EU Support for Smes During the COVID Crisis

9 April 2020 EU support for SMEs during the COVID Crisis

SURE - European instrument for temporary support to mitigate unemployment risks in an emergency

Proposal for a Council Regulation based on art 122 TFEU setting up a new EU-wide scheme to mitigate unemployment risks. The SURE Fund:  is guaranteed by the EU budget, with additional guarantees provided by all Member States;  at least €25 billion needed to start (to be raised by Member States);  can borrow on financial markets up to €100 billion;  provides back-to-back loans to Member States (with no pre- allocated amounts);  these loans must be used by Member States to finance short-time work schemes for employees or similar measures for the self-employed;  The European Commission will manage the disbursements, after approval by the Council.

Research funding The Commission supports SMEs researching on innovations relevant to Covid-19:  The European Innovation Council (EIC) published a call for start-ups and SMEs with technologies and innovations that could help in treating, testing, monitoring or other aspects of the Coronavirus (financing up to €164 million).  The European Commission and the European Investment Bank have managed to mobilize up to €80 million of financial support to CureVac (innovative vaccine developer) to scale up development and production of a vaccine.  First European Research Area vs Corona Action Plan (resulted from dialogues between Commission services and the national ministries): o This action aims at awarding Seals of Excellence for coronavirus relevant innovations by SMEs/start-ups which will help finding access to finances. o Under this action, a favourable treatment of state aid to Covid-19 Seals of Excellence applies. Additional funding sources, e.g. national / regional funding, private foundations, InvestEU etc are possible.

9 April 2020 EU Structural and Cohesion Funds  Commission proposal for a regulation on Covid-19 Response Investment Initiative (CRII) with €8 billion which could trigger as much as €37 billion aimed at mobilising available cash reserves in the European Structural and Investment Funds to fight the crisis. It amends amongst others: o The European Regional Development Fund Regulation (ERDF) . can support, as a temporary measure, the financing of working capital in SMEs and its investment priority to strengthen research, technological development and innovation is modified, in order to cover investment in products and services necessary for fostering the crisis response capacities in public health services.

European Investment Bank Guarantee Fund  The EIB on 3 April 2020 discussed the creation of a €25 billion guarantee fund to enable the EIB Group to scale up its support for companies in all Member States by an additional €200 billion o Direct funding through banks with 50% to 80% guarantee coverage  This will serve as a protective shield for EU firms facing liquidity shortages, the scheme would be implemented by the EIB and the EIF in close partnership with national banks, the European Commission and other financial partners.

MBIL/ Financing package  The EIB Group also approved a multi-beneficiary intermediated loan (MBIL) of €5 billion covering all EU Member States, as part of its emergency response package which aims to rapidly mobilise financing for SMEs and mid-caps in the coming weeks up to €40 billion.  This will go towards bridging loans, credit holidays and other measures designed to alleviate liquidity and working capital constraints for SMEs and mid-caps. The EIB Group, including the European Investment Fund (EIF) which specialises in support for SMEs, will work through financial intermediaries in the Member States and in partnership with national promotional banks.  The proposed financing package consists of:  Dedicated guarantee schemes to banks based on existing programmes for immediate deployment, mobilising up to €20 billion of financing;

9 April 2020  Dedicated liquidity lines to banks to ensure additional working capital support for SMEs and mid-caps of €10 billion;  Dedicated asset-backed securities (ABS) purchasing programmes to allow banks to transfer risk on portfolios of SME loans, mobilising another €10 billion of support.

European Investment Fund  The European Commission has unlocked €1 billion from the European Fund for Strategic Investments (EFSI) that will serve as a guarantee to the European Investment Fund (EIF), part of the European Investment Bank Group.  The €1 billion unlocked from the EFSI under the COSME Loan Guarantee Facility and the InnovFin SME Guarantee under Horizon 2020 allows the EIF to provide guarantees worth €2.2 billion to financial intermediaries, unlocking €8billion in available financing.  This will allow the EIF to issue special guarantees to incentivise banks and other lenders to provide liquidity to at least 100,000 European SMEs and small mid-cap companies hit by the economic impact of the coronavirus pandemic, for an estimated available financing of €8 billion.  Key features of these guarantees will be: o Simplified and quicker access to the EIF guarantee; o a higher risk cover – up to 80% of potential losses on individual loans (as opposed to the standard 50%); o focus on working capital loans across the EU; o allowing for more flexible terms, including postponement, rescheduling or payment holidays  The measures are available through the European Investment Fund (EIF) by means of a call for expression of interest for financial intermediaries until 30 September 2020. More information: https://www.eif.org/what_we_do/guarantees/single_eu_debt_instrument/cosme- loan-facility-growth/call/covid-addendum.pdf

European Bank for Reconstruction and Development (EBRD)  The EBRD has unveiled an emergency €1 billion “Solidarity Package” of measures to help companies across its regions deal with the impact of the coronavirus pandemic.

9 April 2020  It is a resilience framework comprising €1 billion of new and additional funding for existing clients, comprising emergency liquidity, working capital and trade finance.  The planned measures will include an expansion of trade finance and the provision of short-term finance of up to two years through financial institutions, specifically in support of small and medium sized enterprises.

European Central Bank  The ECB conducts targeted long-term refinancing operations to provide more liquidity to the European financial system.  The ECB Banking Supervision allows for significant capital relief to banks in support of the economy.

ESCALAR  The Commission is launching ESCALAR, a new investment approach, developed together with the European Investment Fund (EIF) that will support venture capital and growth financing for promising companies, enabling them to scale up in Europe and help reinforce Europe's economic and technological sovereignty.  It will provide up to €300 million (backed by EFSI) aiming to increase the investment capacity of venture capital and private equity funds, triggering investments of up to €1.2 billion, or four times the original investment, to support promising companies.  With the launch of ESCALAR, the Commission is delivering on one of the actions announced in the new SME Strategy to improve access to finance for SMEs.

EU State aid Temporary Framework To further mitigate economic shocks and save businesses, the European Commission has temporarily extended the Temporary Framework for State Aid rules until the end of 2020, allowing Member States to provide direct support for hard hit companies and especially SMEs as they may risk closing down without support.  The new Framework does not replace, but complement the many other possibilities already available to Member States in line with State aid rules (link to list: https://ec.europa.eu/competition/state_aid/what_is_new/State_aid_decisions_TF_ and_107_2_b.pdf)

9 April 2020  The amendment extends the Temporary Framework by providing for additional five types of aid measures: 1. direct grants (or tax advantages) of up to € 800,000 per company; 2. subsidised State guarantees on bank loans; 3. public and private loans with subsidised interest rates; 4. banks’ existing lending capacities, and use them as a channel for support for businesses – in particular to small and medium enterprises - such aid is clearly direct aid to the banks' customers and not to the banks themselves; 5. additional flexibility to enable short-term export credit insurance to be provided by the State where needed