Businesses in Europe are at a crossroads. Global competition is increasing and challenges the security and resilience of value chains and European competitiveness. The net zero transition, digitalisation, and AI call for substantial restructuring of the way in which European businesses work, requiring investment, innovation and focus on skills.
Small and medium-sized enterprises (SMEs) and mid-caps contribute to the European economy and its competitiveness in important ways, including through innovation, productivity enhancements, and the diffusion of strategic technologies. It’s essential to foster an environment that encourages business growth and transformation.
EU firms, particularly small and more innovative firms, face challenges to access the necessary financial resources for their operations and growth. The most recent EIB Group Survey on Investment and Investment Finance shows that more than 6% of firms fall into this category on average in the EU. The share differs considerably across EU countries, ranging between 3%-18%.
The public sector can help bridge this gap by providing tailored financial programmes and risk-sharing mechanisms. Targeted interventions facilitate EU businesses’ access to capital, both public and private, thereby supporting competitiveness and economic resilience. Business support instruments also contribute to achieving strategic objectives like sustainability, digitalisation and competitiveness.
About the report
This report presents the rationale behind EIB Group support for businesses and the evidence on the impact of SME targeted financial instruments. It gives an overview of relevant market failures and financing gaps, and how different EIB Group instruments address them. By addressing critical market failures, the EIB Group's business support instruments are shown to have a real impact and to be crucial to achieving the EU's strategic objectives.
Supporting firm growth and investment via financial intermediaries
The EIB’s intermediated lending supports SMEs and mid-caps’ access to finance. Impact studies have shown the impact of EIB intermediated lending through a comparison of loan recipients with peer firms with similar characteristics but no EIB funding.
- Firms receiving EIB intermediated loans reported 5.4% higher levels of employment, 4.7% higher earnings and 5.3% higher value added in the three years after funding.
- Loan recipients showed 15.3% higher levels of investment, indicating the use of funding for the purchase of investment goods.
- Recipients are also more likely to innovate, achieving a small but significant increase in patenting activity (1.1%) and strong increase in their intangible fixed assets (13.3%).
Impacts are found to be larger for smaller firms, younger firms and firms in economically less developed (cohesion) regions.
Impact of EIB intermediated loans (% change relative to peer firms)
Guarantees support access to finance
Guaranteed loans support SMEs’ access to finance in the presence of strict collateral requirements and insufficient capital. Risk-sharing products, such as asset-backed securities, also strengthen the capacity of banks to supply new loans. Impact studies have shown several positive impacts of EIF-guaranteed loans.
- EIF-guaranteed loans have been shown to increase beneficiary firms’ assets by 7% to 35%.
- Guaranteed loans increased beneficiary firms’ employment by 8% to 30%.
- Decreasing bankruptcy rates by about a third, and by as much as a half in some countries
Impact of EIF credit guarantees to SMEs (range of estimated % difference relative to peer firms)
Brault and Signore, 2019
Venture capital helps start-ups grow and succeed
Venture capital financing is an indispensable source for startups. The EIF’s investments into venture capital and private equity funds aim at fostering a European venture capital or private equity ecosystem. Studies show that the EIF's supported indirect venture capital investments have a positive impact on the start-ups’ growth, compared to other new technology-based firms without such financing.
- Start-ups backed by EIF-supported venture capital funds achieved higher levels of capital (up to two times higher than peer firms), revenues (19% to 97% higher levels) and faster job creation (100% higher levels).
- Supported firms had a 10.3 percentage point higher chance of a successful exit by being acquired.
- Supported start-ups had a 1.7 percentage point higher chance of a successful exit through an initial public offering (IPO).
Impact of EIF-supported venture capital investments in start-ups (change in probability relative to peer firms)
Venture debt crowds in financing
The EIB helps fill the financing needs faced by high-growth, innovation-focused companies scaling up production by issuing quasi-equity, that is long-term debt with equity features. The EIB’s direct venture investments serve high-risk companies with groundbreaking technologies in need of early and later-stage financing. The EIB is a lead investor, signalling investment quality to the market.
- EIB venture debt recipients report significantly higher firm growth in the years following the loan.
- Following the credit line, the recipients also report crowding-in of additional debt funding at favourable lending conditions.
Impact of EIB venture debt (% change relative to peer firms)
