The 2013/06/21 at 08:01
Marie Luginsland, in Germany
The complexity of procedures and the slowness of decision-making processes are two primordial obstacles to SME financing. Often, these barriers can prove to be fatal to the endurance of young companies. As Antonio Tajani, European Commissioner for Industry and Entrepreneurship, points out, “access to finance of SMEs remains difficult and is one of the main reasons for the current economic downturn. (It) is crucial to help Europe’s jobs engine, our small enterprises, to run smoothly again. It is they who create 85 % of all new jobs.”
30 euros in loans for every euro guaranteed
Aware that Europe’s economic recovery relies on the dynamism of SMEs, the European Commission took advantage of the publication in May of the European Investment Bank (EIB)’s yearly report to announce new measures in favour of businesses. In this report, the European Commission and the EIB point out that 13 billion euros in grants were accorded to businesses in 2012. In addition, the Commission intervened in the form of guarantees to unblock 13 billion euros in loans and 2.3 billion euros in risk capital.
A total of 220,000 European SMEs, 90 % of which have fewer than ten employees, benefited from this European financial support last year for loans whose sums averaged 65,000 euros. The Competitiveness and Innovation Framework Programme (CIP) is a mechanism offering guarantees for small enterprises, whose managers cannot provide sufficient guarantees to obtain bank loans.
This year, Brussels plans to continue to provide this form of aid and even extend it, for the EIB has benefited from a capital increase of 10 billion euros – an operation enabling it to lend a further 15 billion euros to SMEs between 2013 and 2015. “We intend to enlarge our loan guarantees to SMEs under the new COSME programme as of 2014. Each euro dedicated to our guarantees has the power to stimulate – on average – 30 euros in bank loans,” promises Antonio Tajani.
Beyond this financial aid, the European Commission is intensifying its support for SMEs. Amongst the new initiatives presented by Antonio Tajani is an information guide to encourage SMEs to get listed on the stock market and to raise the interest of investors in the world of small businesses. A prize has been created to reward the best stock quotes for small and intermediate-sized businesses in Europe. In addition, recalling that support for SMEs in the current context is one of the top priorities of the EIB, Werner Hoyer, its President, indicated that “securitisation could be a useful tool to revive SLE lending”.
However, the key news to note is the creation of a portal aimed at SMEs, centralising all financial instruments existing in Europe. By simply clicking on his country of origin or the country of investment of his choice, a company head can identify the bodies and financial institutes that can potentially support him. This portal operates like an interactive financial support map for European SMEs.
Hailing these initiatives, Eurochambres, the association of European CCIs, representing over 20 million European businesses, 93 % of which are SMEs, recalls the need to allocate EIB funds to support these enterprises in their innovations, skills, clean energy initiatives and modern infrastructures. Eurochambres also suggests that “given the problems emerging on financial markets and the focus on financing the debt of European companies, access to loans could be stimulated by a range of guarantee schemes”.
Indeed, as Eurochambres maintains, “it has been proven that such guarantee schemes provide more stimulation as they also reduce the risk of default and the absorption of capital by lenders.” As for the long-term financing of businesses, Eurochambres hopes for an opening up of discussion on how to attract private investors.