Coronavirus: Commission and European Investment Fund unlock € 8 billion

The European Commission has unlocked € 1 billion from the European Fund for Strategic Investments (EFSI), which will provide a guarantee for the European Investment Fund (EIF), which is part of the European Investment Bank Group. This will allow the EIF to issue special guarantees to incentivize banks and other lending entities to provide liquidity to a minimum of 100,000 SMEs and small mid-cap companies affected by the economic impact of the coronavirus pandemic, with available funding estimated at 8 billion euros. Today's announcement follows the commitment of the Commission Communication of March 13 to provide immediate help to the most affected SMEs, with funds that may circulate as early as April. This is part of the package of measures announced by the EIB Group on 16 March in order to quickly mobilize support for European SMEs and mid-cap companies.

One of the immediate economic consequences of the coronavirus pandemic is the sudden lack of liquidity that affects small and medium-sized companies. These companies are often the most affected in a crisis, and supporting them with adequate liquidity is essential for them to survive. However, in a liquidity crisis situation, banks have no incentive to lend money to SMEs due to the sudden increase in perceived risk. This is why EU guarantees in support of these loans are necessary. Starting today, the EIF will offer the market EFIE-backed guarantees to contain the impact of the pandemic on small and medium-sized and small-cap companies.

The € 1 billion unlocked by the EFSI under the COSME Program Loan Guarantee Instrument and the InnovFin Guarantee for SMEs under Horizon 2020 allow the FEI to offer collateral worth € 2.2 billion to financial intermediaries, thus unlocking 8 billion euros of available financing. The guarantees will be offered through the FEI to the market, through a call for expressions of interest that is issued today to several hundred financial intermediaries, such as banks and alternative loan entities. The fundamental characteristics of these guarantees will be the following:

• simplified and faster access to the EIF guarantee;
• higher risk coverage (up to 80% of potential losses on individual loans, compared to the usual 50%);
• focus on working capital loans across the EU;
• more flexible conditions, such as extension, rescheduling or suspension of payment.

Both new financial intermediaries and those who already collaborate with the EIF will have access to the new features, which will grant special conditions to more than one hundred thousand companies that benefit from guarantees under the COSME Program Loan Guarantee Instrument and the Guarantee of SMEs InnovFin.

Next stages

Following the call for expressions of interest launched today, financial intermediaries who have already entered into agreements with the EIF under the COSME and InnovFin programs will be able to access the new guarantees immediately upon request. Other financial intermediaries will be able to access them after a quick application process. In this way, the new funds will be able to start flowing to severely affected companies in April. SMEs may contact the local banks and lending entities participating in the program directly, which are listed at www.access2finance.eu

The Commission and the EIB Group will continue to work on additional measures and will use all the instruments at their disposal to help contain the coronavirus pandemic and cope with its economic consequences. Context To unlock the € 1 billion from the EU budget, the Commission and the EIB Group have made a number of modifications to their specific agreements.

Context To unlock the € 1 billion from the EU budget, the Commission and the EIB Group have made a number of modifications to their specific agreements.

The European Investment Fund (EIF) is part of the Group of the European Investment Bank. Its main mission is to provide support to European micro, small and medium-sized enterprises, helping them to access financing. The EIF designs and develops both venture capital and growth funds as well as guarantees and microfinance instruments that specifically target this market segment. In this role, the EIF promotes the EU's objectives in support of innovation, research and development, entrepreneurship, growth and employment.

COSME is the Program for the Competitiveness of Companies and for Small and Medium-sized Enterprises (SMEs) between 2014 and 2020, with a total budget of 2.3 billion euros. At least 60% of the program is intended to improve SMEs' access to finance in Europe, with two financial instruments. The COSME Program Loan Guarantee Instrument offers guarantees and counter-guarantees to financial entities to help them provide more loans and financial leasing to SMEs. The COSME Program Capital Instrument for Growth helps to provide venture capital to SMEs, mainly in the expansion and growth phases.

Horizon 2020 is the EU's research and innovation program between 2014 and 2020, with a total budget of € 77 billion. Under Horizon 2020, InnovFin's financial instruments (EU funding for innovators) aim to facilitate and accelerate access to finance for innovative companies across Europe. In particular, the SME Guarantee Instrument (InnovFin) provides guarantees and counter-guarantees on debt financing of between € 25 billion and € 7.5 billion to improve access to finance for SMEs and innovative mid-cap companies . In the framework of the InnovFin SME Guarantee, an instrument managed by the EIF, guarantees are provided to financial intermediaries (banks and other financial entities) to cover part of the losses incurred in financing the debt covered by the instrument.

The European Fund for Strategic Investments (EFSI) is the financial pillar of the Investment Plan for Europe, which was launched in November 2014 to reverse the downward trend in investment levels and put Europe on the path of Economic recovery. Its innovative approach, based on the use of an EU budget guarantee provided to the EIB Group, enables significant public and private funds to be mobilized to invest in strategic sectors of the European economy. The Investment Plan for Europe has already generated more than € 460 billion of investment and has supported 1,100,000 startups and SMEs across Europe.

Check the latest EFSI figures by sector and by country here.