The European Commission and the European Investment Bank have launched a new initiative aimed at helping small and medium-sized enterprises access loans for research and innovation.
This initiative – through a facility to be known as the European Investment Fund (EIF) – builds on the success of the Risk-Sharing Finance Facility (RSFF), launched in 2007, that has so far helped 75 companies benefit from over €7 billion in EIB loans to projects enhancing European growth and competitiveness.
The new instrument will be managed by the EIF with the EIB and the European Commission providing extra resources for research.
According to Brussels, the new facility aims to encourage banks to provide loans and leases of between €25,000 and €7.5 million to SMEs and smaller mid-sized firms undertaking research, development or innovation, with loan periods of two to seven years, and with the risk finance covering investments in assets and working capital.
Through the scheme, the new Fund (EIF) will enter into individual guarantee agreements with banks following the submission of applications under an open call for expressions of interest, which is to be launched in early 2012.
Applicant banks will be treated on a first come, first served basis, subject to their meeting the requirements of the EIF’s standard screening and due diligence procedures.
Under the terms of each agreement, the EIF will provide, in return for a commission fee, a guarantee to the bank concerned against loan defaults. For each default, the bank would receive 50 per cent of the amount of the outstanding loan.
The Commission’s intention is that some 10 European banks are likely to be involved and the scheme plans to reach up to 500 beneficiaries with a total loan volume of up to €1.2 billion.
Research and innovation are considered as the cornerstone of future economic development in Europe. EU leaders have set a target of dedicating three per cent of their GDP to research and development by 2020.
Although in order to achieve this target there is a need for private sector involvement, financial markets and institutions are often reluctant to back research or innovation-intensive companies or projects due to the relatively high levels of uncertainty and risk inherent in their activities.
The Commission has launched various initiatives since 2007 and together with the EIB is providing up to €2 billion for the period 2007-2013.
Malta, which is considered to be among the EU laggards when it comes to research and development has been also investing heavily in this sector in the past years in order to make a leap forward. A multi-million Science Park was recently been launched by the government with the help of EU funds.