exportinvest 28 29 June 2004, Munich SME venture capital and loan financing offered by the EIB Group

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exportinvest 28 29 June 2004, MunichSME
venture capital and loan financingoffered by the
EIB Group

• U. Grabenwarter J. Link

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• Small and medium sized enterprises
• a cornerstone of the EU economy
• Two-thirds of employment in the EU in SMEs
• (i.e. firms with less than 250 employees)
• SMEs tend to be better at adopting new
• technologies and more flexible in how they
  operate
• SMEs are important drivers of productivity growth

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THE EIB GROUP EIB AND EIF
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• 1. EIB - European Unions financing institution
• Created by the Treaty of Rome in 1958, to provide
  long-term finance for projects promoting European
  integration
• Subscribed capital EUR 163.7bn
• EIB shareholders 25 Member States of the
  European Union
• Lending in 2003 EUR 42bn (EUR 34bn within the
  EU)
• Borrowing in 2003 EUR 42bn (EUR 31bn in EU
  currencies).

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THE EIB GROUP EIB AND EIF contd.
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• 2. EIF - EIBs venture capital and SME guarantee
  vehicle
• Established in 1994
• Subscribed capital EUR 2bn
• Tripartite structure EIB (60), European
  Commission (30) and financial institutions
  (10)
• Volume of operations
• - Investments at risk EUR 2.480m
• - Guarantees at risk EUR 6.351m.

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THE EIB CAPITAL (in )
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EUR 163.7bn
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DECISION-MAKING STRUCTURE AT THE EIB
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Board of Governors
25 Members
Audit Committee
Board of Directors
26 Directors 16 Alternates 6 experts
Management Committee
President 8 Vice-Presidents
Management Committee Advisor
Ops B
Ops A
FI
PJ
SG-JU
RMD
IT
AI
EV
HR
General Secretariat Legal Affairs
Lending in Westernand Central Europe 9
Directorates 28 Divisions
Lending outside Europe 4 Directorates 11 Divisions
Finance Directorate
Projects Directorate
Human Resources
Operations Evaluation
Information Technology
Risk ManagementDirectorate
Internal Audit
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STRATEGIC OUTLOOk

• 5 priorities
• Economic and social cohesion in an enlarged EU
• Implementing of the Innovation 2010 Initiative
  (i2i)
• Development of Trans-European and access networks
  (TENs)
• Environmental protection and improvement
• Support for EU development aid and cooperation
  policies with Partner Countries, in particular
  through FEMIP and the Cotonou Agreement

EIB implements EU policies a policy driven Bank
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LOANS IN THE NEW MEMBER STATES1999-2003 EUR
13.5bn
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Estonia 192

• EURm
• New Member States
• Accession states
• Applicant states
• Candidate states
• --------
• Energy
• Communications
• Water
• Industry
• Education,Health
• Global loans

Latvia 276
Lithuania 249
Poland 4 860
Czech Rep 3 160
Slovakia 880
Hungary 2 149
Slovenia 974
Cyprus 705
Malta 25
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FINANCING EU ENLARGEMENT
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In 2003, EUR 4.6bn for investment in the 10
Accession Countries in Central and Eastern
Europe, Cyprus and Malta
FOCUS

• Communications infrastructure (including TENs)
• Regional development
• Industrial competitiveness (including Foreign
  Direct Investment)
• Environmental protection
• Health and Education

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LOANS IN ACCESSION, APPLICANT AND CANDIDATE
STATES 1999-2003 EUR 6.1bn
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• EURm
• New Member States
• Accession states
• Applicant states
• Candidate states
• --------
• Energy
• Communications
• Water
• Industry
• Education,Health
• Global loans

Romania 2 175
Bulgaria 565
Turkey 2 197
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EIF
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• Small and medium sized enterprises
• a cornerstone of the EU economy
• Two-thirds of employment in the EU in SMEs
• (i.e. firms with less than 250 employees)
• SMEs tend to be better at adopting new
• technologies and more flexible in how they
  operate
• SMEs are important drivers of productivity growth

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SMEs tend to pay more for loans
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• Small loan size fixed costs -gt Higher unit cost
• SME risk
• Smaller and younger firms are riskier
  individually
• Even a diversified portfolio of SME loans may
  justify a risk premium

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EIB Group support for SMEs
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• EIF equity for the early stage
• EIF guarantees for the SME loans
• EIB/EC infrastructure support for SME lending
• EIB Global loans for improved terms and
  conditions of SME loans

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Origin of favourable interest rates
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• AAA-Rating Funding though bond issues and
  private placements in all major capital
  markets of the world
• Slim, cost covering margins (13bp)
• Transmission mechanism through partner banks,
  ensuring optimal adaptation on requirements of
  the final beneficiaries

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FINANCING OPTIONS TO PUBLIC AND PRIVATE SECTORS
EIB PARTICIPATION IS LIMITED TO 50 OF A
PROJECTS COST
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• Large-scale projects (gt EUR 25 million)
• direct financing
• indirect financing

• Small and medium-scale projects (EUR 40 000 25
  million)
• Global loans with partner banks
• High-growth innovative SMEs investment
  funds,venture capital or development capital
  companies

Tailor-made finance to fit project and promoter
subject to adequate security
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Global loans
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• Definitions
• SME criteria
• Amounts and limits
• Essential rules

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Global loan - Definitions
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• Credit line for partner banks of the EIB (c.f.
  list of partner institutions)
• Access to favorable prized funds below capital
  market level
• Objective financing eligible projects of SMEs
• Character neither grants nor interest rate
  subsidies, but passing-on of prime funding
  conditions of the Bank of the Union

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Global loan SME criteria
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• Max. 500 employees
• Fixed assets up to EUR 75m
• Up to one third of own funds may be held by large
  company

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SMEs
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• From January 2005 Realignement to EU definition
• lt 250 employees
• Still in negotiation with EU
• Total assets
• Turnover
• Shore of non-SMEs

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Global loans Amounts and limits
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• Project cost EUR 40 000 to EUR 25m
• Loan amount ( allocation ) up to 50 of
  project cost
• Accumulation with other EU contributions 75
• In assisted areas (Objective I) . Up to 90

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Global loans essential rules
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• Project definition
• Sector rules
• Geographic rules

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Options for larger companies
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• Support of projects beyond SME criteria
• Environmental protection
• Rational use of energy, alternative sources of
  energy
• Health, education, training
• Research and development (under preparation)
• Exceptions for assisted areas (size of companies,
  size of projects)
• Labor-intensive production

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Partner banks
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• SME
• Finance Facility

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SME FF Identification
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• An Eligible Final Beneficiary
• EC definition of SMEs total assets worth of
  less than EUR 27 m
• or total turnover lower than EUR 40 m
• fewer than 250 employees
• majority private ownership and no more than 25
  of its capital controlled by a company not
  meeting these criteria
• An Eligible Sub-Project
• investments not lower than EUR 40 000 and,
  normally, not higher than EUR 1 m and having an
  implementation phase shorter than 5 years.
• An Eligible Sub-Financing
• between EUR 20 000 and EUR 250 000, with a
  maturity of at least 4 years, which has been
  disbursed in at least EUR 20 000.

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Ensure your access to favorably prized EIB global
loans
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• Ask for offers under EIB global loans
• Check compliance of your company and your
  investment project with EIB support criteria
• Intensify service functions of your house-banks