EU funding available for banks interested in building specific loan instruments for games in 2017

The European Union has number of different instruments for banks interested in supporting SMEs. The main ones are listed below.

4.1 COSME – The Loan Guarantee Facility (LFG)

Who can become a financial intermediary?
- Financial or credit institutions and loan (debt) funds authorised to carry out lending or leasing activities to SMEs;
- Guarantee institutions, credit or financial institutions authorised to issue guarantees to SMEs
Who should an intermediary provide loans to?
- SMEs
How does it work?
- Counter-guarantee
  - The credit risk protection shall be provided through a Counter-guarantee which shall be issued by EIF. It shall partly cover the credit risk associated to eligible Debt Financing granted by Sub-Intermediaries to SMEs included in the portfolio of guarantees (the “Portfolio”). Intermediary Transactions shall be covered at a guarantee rate of up to 50% (the “Counter-guarantee Rate”). For the purpose of alignment of interest, the Intermediary will have to retain a minimum 20% exposure to every Intermediary Transaction.
  - The Counter-guarantee is subject to a cap amount. This Counter- guarantee Cap Amount is calculated as follows : Actual portfolio volume (i.e. the portfolio volume) x Counter-guarantee Rate x Counter-Guarantee Cap Rate.
- Capped Direct Guarantee
  - The credit risk protection shall be provided through a Guarantee which shall be issued by EIF. It shall partly cover the credit risk associated to eligible Debt Financing granted to SMEs included in the portfolio (the “Portfolio”). Intermediary Transactions shall be covered at a guarantee rate of up to 50% (the “Guarantee Rate”). For the purpose of alignment of interest, the Financial Intermediary will have to retain a minimum 20% exposure to every Intermediary Transaction.
  - The Guarantee is subject to a cap amount (the “Guarantee Cap Amount”). This Guarantee Cap Amount is calculated as follows : Actual portfolio volume (i.e. the portfolio volume) x Guarantee Rate x Guarantee Cap Rate
- Securitisation
  - The COSME Guarantee for Securitisation will be provided to Financial Intermediaries in respect of the mezzanine tranche (the “Guaranteed Mezzanine Tranche”) of eligible Securitised Portfolios consisting of at least 80% of SME debt finance transactions. The remainder of the transactions in the eligible Securitised Portfolio may include corporate loans with larger corporates.
  - The Guarantee may be provided for the mezzanine tranche of cash or synthetic securitisation operations.
  - The credit risk protection shall be provided through a Guarantee which shall be issued by EIF. It shall cover the credit risk associated with the mezzanine tranche of the eligible Securitised Portfolio. For the purpose of alignment of interest, the Originator will have to retain a minimum exposure in accordance with Directive 2013/36/EU on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms (CRD IV) and Regulation (EU) No 575/2013 on prudential requirements for credit institutions and investment firms (CRR). As a reference, article 405 of CRR requires –as of the date of publication of this call- a minimum exposure 5% of the total nominal value of the Securitised Portfolio.
  - The Guarantee shall constitute a financial Guarantee and shall cover losses incurred by the Beneficiary of the Guarantee in respect of the Guaranteed Mezzanine Tranche.
- DL: 30.9.2020
- More information: http://www.eif.org/what_we_do/guarantees/single_eu_debt_instrument/cosme-loan-facility-growth/index.htm

4.2 EASI – EU Programme for Employment and Social Innovation loan instruments

Who can become a financial intermediary?
- Public and private bodies authorised to provide microcredit
Who should an intermediary provide loans to?
- Microenterprises and/or financing for social enterprises.
How does it work?
- First loss portfolio EaSI Microfinance Guarantee issued by EIF providing partial credit risk coverage to eligible Financial Intermediaries that enter into Final Recipient Transactions having a nominal value up to and including EUR 25 000.
- The EaSI Microfinance Guarantee, provided by EIF but financed by the European Union, shall cover losses incurred by the Financial Intermediary at a guarantee rate of up to 80%. Losses covered by the EaSI Microfinance Guarantee in respect of the portfolio of eligible Final Recipient Transactions shall in aggregate not exceed the cap amount stipulated in the EaSI Microfinance Guarantee Agreement.
DL: 30.9.2023
More information: http://www.eif.org/what_we_do/microfinance/easi/

4.3 EIB – European Investment Bank

EIB Intermediated lending for SMEs and Midcaps
- Who can become a financial intermediary?
  - Banks, leasing companies, national promotional banks or institutions providing medium and long-term loans
- Who should an intermediary provide loans to?
  - small and medium-sized enterprises (SMEs, including micro-enterprises) or medium-sized companies (Midcaps)
- How does it work?
  - Indicatively above EUR 25m (smaller on a case-by-case basis), taking into account:
    - the credit risk limits applicable for the risk profile of the borrower and the operation structure, and
    - the need to on-lend at least double of the EIB financing to eligible final beneficiaries
  - Example: a Financial Intermediary takes an EIB loan of EUR 100m to on-lend to SMEs. Accordingly the Financial Intermediary must commit to the EIB that it will provide at least EUR 200m to SMEs during a specified timeframe.
- More information: http://www.eib.org/products/sheets/intermediated-lending-smes-midcaps-features.htm
EIB Intermediated loans
- Who can become a financial intermediary?
  - Banks, leasing companies, national promotional banks or institutions
- Who should an intermediary provide loans to?
  - SMEs and micaps
- How does it work?
  - Indicatively above EUR 25m (smaller on a case-by-case basis), taking into account:
    - the credit risk limits applicable for the risk profile of the borrower and the operation structure, and
    - the need to on-lend at least double of the EIB financing to eligible final beneficiaries
  - Example: a Financial Intermediary takes an EIB loan of EUR 100m to on-lend to SMEs. Accordingly the Financial Intermediary must commit to the EIB that it will provide at least EUR 200m to SMEs during a specified timeframe.
- More information: http://www.eib.europa.eu/products/sheets/intermediated-lending-smes-midcaps-features.htm

4.4 EIF European Investment Fund

EIF Guarantee facility to the cultural and creative sectors
- Who can become a financial intermediary?
  - (i) any financial institution or credit institution authorized to carry out lending or leasing activities or providing bank guarantees
  - (ii) any guarantee scheme, guarantee institution or other financial or credit institution authorized to issue guarantees
- Who should an intermediary provide loans to?
  - SMEs in the cultural and creative sectors
- How does it work?
  - To encourage the creation of portfolios, the European Commission has committed to partially cover financial intermediaries’ potential losses when they engage with CCS projects. Coverage will reach up to 70% of individual loans’ losses and up to 25% for portfolios using two models:
    - the provision of guarantees to financial intermediaries to cover portfolios of loans
    - the provision of counter-guarantees to Guarantee Institutions giving guarantees to financial intermediaries to cover portfolios of loans or project-based loans.
  - DL: 30.9.2020
  - More information: https://ec.europa.eu/digital-single-market/en/financial-guarantee-facility-culture-creative
- EIF Credit Enhancement
  - Who can become a financial intermediary?
    - banks and financial institutions
  - Who should an intermediary provide loans to?
    - SMEs
  - How does it work?
    - EIF can provide various types of guarantees (such as wraps, bilateral guarantees, credit default swaps, etc.) on senior and/or mezzanine tranches of risk, typically with a minimum rating equivalent to BB/Ba2.
    - Guarantees on ABS are provided in different forms, such as wraps or bilateral guarantees to the noteholders.
  - More information: http://www.eif.org/what_we_do/guarantees/credit_enhancement/index.htm

EIF SME Initiative
- Who can become a financial intermediary?
  - g. Banks, leasing companies, guarantee institutions, debt funds
- Who should an intermediary provide loans to?
  - SMEs
- How does it work?
  - The initiative contemplates the implementation of up to two products:
    - an uncapped portfolio guarantee instrument and
    - a securitisation instrument.
  - Via the SME Initiative, the EIF offers selected financial intermediaries loss protection and potential capital relief at an advantageous cost. In return for this risk-sharing, the financial intermediaries undertake to provide SME loans, leasing and/or guarantees at favourable terms (for example, reduced interest rates and collateral requirements for the final recipients). Financial Intermediaries are selected through EIF via an Open Call for Expression of Interest.
  - Member States can opt-in to the SME Initiative until the end of 2016, by expressing their interest to the European Commission.
  - Compared to other financial instruments that can be set up with ESIF funding, the SME Initiative offers to Member States and Managing Authorities the following advantages:
    - No co-financing required from national or regional resources;
    - No need to conduct additional ex-ante assessment, which has already been completed at EU level by the European Commission and the EIB in 2013;
    - The European Commission and the EIB Group have already adopted a ‘Model Funding Agreement’, which is a ready-made template for the Funding Agreement to be negotiated between Member States and the EIF;
  - More information: http://www.eif.org/what_we_do/guarantees/sme_initiative/index.htm

4.5 InnovFin

SME Guarantee
- Who can become a financial intermediary?
  - Financial, credit institutions or loan (debt) funds and Guarantee schemes, guarantee institutions or other credit or financial institutions
- Who should an intermediary provide loans to?
  - Innovative and fast rowing small and medium-sized enterprises and small midcaps (up to 499 employees)
- How does it work?
  - In order to ensure an alignment of interest between the Financial Intermediary and the Facility, eligible Beneficiary Transactions shall be covered by EIF at a guarantee rate of up to 50%.
  - The Guarantee shall constitute a financial guarantee and shall cover defaulted amounts (relating to unpaid principal and interest) incurred by the Financial Intermediary in respect of each defaulted eligible Beneficiary Transaction.
  - The amount committed by the Financial Intermediary (or the On-Lending Bank, as applicable) under the Beneficiary Transaction: (i) shall not be, other than as a result of a Permitted Beneficiary Transaction Amendment, lower than the equivalent of EUR 25,000 and (ii) shall not exceed the equivalent of EUR 7.5 million, or such lower amount as specified in the relevant Guarantee Agreement following EIF’s risk assessment.
- For more information, please visit: http://www.eib.org/products/blending/innovfin/products/sme-guarantee.htm
Midcap Guarantee
- Who can become a financial intermediary?
  - banks and other financial institutions
- Who should an intermediary provide loans to?
  - innovative midcaps (between 499 and 3000 employees), not SME
- How does it work:
  - InnovFin MidCap Guarantee provides guarantees and counter-guarantees on debt financing of up to EUR 50m. This facility is being rolled out through financial intermediaries, namely banks and other financial institutions, which will be guaranteed against a portion of their potential losses by the EIB.
- For more information, please visit: http://www.eib.org/products/blending/innovfin/products/midcap-guarantee.htm