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Loans, guaranties and capital venture (BEI)

Welcomeurope - all the European programmes such as subsidies, funds, grants, loans, guarantees

THE FUNDS ALLOCATED BY THE EIB GROUP


1. Access the loans of the European Investment Bank
Five priorities for loans
Financing the SMEs
Financing of trans-European networks

2. The SME support of the European Investment Fund
The guarantee mechanism
The Multiannual Programme for Companies (MAP)
The capital-venture activities

First part: The EIB group


The EIB Group :

- The European Investment Bank
- The European Investment Fund
Newly constituted in June 2000 after a reformation of the EIF statutes, the EIB Group aims at:
- Financing long-term projects with great dimension through direct or indirect loans
- Investing in small or medium structures through capital venture and guarantee allocation within the Union and the 12 applicant countries.

The work schedule was defined for the period 2001- 2003

1. Access the loans of the European Investment Bank

How does the EIB operate and for which loans?
- Within the EU, the EIB finances
· regional development,
· industry,
· the amelioration of companies competition,
· communications and infrastructures,
· security of energy supplies,
· environmental protection,
· improvement of the quality of life
,
- outside the EU in the framework of partnerships with
· ACP countries
· 12 Mediterranean States (Euro-Med area)
· and some Eastern European countries (in cooperation with the EBRD)
· ALA area (Latin America - Asia)


Five priorities for loans :

1. Support the economic and social coherence and regional development
This essential mission of the EIB answers to the objectives 1 and 2 of the Structural Funds.
More than two thirds of the individual loans (13,7 billion Euros) contribute to the financing of a large range of investments for the underdeveloped regions or areas with structural difficulties.

The main supported projects:
· develop communication infrastructures conditioning the creation of activities
· Projects linked to environmental protection
· Actions contributing to the improvement of the quality of life: urban revitalisation, development of public transport and construction or modernisation of sanitary infrastructures
· Transport telecommunication and energy infrastructures,
· Extension, modernisation or setting out of industrial companies
· Strengthening of the international competition of the European heavy industry: automobile, electric or electronic equipment, metal, paper or rubber working
· Adaptation of the industrial fabric to support the international competition and to create jobs

2. Promote investments for a society based on knowledge and innovation
Initiative Innovation 2000 - i2i allocates middle and log-term loans up to 12 to 15 billion Euros for projects with a technological high added value and frontier technology sectors for 2001-2003.
In 2000 : 1,6 billion Euros allocated through lending to 11 Member States

This programme consists of five priorities:
· Development of SMEs and entrepreneurial spirit, strengthening of capital venture activities
· Spread and use of innovation tools : financing of all ranges of investments implemented by public local authorities or companies. These subsidies may help to develop the necessary skills for the use of new technologies.
· Research and Development : support of private or public projects associating companies or public organisations, promotion of research infrastructures, of centres of excellence or structures facilitating the access of SMEs to research programmes.
· Networks of information and communication technologies: support of trans-European networks and multimedia, material or virtual infrastructures with a local access to these networks, especially in the less developed countries of the European Union.
· Enriching of the human capital: modernisation and computerisation of schools, high schools and universities in favour of training centres for information technologies

INNOVATION 2000 INITIATIVE

3. Prepare the accession of the candidate countries
Since 1990, more than 14 billion Euros have been invested and 2,9 in 2000 to contribute to the economic catching-up process of these countries.
Generally, the Bank was able to offer credits in local currencies and to limit the losses of foreign-exchange operations for borrowers, if possible.

Financing :
· Infrastructures : railway and route facilities, harbour, airports, aerial monitoring, telecommunication networks, communication infrastructures, development of new shafts…
· Environment : amelioration of natural and urban environment, programmes for waste water treatment, modernisation of tubes, tramways, creation of urban infrastructures, actions of assistance for damaged areas.
· Industry: global loans allocated to partner financial institutions for the support of local industrial projects (intermediary loans)

PRE-ACCESSION FACILITY - PREPARATION FOR ENLARGEMENT

4. Cooperate with third countries
· Euro-Med area: in 2000, the EIB supported the objectives of the Euro-Mediterranean partnership in order to create an area of economic stability and prosperity.
Financing: modernisation of the private sector (SMEs), development of the financial sector and of infrastructures for environment.
· ACP - Africa, Caribbean, Pacific : the Bank takes action in 25 countries and loans for the implementation of regional projects. The EIB focuses its efforts on the private sector development. Attached to the poorest countries, the EIB contributes to the debt relief of a dozen countries.
· South Africa: financing of the telecommunications, the industry and small infrastructures of local interest.
· ALA area- Latin America - Asia: investments for the private sector, support of co-enterprises for which operators and European banks take action with the involved countries.
· Balkans : The EIB contributed to the Stability Pact for Europe and was involved in a bridge construction on the Danube, the rehabilitation of electric transport networks and in the amelioration of a route shaft in Albania

Eurofunding programme sheets :
South Africa
Asia and South America
ACP countries

5. Natural and urban environmental protection
Essential ! ! The EIB systematically takes the environmental considerations into account in the evaluation of all the projects it supports.
The strict observance of the current standards and the implementation of the most adapted measures for protection (Community Law) constitute a necessary and perequisite condition
for the allocation of a loan by the EIB.
Financial support:
· Natural environmental protection: waste and water treatment, reduction of air pollution, deployement of industrial non polluting processes, protection of soils …
· Improvement of urban environment: reduction of noise disamenity due to traffic, development of urban transport on separated railroad, projects for tramways, tubes and urban railways, construction of loop lines or tunnels to purge the city-centres, layout of urban renewal, rehabilitation of social housing in disadvantaged areas.
· Environment in the accession countries: projects for water provision, waste water sanitation, local waste treatment, public transport and town planning
· Prevention for climate change: the EIB aims at developing its lending activities in two main sectors: energy saving and substitutes of energy sources. It offers to develop the synergisms between its loans for environment and the loans it allocates in the framework of the i2i programme: finance innovative projects for research and development in fields that have a positive impact on environment and support investments based on the industrial application of these researches.

Financing the SMEs

SMEs represent 98% of all the private companies in Europe. They play a fundamental role in the introduction of advanced technologies. The EIB contributes to support their developments thanks to middle and long-term loans.

The community definition of a small and medium enterprises (SMEs)
· It must have less than 500 employees
· The net fixed assets in the balance sheet must amount to less than 75 million Euros
· The independent capital cannot exceed 25% of the capital owned by a big group.

The global loans of the EIB
In 2000, 5,7 billion Euros were granted by the EIB for the development of some 27000 SMEs. The smallest of them are the beneficiaries of two thirds of the allocated amounts.
This is an indirect action, carried out with the partnership of almost 180 banks or financial institutes.
The cooperation with these financial intermediaries allow the SMEs to have a direct access to the needed funds.

Financing of trans-European networks

Framework of the measures of support
The EIB constitutes the first banking financing resource of these big networks and is involved in the implementation of great infrastructures. It is able to mobilise the necessary amounts for their realisation at the best conditions, to propose period conditions and lending opportunities appropriate to the project scheme and to catalyst other financing resources.

The different financial products
The EIB has established a mechanism of formal finance, with a stock reserve of 750 million Euros for 2001-2003.
Priorities:
· Adapt its actions to the needs of projects presenting high risks,
· Pursue its financing activities through own funds or guarantees for large infrastructures.
Diversity of the financial products:
· Loans and guarantees of first ranking: take the risk into account before achievement and related to the initial steps of the exploitation,
· Subordinated loans and guarantees of higher ranking than the subordinated loans for the shareholders,
· Mezzanine Financing: high return issued by small or medium industrial societies in change-over or in restructuring
· Derivatives corresponding to the projects

Objectives
Bring an added value to priority projects by completing the actions of commercial banks and capital markets.

2. The SME support of the European Investment Fund

What does the EIF finance?
The EIF supports the SMEs and help them start the activities that foster the economic growth and job creation.
Currently, the experts notice that the SMEs, which represent 98% of all the private companies in Europe, keep on suffering from financial insufficiency adapted to their needs, which slows them down in their development.
So the EIF has 2 tools at its disposal to answer to these needs:
· The guarantee portfolio for the SMEs
· The capital-venture activities

The guarantee mechanism

Characteristis:
Possible operations:
· Direct guarantee of loans portfolio
· Securitisation of loans allocated to companies
The clients :
· Public organisations
· Commercial banks and other financial institutions
· Regional or national guarantee fund
· Special tools for the financing of SMEs

Objectives
CAUTION ! !The EIF does not grant any guarantee for individual loans but always on the basis of an operation portfolio (intermediary action)
Goals :
· Reduce the intermediary risks during the allocation of financing through loans for small societies
· Make a better use of the capital and increase the lending capabilities

The Multiannual Programme for Companies (MAP)

The EIF has elaborated new guarantee and capital-venture tools, thanks to the Council and Parliament in the framework of a new action Programme for the period 2001-2005. These actions gather the old concepts of financing programmes, the mechanism for growth and environment and the guarantee mechanism for SMEs, with a larger application.

1. Mechanism for Growth and Environment
· It offers guarantees to financial institutions that allocate loans to European SMEs for the support of environment-friendly investments
· The guarantees does not cost anything to the financial institutions that are involved because of the EU support.
· The loans that are eligible concern the small companies with less than 100 employees in the 15 Member States.
· New: focus on the incubators and seed-capital financed in the framework of the ETF start-up scheme

INNOVATION AND SME - ENCOURAGING SME PARTICIPATION

2. Guarantee Mechanism for SMEs
This programme is part of the EU initiative for growth and employment.
Characteristics:
· Facilitate the access to lending opportunities for SMEs
· Support the job creation
· administration on a trustee basis in the name of the European Commission through intermediary institutions located in the Member States and specialised in guarantee issue.
· Extension of the Guarantee Mechanism for SMEs, covering guarantees for capital sharing of the micro-credits as well as financial guarantees for small innovative companies, operating or investing into information and telecommunication technologies (start-up)

Programme sheet Eurofunding :
GUARANTEE MECHANISM SMEs

The capital-venture activities

Capital-venture is a fundamental factor of the companies growth and job creation. To offset the European delay, it is expected that the EIF mobilises between 3 and 4 billion Euros for the period 2000-2003 and so becomes the main actor of the European capital-venture market.

Objectives
· Strengthen the banking structures of capital-venture in Europe
· Catalyst the sharing of private or public co-investors
· Adapt the market needs
· Act as a fund of fund (intermediary)
· Satisfy all the needs: from the start-up to the introduction into the market

The EIF priorities are :
· High-tech innovative societies with a high growth rate and a great potential of job creation, that enable the modernisation of the economy.
· Regional capital-venture funds acting for a more homogeneous European market
· Pan-European capital-venture funds that encourage national initiatives and foster the transfer of know-how and the spread of best practices in the Union.

Capital management in the European Union
The EIF must be able to:
· Anticipate the market evolutions
· Facilitate the establishment of an efficient and coherent European capital-venture sector

The resources in capital-venture in the Community (ETF Start-up) are for specialised funds
· That take action for the financing of seed-capital that the companies need
· That support the incubators as advocated by the Union.


For further information about the EIB Group, go to :
·www.bei.org
·www.eif.org


First part: The EIB group

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