about ensuring a higher transparency...
Yes, the purpose of the portal is to increase the transparency of existing projects and thus give their leading partners the opportunity to introduce their investment projects or ideas to potential investors from the whole world, not only Europe. It's a big opportunity especially for smaller countries, such as Slovenia, which are not often on the radar of global investors. On the other hand, the latter can use the portal to gain access to a wide range of credible investment opportunities in the EU. If you want it in simpler terms: it could also be called “investment dating”, since publishing the project on the portal does not necessarily mean the project will actually get financing. I hope Slovenian companies will take advantage of the opportunities offered by the portal.
More information about the Investment plan for Europe at: http://ec.europa.eu/slovenia/news/2015/2015-0728_evropski_sklad_za_strateske_nalozbe_sl.htm
