This case study explains how the appropriate financial instrument can boost the potential of SMEs through using the European Regional Development Fund (ERDF).
The main aim of the financial instrument is to raise the capacity of the SMEs in the field of research, development and innovation in both cohesion regions (where West cohesion region should be allocated 1/3 of available resources and the East cohesion region 1/3). It is expected that SMEs will use this type of instruments to secure their financial flow for investments in new technologies. Close to 19 mio EUR of the ERDF funds are available to set up a new financial instrument for SMEs, namely the portfolio guarantees. Studies in the field among the SMEs have shown the need for such instrument, since companies need favourable loans and credits to accelerate their investment in research facilities and infrastructures, improve the technological processes and boost the innovation potential. The needs of the SMEs should comply with the specific objectives of the Operative Programme for the period 2014–2020 as well as with the Slovenian Smart Specialization Strategy (S4). The financial instrument will be offered through commercial banks and saving banks with intention to get closer to final recipient. It is estimated that a total of over 30 mio EUR of loans and credits will be generated in the period from 2021 until 2023. The core of the instrument is to cover 62,5 % of loss at individual credit or loan. The main guarantor is SID Bank as the primary intermediary body for this financial instrument. The value of the guarantees on credit and loans is from 10.000 EUR to 10 mio EUR.
Resources needed
Close to 18,88 mio EUR of ERDF funds are available.
Evidence of success
This financial instrument has proven to be useful due to its favorable conditions vis-à-vis commercial banks (guarantee fulfils the conditions for according to CRR) and final recipients (free of charge, high coverage). The guarantee instrument was made available by the selected financial institution at the beginning of March 2021.
Potential for learning or transfer
This financial instrument is expected to be useful due to its favorable conditions vis-à-vis savings banks (guarantees fulfil the conditions for unfunded credit protection under the CRR) and the final recipients (guarantee free of charge, high coverage). Having banks involved in these types of financial instruments (SID Bank is, in addition to the guarantee instrument for RDI for SME, offering another portfolio guarantee instrument for SME through three banks), we can improve the access to portfolio guarantees for SMEs and solo proprietors, since we have found that there is a need for such financing. This gives us further incentive to design similar financial instruments that can help improve the potential of the RDI in Slovenia.
Tags: Financial instruments
