How does the European Bank for Investments work? A short guide
The European Investment Bank (EIB) was founded in 1958 with the Treaty of Rome to help economies grow, create new job opportunities, sustain initiatives to mitigate climate change and promote equality across the European Union and abroad. The EIB supports also Europe’s post-pandemic economic recovery by implementing the European Fund for Strategic Investments, and directly funds thousands of projects in over 160 countries. Here is a short guide to understanding how EIB works and which are the opportunities to be financed.
How does EIB work?
The Luxembourg-based bank borrows on capital markets and makes loans on favourable terms for projects that support the before-mentioned European Union's general objectives. About 90% of the loans are provided in the European Union.
The EIB provides three main types of products and services:
- Loans (90% of its total financial commitments). The bank lends to clients of all sizes, often helping to attract other investors;
- "Blending": clients can combine EIB financing with further investments;
- Advice and technical assistance to maximize the return on funds.
How much can EIB invest for a single project?
EIB covers the investment costs for a period of up to three years, but can even be longer. The EU bank typically covers up to 50% of the total projects' costs, starting with loans of 25 million euros.
There is also the possibility to get intermediate loans for less than 25 million from local banks. Direct loans between 7.5 and 25 million euros are possible for Small and Medium enterprises and midcap companies (up to 3000 employees).
Opportunities for Small and Medium Enterprises
Small and medium enterprises (SMEs) are important actors of the global economy. In European Union, small businesses represent 99% of the total and provide 75% of all job opportunities. EIB partners with commercial banks, leasing companies, venture capital, private equity funds and others. Last year, the EU bank has provided €45 billion only to 431.000 SMEs, including companies coming from regions where access to finance is difficult. Here is how investments can be made:
- venture capital and microfinance for SMEs, in particular for new and innovative companies;
- guarantees for financial institutions, to cover loans to SMEs;
- help EU and acceding countries to develop their markets of venture capital;
EU bank total investments in actions in line with the Green Deal objective of a carbon-neutral planet are expected to reach €1 trillion for the decade between 2021 and 2030. This would contribute to exceeding 50% of total operations dedicated exclusively to the preservation of the environment and climate; moreover, there will be 500 000 jobs in Europe by 2050 contributing to a just transition.
In particular, equity and debt funds are focused to sustain in "climate-friendly" projects. The main characteristics of investments are that they should represent 10% to a maximum of 25% of the fund size. Tenors should also reflect the fund’s life – normally 10-12 years, but the tenor can be 25 years or more.
Our typical investment size is between €25 and €60 million, but can go up to €200 million under certain conditions. The EIB shall not hold the largest commitment in a fund and will not invest in open-ended (evergreen) funds unless there is a pre-determined exit route for EIB’s investment.Co-investments are highly encouraged. Who is eligible?
Which macro-areas does EIB finance?
- Climate and environmental sustainability (43% of the total financing). The bank's goal is to mitigate the Planet's ongoing climate emergency by trying to reach the limit of global warming to 1.5°C above pre-industrial levels by the end of the century. In 2021 EIB invested 27,6 billion euros (51% of the total).
- Investments in innovation, digital and human capital. Only in 2021, EIB provided 20,7 billion euros to support the development of new products and business models, but also investments in research and adoption of new technologies.
- Infrastructure. EIB wants to reach carbon neutrality in areas such as sustainable mobility, energy, water management and sustainable communities. Last year, €13.80 billion were used to support sustainable cities and regions and €15.38 billion to improve the usage of natural resources.
Other areas of financial intervention include development around the world, territorial cohesion and growth of small and medium enterprises.
Who is eligible for funds?
Anyone who runs a business in the public sector and has a project that could contribute to the EU's strategic objectives could benefit from a loan.
In particular, these are the entities which are eligible for financial support:
- Sovereign states;
- National agencies, departments, institutions and ministries;
- Regional or local authorities;
- Public sector companies.
How to contact EIB if you need to be funded
If you are an entrepreneur seeking financing, contact EIF intermediaries in your country to check your eligibility for EIF equity or debt. To make a request, the EIB should be contacted by e-mail, with an online form or through its regional offices, providing information that allows the Bank to verify whether the project meets the established objectives.