Financial support for businesses, in the form of loans, guarantees and investments from the EU budget, have been playing an increasingly important role in funding European companies over the past few years. According to Roger Havenith, deputy chief executive of the European Investment Fund (EIF), these instruments also represent a vital component of the EU's flagship Capital Markets Union (CMU).
In a recent interview, Havenith explains that the funding has a 'multiplying' effect, whereby funding from the EIF encourages private investors to 'crowd in' and support those projects. Havenith says: “This ultimately results in greater financial assistance for European SMEs.” For example, in terms of venture capital, a 1 per cent increase in EIF-provided venture capital in a region led to a 1.4 per cent increase in investment volumes by other market players in the same region.”
But there is a need to streamline the rules, says Havenith, as well as to allow more flexibility for the use of financial instruments. He added: “Financial instruments can make financing more readily available for European SMEs, thus boosting growth and employment. We need to make this message clear to European citizens.”
In the past, the EU has had a strong track record of supporting non-revenue generating projects such as research. Havenith says that they now want to focus on helping such projects become commercial, for example by offering financial instruments such as Grant-2-Loan and Grant-2-Equity. And he adds that the EIF wishes to ensure that “growth capital is available to the EU’s existing successful start-ups, in order to avoid them leaving for other geographic areas where funding may be more readily available”.
Under the pan-European VC Fund-of-Funds initiative, the EIF will commit up to EUR 400 million into various funds-of-funds, matched by private investors. These funds-of-funds will invest in venture-capital funds that will in turn support European SMEs through equity investments. Havenith says that this will “trigger cascading investments in innovative and growing businesses across Europe. This is a key contribution to the Capital Markets Union, one of the EU’s top priorities.”
Vienna Initiative: boost to capital markets in central & Eastern Europe
The European Commission has announced an initiative to strengthen capital markets in central, Eastern and South-eastern Europe, to boost financing and investment in the region
EU cuts red tape to give SMEs easier access to capital markets
The EU has agreed to exempt small and medium-sized enterprises (SMEs) from the burden of producing lengthy and expensive prospectuses to access funding through capital markets.
Juncker seeks to boost confidence in funding for EU businesses
The European Commission yesterday reinforced its commitment to completing the Capital Markets Union and pledged to double a fund that will boost investment in European businesses.