New financing deadline under European Guarantee Fund set to 31 December 2022
The European Commission approved the lenghtening of the deadline for banks to provide new financing to companies under the European Guarantee Fund from 30 June 2022 to 31 December 2022, as an effort to help businesses in participating Memeber States to face “serious disturbance” in their economies triggered by the pandemic crisis.
The European Commission approved the prolongation of the deadline for banks to provide new financing to companies under the European Guarantee Fund (EGF), the crisis mechanism backed by 22 Member States that the EIB Group (European Investment Bank and European Investment Fund) has put on the market to help businesses, mainly small and medium-sized enterprises, facing the impact of Covid-19 pandemic, as part of the €540 billion EU recovery package agreed in 2020 by European leaders.
As the deadline for banks to provide new financing to companies was set to 30 June 2022, the European Commission approve to prolong it to 31 December 2022 to allow banks that already had signed an agreement with EIB Group ”to include loans and other financing options under the Fund's guarantee”. The prolongation was assessed under the State aid rules, in particular the Commission found that the article of the Treaty on the Functioning of the EU, which allows “aid to be granted by Member States to remedy a serious disturbance in their economy”, was appropriate to address the needs of businesses and companies. As the Commission “concluded that this exceptional prolongation does not affect the compatibility of the Fund's measures with the internal market.
The European Guarantee Fund is employed through risk sharing (including guarantees to be deployed by national promotional institutions: at least 75% of EGF financing) and equity-type instruments (including venture debt): up to 25% of EGF financing. According to the European Investment Bank reports, by February 2022 through the Fund, 354 finance contracts were signed in participating countries, which are Austria, Belgium, Bulgaria, Croatia, Cyprus, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Lithuania, Luxemburg, Malta, the Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain and Sweden. At the end of 2021, EGF had reached € 23.2 billion in approved investments. Small and medium-sized enterprises are on their way to receive 65% of the investment mobilized, mid-caps and larger corporate up tp 28%, while innovative companies will get up to 7% as equity investment mobilized.
Investment are set to reach all 22 participating Member States and, on average, the geographical distribution of approved transactions exceeds 0,23% of these countries GDP. Such investments are expected to mobilize close to 8 times the lending level or € 174.6 billion in total financing and investments.
The Commission believes, while the exceptional prolongation of the deadline does not affect the compatibility with EGF’s measure, they “remains necessary, appropriate and proportionate to remedy a serious disturbance in the economies”.