EC and EIF unlock working capital financing for SMEs affected by COVID-19

Following the European Commission’s commitment of 13 March to bring immediate relief to small and medium-sized businesses (‘SMEs’) affected by the COVID-19 crisis, €1 billion has been unlocked from the European Fund for Strategic Investments (the ‘EFSI’) as a guarantee to the European Investment Fund (the ‘EIF’) with the aim to incentivise banks and other financial intermediaries to provide working capital financing to SMEs and mid-cap companies.  

This COVID-19 support measure is expected to allow the EIF to provide guarantees worth total €2.2 billion to financial intermediaries, resulting in estimated additional financing of €8 billion being made available to at least 100,000 European SMEs and mid-cap companies.

The measure represents an enhancement to the following guarantee schemes in place under two existing EU programmes, the EU programme for the Competitiveness of Enterprises and Small and Medium-sized Enterprises (‘COSME’) and Horizon 2020:

(i) The COSME Loan Guarantee Facility; and

(ii) The InnovFin SME Guarantee (‘SMEG’) Facility.

The new guarantees shall be open to existing financial intermediaries already working with the EIF (i.e. those already benefiting from guarantees under the COSME Loan Guarantee Facility or the InnovFin SMEG Facility) and to new applicants.

Key features of the new guarantees:

• Simplified and quicker access to the EIF guarantee;
• A higher risk cover – up to 80% of potential losses on individual loans (as opposed to the standard 50%);
• Focus on working capital loans across the EU;
• Allowing for more flexible terms, including postponement, rescheduling or payment holidays.

Application method

A call for expressions of interest has been issued and shall be open until 30 June 2020. Financial intermediaries with existing EIF agreements under the COSME Loan Guarantee Facility or the InnovFin SMEG Facility may access the new guarantees upon their request without any application process. Other financial intermediaries may access the guarantees following a swift application process.

SMEs may then apply directly to their local financial intermediaries participating this scheme. Such intermediaries shall be listed on www.access2finance.eu.

The full text of the European Commission press release may be found here.