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  • European Commission
  • CORDIS
  • Programmes
  • Programme on measures of financial assistance for innovative and job-creating small and medium-sized enterprises (SMEs) - the growth and employment initiative, 1998-2000

Programme funding

EUR 450 million

Official Journal Reference

L 155 of 1998-05-29

Legislative Reference

98/347/EC of 1998-05-19
To stimulate job creation by facilitating and strengthening the establishment and growth of innovative SMEs by supporting their investment through increased availability of finance. The programme will be targeted at SMEs with growth and therefore employment potential.

Abstract

At the European Council meeting of June 1997, and within the context of measures to alleviate unemployment, the European Investment Bank (EIB) and the European Investment Fund (EIF) were invited to develop a facility to provide venture capital for high technology projects of SMEs. The Council acknowledged the link between SMEs, innovation, technology and new jobs as well as the role of risk capital in underpinning job creation.

Following its endorsement at the European Employment Summit in Luxembourg on 20 and 21 November 1997, the Growth and Employment Initiative was allocated ECU 450 million over the three year period (1998 to 2000). ECU 30 million of that money was earmarked for innovative actions and projects in the labour market in 1998. Under the programme, financial instruments supporting innovative and job-creating initiatives reinforce the EIB-financed and EIF-administered European Technology Facility (ETF) by opening a 'risk capital window'. They support transnational joint ventures between SMEs within the European Union and establish, within the EIF, a special guarantee fund to facilitate risk-taking by institutions providing finance for small and medium-sized enterprises.

The evolution of this programme follows from and complements the Third multiannual programme for Small and Medium-sized Enterprises (SMEs) in the European Union, 1997-2000 (SMEAP 3C) and the Programme for the dissemination and optimization of the results and activities in the field of research and technological development, including demonstration, 1994-1998 (INNOVATION).

Subdivision

The programme consists of three complementary facilities:

- ETF Start-up facility:

A risk-capital scheme managed by the European Investment Fund (EIF) providing risk-capital participation in SMEs mainly in their early stages and/or innovative SMEs, through investments in relevant specialized venture-capital funds. It may also stimulate investment in funds operating in regions or specific technological sectors. It will reinforce the European Technology Facility, established by the EIB in cooperation with the EIF, by adopting an investment policy involving a higher risk-profile, both as regards intermediary funds and their investment policies.

- Joint European Venture:

A scheme for financial contributions supporting the creation of transnational joint-ventures by SMEs within the Community. The Community contribution is intended to cover a portion of the expenses incurred in the conception and setting up of transnational joint ventures. It is based on the limited initiative launched under the third multiannual programme for SMEs, approving a support mechanism for the creation of transitional joint ventures for SMEs in the Community.

- SME Guarantee Facility:

A guarantee scheme managed by the EIF where the Community provides funds to cover the cost of guarantees and counter-guarantees issued by the EIF to promote an increase of loans to SMEs, by increasing the capacity of guarantee schemes operating in the Member States in the public or private sector. It may also support risk-sharing SME instruments the EIB (or other appropriate institution) make available.

Implementation

The initial phases of the programme will be implemented over the period 1998-2000.

The main elements of the implementation of each of the three facilities is set out as follows:

- ETF Start-up facility:

. Operated by the EIF on a trust basis. Targets will be smaller or newly established funds, covering specific regions or focusing on specific industries or technologies, or venture-capital funds linked to research centres and science parks;

. Intermediaries will be selected in conformity with best business and market practice in a fair and transparent manner;

. Maximum aggregate investment will be 25% of the total equity capital held by the relevant fund, or up to a maximum of 50% in exceptional cases (such as new funds which are deemed to be likely to have a particularly catalytic effect in the development of venture capital markets for a specific technology or in a specific region). No commitment in a single venture-capital fund will exceed ECU 10 million;

. ETF will usually take 5-12 year positions in venture capital funds. No investment will exceed 16 years;

. Reinvestment of realised investments may take place during the first four years of the operation of the scheme. Under certain circumstances, this reinvestment period can be extended by up to three years;

. Budgetary funds underpinning the scheme will be held within a separate trust account. It will be interest bearing and interest earned will be added to the resources of the facility;

. Payment regularity will be verified by the Court of Auditors of the European Community.

- Joint European Venture:

. Accessible to SMEs through intermediaries, which may be banks or other financial institutions. They will be selected after a call for expression of interest published in the Official Journal of the European Communities. Eligibility will be checked by the Commission in the light of the programme objectives;

. SMEs will submit applications for financial contributions through the intermediaries, who will be responsible for evaluating the applications and, if necessary, passing them to the Commission;

. Projects will be funded at a maximum of ECU 100 000 per project which will be paid to the SME, through the financial intermediary. Payments will be made in two tranches:

First tranche payments - up to ECU 50 000 to cover 50% of eligible expenditure for the conception and preparation of the project - will be paid in two installments. A reimbursable advance of 50% (maximum ECU 25 000) paid as soon as the application has been accepted by the Commission; and a second payment of 50% (maximum ECU 25 000) made once supporting documents for all the expenditure incurred and a detailed project evaluation have been submitted. Once these have been accepted, the reimbursable advance will be converted into a grant;

Second tranche payments - covering up to 10% of the investment, will be made after the Commission has received satisfactory evidence of completion of the investment and the start of the activity. Any SME receiving second tranche payments will be obliged to continue to send the Commission information on the activities of the joint venture set up and the number of jobs created for five years.

. The programme will be managed externally by contractors selected following a call for expressions of interest;

. Joint ventures must create economic activities and involve investment and employment creation within the Community. Partners must pay an active role in the joint venture and assume an active role (although joint ventures where one partner owns more than 75% will be ineligible). Any new joint venture must be created by at least two SMEs from two different Member States;

. Arrangements will have to be made to allow the Court of Auditors of the European Community or the Commission access to declarations in support of payments as well as the payments themselves.

- SME Guarantee facility:

. Operated by the EIF on a trust basis;

. Allocation will cover the full cost of the facility, including EIFs guarantee losses and any other eligible costs or expenses of the facility. The cost of the facility (to the Community) will be capped so that it does not exceed the budgetary allocations made to the EIF;

. Intermediaries will be guarantee schemes operating in the Member States in the public or private sector. They will be selected using best business and market practice;

. For SME-lending eligibility, financial criteria will be determined individually for each intermediary in the framework of existing guarantees. Priority will be given to small enterprise with up to 100 employees. Particular attention will be given to lending to finance intangible assets;

. Guarantees given by the EIF will relate to individual loans in a specific loan portfolio. The guarantees issued by the EIF will cover a part of the credit risk inherent in the underlying loan portfolio with the risk shared with the relevant financial intermediary;

. Budgetary funds underpinning the scheme will be held in a trust account within the EIF. It will be interest bearing and the interest earned will be added to the resources of the facility. The EIF will retain the right to debit the trust account for payments to meet its obligations;

. Individual SME guarantees will normally mature after 5 to 10 years;

. Payment regularity will be verified by the Court of Auditors of the European Community.

The Commission will report annually to the European Parliament and the Council on the implementation of the programme and the different schemes under it.
Record Number: 651 / Last updated on: 2014-03-05