1 / 28

FinNetSME: What has been achieved? Detailed outputs

Financing enterprise growth in the regions of the EU – models and recommendations FinNetSME Final Conference, Brussels, 6 June 2007.

tieve
Download Presentation

FinNetSME: What has been achieved? Detailed outputs

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Financing enterprise growth in the regions of the EU – models and recommendations FinNetSME Final Conference, Brussels, 6 June 2007 Christian Müller, NRW.BANK – Christian Saublens, EURADA – Martin Dastig, Investionsbank Berlin –Thomas Hüttich, Investitionsbank Berlin – Juris Cebulis, Mortgage and Landbank of Latvia – Cornelia Gerster, EAPB FinNetSME: What has been achieved?Detailed outputs

  2. Contents • FinNetSME: objectives and approach • Market gaps along the regional value chain of SME finance • Financial models and best practice examples • Making FinNetSME’s results accessible • Conclusions and outlook Christian Müller, NRW.BANK

  3. I. FinNetSME: Objectives and ApproachImportance of SME Finance for Reaching the Lisbon Goals • SMEs play a central role in achieving the Lisbon objectives • 23 million SMEs account for 99% of all enterprises and 66% of private employment in the EU. • SMEs are a major source of entrepreneurial skills, innovation and contribute to economic and social cohesion • Strengthening the competitiveness of SMEs is the key to more economic growth and employment! • Access to finance is one of the most severe bottlenecks in this field! • FinNetSME strives to address the existing market gaps by developing innovative financing models and strategies! Christian Müller, NRW.BANK

  4. I. FinNetSME: Objectives and ApproachFinNetSME – Methodological Approach • Stock-taking: accumulation of information on practices in the various regions of the EU • Analysis: assessment and clustering of most common financing problems of SMEs (market gaps) in FinNetSME’s four working groups, each focusing on a specific issue of SME financing: • Regional value chain (coordinator: EURADA) • Early-stage finance (coordinator: INEC) • Micro-financing schemes (coordinator: IBB) • Equity-financing (coordinator: IB-SH) • Development of models, i.e. templates, as guidance for the development of innovative instruments to increase SMEs’ access to finance Christian Müller, NRW.BANK

  5. II. Market Gaps along the Regional Value ChainStarting Point: The Regional Value Chain of SME Finance Christian Saublens, EURADA

  6. II. Market Gaps along the Regional Value ChainDifferent Perspectives of the SameProblem To get a comprehensive view of financing problems / suitable tools, FinNetSME focuses on all players of the regional value chain: • Aspects deriving from the sphere of the SME, e. g. • Equity capital base • Collateral position • Managerial skills • Aspects deriving from the sphere of the suppliers of finance, e. g. • Profitability • Risk • Aspects deriving from the sphere of the public hand, e. g. • Bureaucracy • Lack of transparency • Lack of financial resources • State-aid-rules Christian Saublens, EURADA

  7. II. Market Gaps along the Regional Value ChainIdentification of Specific Market Gaps Based on the analysis of the ideal typical Regional-Value-Chain and the discussions in FinNetSME’s working groups, three specific market gaps will serve to demonstrate the results: • Early-stage-finance, esp. SMEs’ access to venture capital • Micro-finance solutions for small and micro-enterprises • Combination of financing and consultancy / investment readiness schemes Christian Saublens, EURADA

  8. III. Financial Models and Best Practice ExamplesEarly Stage Finance / SME Access to Venture Capital A. Clustering of Problems • Cluster 1 – Sphere of the SME • Lack of knowledge and asymmetrical information • Lack of equity capital base • Cluster 2 – Sphere of the supplier • Market not developed • Market cyclical • Specific management challenges (Risk assessment, controlling of portfolio companies, exit) • Cluster 3 – Sphere of the public hand • Bureaucracy (reporting requirements) • Attracting private funding as co-financers • EU rules for using European means Martin Dastig, Investitionsbank Berlin

  9. Profit potential Equity-Investment of VC provider Venture Company growth III. Financial Models and Best Practice ExamplesEarly Stage Finance / SME Access to Venture Capital B. Instruments, Tools and Models • Instruments • Equity • Silent partnership / Soft loans • Tools • Funds • Fund management • EU-Funding • Models • Use of ERDF-funds • Attraction of private investors’ money • Sector-specific VC-funds Martin Dastig, Investitionsbank Berlin

  10. III. Financial Models and Best Practice ExamplesEarly Stage Finance / SME Access to Venture Capital C. The FinNetSME Model: Equity Financing Martin Dastig, Investitionsbank Berlin

  11. III. Financial Models and Best Practice ExamplesEarly Stage Finance / SME Access to Venture Capital D. Best Practice: Equity Financing in Berlin, Germany • VC Fonds Berlin • VC Fonds Berlin GmbH • Management IBB Beteiligungsgesellschaft mbH • Fund volume: 20 mill. EUR • Berlin Kapital • Fund inside the bank without own fund vehicle (SPC) • Fund management by the bank • Fund volume: 15 mill. EUR • In structuring: VC Fonds for the creative industries • 1st regional non-technology-oriented VC Fund in Berlin • Fund Volume: 30 mill. EUR Martin Dastig, Investitionsbank Berlin

  12. Investitionsbank Berlin National co-financing 50% 50% 100 % owner EFRD VC Fonds Berlin GmbH IBB-Beteiligungs-gesellschaft mbH Management- contract Private investors‘ money 30% on top Portfolio Companies Venture C Venture A Venture B III. Financial Models and Best Practice ExamplesEarly Stage Finance / SME Access to Venture Capital D. VC Fonds Berlin Martin Dastig, Investitionsbank Berlin

  13. III. Financial Models and Best Practice ExamplesEarly Stage Finance / SME Access to Venture Capital E. EU Funding • CIP Framework • Co-Investments in regional or specialised VC Funds (High Growth and Innovative SME Facility (GIF)) • SME Guarantee Facility (SMEG) • Grants in the framework of the Capacity Building Scheme (CBS) • ERDF financial engineering • University spin outs as an efficient instrument for technology transfer? Martin Dastig, Investitionsbank Berlin

  14. III. Financial Models and Best Practice Examples Micro-loans for Small and Micro-Enterprises A. Clustering of Problems • Cluster 1 – the sphere of the SME • Lack of sound business and management experience • Weak collateral position of micro-enterprises and start-ups • Cluster 2 – the sphere of the supplier • High administration and credit assessment costs due to small size of loans • High risk associated with the start-up phase of the enterprise • Cluster 3 – the sphere of the public hand • Lack of financial resources • Bureaucracy and complex eligibility rules, banking regulations Thomas Hüttich, Investitionsbank Berlin

  15. III. Financial Models and Best Practice Examples Micro-loans for Small and Micro-Enterprises B. Instruments, Tools and Models • FinNetSME partnership offers a variety of instruments and tools for tailor-made micro-finance-schemes. • Some sort of public subsidies is crucial: national, regional or EU funds for capital, guarantee scheme or accompanying measures. • Accompanying business support measures can reduce risk and lower costs of the financier • Different tools cluster around two main approaches that have been formed into general models: • Facilitating micro-credit supply through commercial banks by forwarding refinancing advantages and risk sharing with public guarantee scheme (“house bank-principle”) • Revolving regional micro-credit fund co-financed by EU-Structural Funds (ERDF/ESF) with independent fund management by regional finance institution (“financial engineering”) Thomas Hüttich, Investitionsbank Berlin

  16. III. Financial Models and Best Practice Examples Micro-loans for Small and Micro-Enterprises • FinNetSME examples: • INVEGA (LT) • Investitionsbank Berlin (D) • NRW.BANK (D) • TEMPME S.A. (GR) • Finpiemonte Turin (IT) • Fon@de Castilla y León (E) • Latvian Guarantee Agency C. The FinNetSME Model 1: • Public private risk sharing Thomas Hüttich, Investitionsbank Berlin

  17. III. Financial Models and Best Practice Examples Micro-loans for Small and Micro-Enterprises • FinNetSME examples: • MBL (LV) • Finnvera (FI) • IBB-SME Fund (D) • SAB (D) • NRW.BANK (D) C. The FinNetSME Model 2: • Financial Engineering Thomas Hüttich, Investitionsbank Berlin

  18. III. Financial Models and Best Practice Examples Micro-loans for Small and Micro-Enterprises D. Best Practice Example: Berlin Start • Promotional loans up to 100 TEUR for investments and working capital • Target group: Start-ups and young enterprises up to 3 years • Obligatory combination with 80% guarantee by regional guarantee agency (BBB), thus no collateral needed • Favourable interest rates, maturity 6-10 years, 2 years repayment exemption, financing up to 100 % of costs • Attractive bank margin for credit delivery, risk assessment and remaining liability • Integrated application process, duration 10 days Thomas Hüttich, Investitionsbank Berlin

  19. III. Financial Models and Best Practice Examples Combining Financing and Consultancy A. Clustering of Problems • Cluster 1 – the sphere of the start-up/SME • Lack of skills to start/develop a business • Insufficient financing (e.g., lack of collateral) • Information asymmetry (e.g. on funding sources, state support etc.) • Cluster 2 – the sphere of the supplier • High administration costs • Lack of credit history in case of start-ups • High risk associated with the start-up phase of the enterprise • Cluster 3 – the sphere of the public hand • Low level of initiative in starting own businesses (regional disparities) • Limited funding and support instruments for business start-ups • Insufficient skills/experience in providing financial/training support for special target groups (e.g. young people, unemployed, people with special needs etc.) Juris Cebulis, Mortgage and Land Bank of Latvia

  20. III. Financial Models and Best Practice Examples Combining Financing and Consultancy B. Instruments, Tools and Models • Existing non-financial instruments include: • Potential start-up training • Staff/entrepreneur/investor training • Advisory services • Mentor networks • Business plan contests • Existing financial instruments: loans, guarantees, grants, equity financing • Possible tools/ models on combining both financial and non-financial support to SMEs involves solutions like: • One stop-shops (information+ advise/consultancy+ financial support); • Pre-loan coaching schemes (consultancy+ financing) Juris Cebulis, Mortgage and Land Bank of Latvia

  21. Loan fund ESF State Financing consultancy Financial support Start up grants Micro loans Start-up Analysis of business plans Training/consulting Consultants Financial institution Business plan preparation Project application III. Financial Models and Best Practice Examples Combining Financing and Consultancy C. The FinNetSME Model: Juris Cebulis, Mortgage and Land Bank of Latvia

  22. III. Financial Models and Best Practice Examples Combining Financing and Consultancy D. Best-practice example: Integrated support for creation of SMEs in Latvia • In December 2006, MBL launched a new programme co-financed by ESF: “Training, consultancy and financial support to business start-ups”. • Goal: to stimulate small business activities by encouraging people, especially first-time entrepreneurs, to start their own business. • Results/ future perspectives: 1.000 start-ups to be trained until mid-2008; 300 to be financially supported; programme to continue in new programming period Juris Cebulis, Mortgage and Land Bank of Latvia

  23. 2-3 month course; 1000 participants Business plans (BP) prepared Analysis of BP Adequate BP get financed (300) • Loan fund (11,9 mill. EUR): • MBL -3,7 • State - 2,0 • ESF - 6,2 Training O u t c o m e: Financial Support Micro-loan Grants 1. Start up grant (investment in start capital); 2. First year's salary grant 3. Mentoring grant up to 25k EUR III. Financial Models and Best Practice Examples Combining Financing and Consultancy D. Best-practice example: Integrated support for creation of SMEs in Latvia Juris Cebulis, Mortgage and Land Bank of Latvia

  24. IV. Making FinNetSME Results Accessible The FinNetSME Database A. Why a FinNetSME database? • Pools, categorises and analyses information on • 74 financial and 24 non-financial business support instruments • 19 participating regions • 21 formal members and associated partners and 14 related institutions • Details of 86 relevant contact persons • Models • Transfers knowledge on good solutions onto the European level and into other regions. • Builds the cornerstone for sustainable project results and a competence centre on regional SME finance. • Is available at www.finnetsme.org. Cornelia Gerster, EAPB

  25. IV. Making FinNetSME Results Accessible The FinNetSME Database B. How does the database describe instruments? • Concise overall description • Basic information on eligible beneficiaries/investments/ amounts and financing sources • Cross-references to region, responsible partner, contact person, supplementary instruments • Class/Type: categorization • Assessment Cornelia Gerster, EAPB

  26. IV. Making FinNetSME Results Accessible FinNetSME – Guide on “Experiences and Practices” • A major FinNetSME print publication providing information on the project history, the activities of FinNetSME and the partners. • Gives detailed explanation of FinNetSME models of the regional value chain, on early stage finance, equity financing and micro-credits. • Hardcopies available on the documentation table. Cornelia Gerster, EAPB

  27. V. Conclusions and Outlook Key Achievements • Financing and consultancy for SME are an important key to growth and innovation in the EU. • FinNetSME developed recommendations for policy-makers and providers of innovative financing products to address the needs of these companies. • Financial models based on FinNetSME‘s ideas have already successfully been implemented in some regions. • The proposed financial models can serve as a basis for financial engineering during the new programming period. • But: State aid rules often limit the possibilities of public support measures for SMEs! Christian Müller, NRW.BANK

  28. Thank you very much for your attention! • Additional information about the work of FinNetSME is available at www.finnetsme.org and in the “Experiences and Practices” guide! Christian Müller, NRW.BANK

More Related