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Commission proposes new financial support measures for SMEs

The European Commission has adopted a proposal for a Council Decision aimed at improving access to finance for SMEs with the objective of stimulating job creation. The Growth and Employment initiative comprises three complementary programmes, a risk capital scheme, support for...
The European Commission has adopted a proposal for a Council Decision aimed at improving access to finance for SMEs with the objective of stimulating job creation. The Growth and Employment initiative comprises three complementary programmes, a risk capital scheme, support for cross-border joint ventures, and a loan guarantee scheme.

Political approval for these proposals was given at the special European Council on Employment, held in Luxembourg in November 1997. The European Parliament had previously proposed to make money available from within the EU budget for 1998. In total some ECU 420 million will go to the scheme in the three years from 1998 to 2000. The money will help unlock the job-creating potential of fast-growing small businesses, particularly those SMEs which exploit advances in technology.

The three schemes are as follows:

- European Technology Facility (ETF) Start-up: a risk capital facility managed by the European Investment Fund (EIF) through investment in relevant specialized investment funds. This will reinforce the existing ETF by targeting a higher risk segment of the venture capital market, notably SMEs at establishment and early stages. It may also support funds operating in regions or specific technological sectors. The indicative budget of ECU 150-190 million is envisaged for this scheme over the three years;

- Joint European Venture (JEV): will provide financial contributions for the establishment of transnational joint ventures by SMEs within the EU. These will be distributed indirectly through banks and other financial institutions in Member States under the overall management of the Commission. The maximum contribution will be ECU 100,000 per project. The scheme is based on the pilot launched by the Commission in November 1997, and will have a budget of ECU 80-100 million for the 1998-2000 period;

- SME guarantee facility: This scheme, managed by the EIF, aims to increase the availability of loans to small or newly established firms through risk sharing with national guarantee schemes, mutual guarantee schemes and other appropriate institutions, including the European Investment Bank (EIB). The indicative budget for 1998-2000 will be ECU 150-190 million.

The financial breakdown between the three schemes may be adjusted during the three years, to take account of the take-up, efficiency and employment generation of the different schemes. Flexibility has been allowed to respond to differences in the financial markets of different Member States.

For the purposes of these schemes, the Commission proposes that the definition of an SME will be an independent company with fewer than 250 employees and annual turnover not exceeding ECU 40 million. The SME guarantee facility will focus on companies with fewer than 100 employees.

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