EIF launches further guarantee programmes for businesses across Europe

The EIF has launched two new funding initiatives to support SMEs in Europe, including a first-of-its kind initiative in Finland. The second provides funding support for Lithuanian micro businesses and SMEs.

The Finnish programme comprises a guarantee agreement signed by the EIF and Finnish specialist lender, Finnvera. The guarantee is designed to facilitate around €190m of new lending for SMEs that are seeking to grow their businesses.

The operation is supported under the COSME Loan Guarantee Facility, backed by the European Fund for Strategic Investments (EFSI), the heart of the Investment Plan for Europe, or Juncker Plan. The EIF’s role in the process is to ‘counter-guarantee’ Finnvera, which will guarantee lending by local banks, including Aktia Bank Plc, Fennia Mutual Insurance Company, Nordea Bank Abp, OP-Services Ltd, Oma Savings Bank Plc and Savings Banks’ Union Coop.

The EIF will cover 50% of Finnvera’s guarantee, which in turn will guarantee 80% of the lending by the participating banks. As such, nearly €190m in new lending will be made available to Finnish SMEs under the first COSME operation of this kind in the country.

Furthermore, Finnvera does not require collateral, which favours businesses who operate in the service, trade or IT sector, for example. It is estimated that at least 2,000 Finnish businesses can profit from this scheme and, to apply, companies must have at least three years of prior activity and a positive credit rating.

Additionally, Vilnius Factoring Company, a private lending company in Lithuania, has signed a cooperation agreement with the EIF to issue microloans of up to €25,000. Micro-enterprises and farmers in Lithuania can now benefit from non-banking business funding opportunities under the EU Programme for Employment and Social Innovation (EaSI).

The Vilnius Factoring Company issues microloans of up €10m with a guarantee from the EIF. The agreement is backed by the Juncker Plan’s EFSI, which allows the European Investment Bank Group to invest in higher-risk operations.

Microloans will be provided to small farmers and enterprises with no more than nine employees. The annual turnover and the amount of assets these enterprises carry should not exceed €2m.

The EaSI programme provides micro businesses with better access to finance, by creating less stringent conditions than traditional banking sources and due to significantly lower collateral requirements. The funds can be invested in either the company’s working capital or its business development.

Renato La Fianza, ceo, Vilnius Factoring Company, comments that the firm has operated in Lithuania for a year and that there is a need for flexible financing instruments for micro businesses. He adds that it is “very important” to have trusted partners like the EIF to allow his firm to “expand the financing instrument packages available for micro businesses and farmers.”

To date, the Vilnius Factoring Company has been providing factoring services to micro businesses and SMEs and within a year of operations in Lithuania, the company has financed invoices valued at €113m and has provided services to 130 clients. At the middle of August, Vilnius Factoring Company had a financing portfolio of €23 million.

Richard Budden