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Access to finance for small and medium-sized enterprises

The focus is on around 25 million European small and medium-sized enterprises (SMEs). As is stated on the official webpage of the European Commission “they represent over 99% of businesses in the EU. They employ two out of every three employees, create 85% of all new jobs, and generate about three-fifth of the EU added value costs”. According to the EC, essential is tailor-made support to help SMEs grow and innovate. At all stages of development, SMEs struggle more than large enterprises to get finance. The Commission deems, that to stay competitive, both start-ups and scale-ups rely on external finance for innovation, digitalization, internationalization, and upskilling.

Coronavirus response in relation to financing for businesses

The EU Commission announces, that it would be mobilizing financial support for SMEs through the programme for the Competitiveness of Enterprises and Small and Medium-sized Enterprises (COSME programme). In particular, it is planned to boost the existing ‘Loan Guarantee Facility’ (LGF) under COSME with additional resources from the European Fund for Strategic Investments to enable banks to offer bridge financing for SMEs. What it involves is long-term working capital loans (of 12 months or more), as well as credit holidays allowing for delayed repayments of existing loans.

According to the EU Commission, the measures will be available through the European Investment Fund (EIF) by means of a call for expression of interest for financial intermediaries until 30 June 2020. Current COSME LGF financial intermediaries and new ones will be able to avail themselves of the loans and enjoy higher risk cover, simplified eligibility criteria, and a fast approval process so that they can engage in new SME lending. As the official EU website states, “SMEs will then have the opportunity to apply for the working capital facilities directly from the participating financial intermediaries”