EU Guarantee Program for development of European SMEs

Garantiqa Hitelgarancia Zrt. submitted an application to European Investment Fund (EIF) to receive counter-guarantee in the framework of Competitiveness and Innovation Framework Programme 2007-13. The main purpose is to improve access to finance for the start-up and growth of SMEs. The EU supported program would like to offer new opportunities for SMEs, which play an important role in improvement of competitiveness within the Union, to get development loans and to increase employment.

The EIF manages the financial instruments of CIP on behalf of European Commission. One of the main purposes is to help SMEs get financial resources for the start-up and growth. The Competitiveness and Innovation Framework Programme runs between 2007 and 2013 with a budget of 3,6 milliard EUR.

In the framework of the program the EIF gives indirect support for SMEs so that it provides guarantees, counter-guarantees or co-guarantees for financial intermediaries related to loans or leasing transactions. These services are free, the guarantee rate cannot be exceeded by 50% of intermediary's commitment, however.

The Garantiqa Hitelgarancia Zrt. as a potential intermediary submitted an application to take part in the programme. The material has been sent to the EIF located in Luxemburg. The institution has been founded in 1994 with the purpose to play a catalytic role to attract private sector finance. EIF’s shareholders are the European Investment Bank (EIB), the European Union represented by the European Commission, and a number of European banks and financial institutions from the public and private sector. These all constitute the EIB Group. EIF carries out its venture capital and guarantee activities using either its own funds or funds entrusted by mandates. Their mission is to give venture capital for SMEs, especially for start-ups and to provide guarantees for banks to cover SME credit loans.

The EIF counter-guarantee would be used by Garantiqa to decrease its own risk, which is not covered by state counter-guarantee. With this tool, the Company could decrease its risk exposure, so our suretyship would mean bigger security for banks, which indirectly increase SMEs' chance of getting loans.