The European Commission and the European Investment Bank Group launched a new guarantee facility for innovative small and medium-sized enterprises (SMEs) to help them access finance from banks. The new scheme, the so-called SME risk-sharing instrument (RSI), will be managed by the European Investment Fund (EIF).

The European Commission presented the SME risk-sharing instrument (RSI), a new scheme that will help SMEs to get loans for research and innovation. This instrument will be managed by the European Investment Fund (EIF), the European Investment Bank Group subsidiary that specialises in providing risk finance to benefit micro, small and medium-sized enterprises across Europe via equity and loan guarantees. The EIF will offer banks a guarantee on part of their new loans and leases to innovative SMEs, allowing the banks to lend more and to do so at more attractive rates.

In particular, the RSI aims to encourage banks to provide loans and leases of between €25,000 and €7.5 million to SMEs and smaller mid-sized firms undertaking research, development or innovation, with loan periods of from two to seven years, and with the risk finance covering investments in assets (tangible or intangible) and/or working capital. Under the terms of each agreement, the EIF will provide, in return for a fee, a guarantee to the bank concerned against loan defaults. For each default, the bank would receive 50% of the amount of the loan outstanding. Some 10 or so banks are likely to be involved, and the RSI plans to reach up to 500 beneficiaries with a total loan volume of up to €1.2 billion.

With the launching of this instrument, the Commission is expected to unlock a further €6 billion of loans until the end of 2013, including up to €1.2 billion for SMEs and up to €300 million for research infrastructures. From 2014, in conjunction with new instruments for equity finance, the Commission intends to scale up and expand it under the proposed Horizon 2020 Framework Programme for Research and Innovation unveiled in November 2011.