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ETF start-up and SME guarantee facilities get underway

The European Commission has recently entered into cooperation agreements with the European Investment Fund (EIF) regarding the implementation of the European Technology Start-up Facility (ETF) and the SME Guarantee Facility. This follows the formal adoption of the Growth and E...
The European Commission has recently entered into cooperation agreements with the European Investment Fund (EIF) regarding the implementation of the European Technology Start-up Facility (ETF) and the SME Guarantee Facility. This follows the formal adoption of the Growth and Employment Initiative, a series of measures of financial assistance for innovating and job creating SMEs, at the ECOFIN Council on 19 May 1998. The Joint European Venture (JEV), another initiative agreed at the same time, will be implemented at a later date.

The ETF will be managed by the European Investment Fund and is designed to stimulate job creation by assisting the establishment and growth of SMEs through the increased availability of risk capital. It will invest in specialised venture capital funds established specifically to provide equity or other forms of risk capital to SMEs. The focus will be on newly established funds, funds operating regionally, and those which are focused on specific industries or technologies and those which finance the exploitation of R&D results.

Investment proposals will be examined on an on-going basis, taking into account the following factors:

- The management team;
- The market situation;
- Deal flow;
- Investment strategy;
- Size of the fund;
- Proposed terms;
- Expected returns and other investors.

The SME Guarantee Facility will support the investment activity of innovative SMEs, through the increased availability of loan finance. Under this facility, a budget will be allocated to cover the cost of guarantees issued by the EIF. The facility will be operated through a system of intermediaries who will be required to undertake to lend exclusively to the final beneficiaries.

The EIF, who will manage the scheme, will select intermediaries having regard to the following criteria:

- The financial standing and operational capability of the intermediary;
- The geographical coverage provided;
- The extent to which their guarantees are accessible by SMEs in the Member State or region of operation;
- The extent to which guarantees will cover loans with lesser collateral than is customary for commercial SME lending;
- The overall risk-sharing arrangements between the intermediary and the lenders.

Source: Official Journal of the European Communities

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