Part of the COSME budget will fund guarantees and counter-guarantees for financial intermediaries (e.g. guarantee organisations, banks, leasing companies) to help them provide more loan and lease finance to SMEs. This facility will also include the securitisation of SME debt-finance portfolios.
By sharing the risk, the COSME guarantees will allow financial intermediaries to expand the range of SMEs and types of financial transactions they can support. The impact is substantial – due to the leverage effect, every euro invested in a loan guarantee is expected to release up to 30 euros of financing for SMEs. These guarantees will help many SMEs who might otherwise not be able to obtain funding due to their perceived higher risk or a lack of sufficient collateral.
It is expected that up to 500,000 SMEs will receive loans backed by COSME guarantees, with the total value of lending being over €30 billion.
The COSME financial instruments build on experience from the financial instruments under the Competitiveness and Innovation Framework Programme (CIP) that ran from 2007 to 2013. Since 2007, more than 340,000 SMEs have benefited from a guaranteed loan or lease thanks to the SME guarantee facility (SMEG). Based on the results of that programme, it is expected that under COSME, 90% of beneficiaries will have 10 or fewer employees with an average guaranteed loan of about EUR 65,000. This is the category of SMEs who currently face the most difficulty obtaining finance.
A call for expression of interest for financial intermediaries is open until 30 September 2020. Financial intermediaries wishing to apply to the LGF can find more information on the EIF website.