Financing SMEs at a regional level with JEREMIE

Transcription

1 Financing SMEs at a regional level with JEREMIE Sébastien Massart Economic Adviser to the Préfet within the General Secretariat for Regional Affairs (SGAR) Head of the regional department for economic development Bruno Robino European Investment Fund Head of Region Regional Business Development 1

2 Short introduction to the Languedoc-Roussillon Region Four solaire d Odeillo Pont du Gard 2

3 Some facts about Languedoc-Roussillon Population: 2.5 millions GDP : 60.5 billion EU s commitment for : 900 million Annual State budget: 13 billion Annual Regional Council s budget: 1.1 billion 3

4 Some facts about Languedoc-Roussillon Strong public research Health & Biotech Agronomy Energy (nuclear, solar) Tourism: 15% of GDP, mostly in summer Weak economy Highest unemployment rate in France: 12,7% Industry: only 8% of local GDP 4

5 The regional innovation strategy 1. Assisting all SMEs growth (Includes financing SMEs development) 2. Accelerating technology transfer 3. Connecting our Region to international networks 4. Connecting our innovative sectors together 5

6 Initial diagnosis: market failures Financing gaps for innovative businesses First fund raising : EUR 0.3 M EUR 1.2 M Follow-on investments : average EUR 2,5 M Weak capital-risk network : average EUR 70 M / year Difficulties for financing standard growing SMEs Tangible assets / equipment Commercial development Working capital 6

7 Weak regional financial market Annual average capital-investment in French Regions (EUR M, from 2005 to 2007) Source AFIC 7

8 Our answer to these market failures Inception Start up Development Debt Funded Risk Sharing Seed Equity Guarantee Co-investment instrument Guarantee Instrument FLPG (First Loss portfolio guarantee) 8

9 Implementing JEREMIE October 2008 : Funding Agreement for a EUR 30M fund French State (managing authority) Languedoc-Roussillon Region Council European Investment Fund Implementation of a clear investment strategy entailing three financial instruments: Funded Risk Sharing Product Risk Capital instrument First Loss Portfolio instrument (Guarantee product) 9

10 JEREMIE : the overall concept in LR Structural Funds ERDF EUR 15 m Managing Authority Contribution from the LR Region: EUR 15m + ERDF Investment Board (COPIL): French State / REGION / EIF JEREMIE Holding Fund LR (JHF): EUR 30m Tailor made portfolio of instruments created to address EU regions /Member States needs in SME Finance Financial Intermediaries SMEs SMESs SMESs SMESs 10

11 JEREMIE LR: investment strategy implementation FR State: EUR 15m ERDF Région: EUR 15m Région Financial Intermediaries selected through a Call for Expression of Interest. EUR 30m JEREMIE Holding Fund (JHF) EIF CREALIA Seed loans Instrument: EUR 2m Leverage of 2 i.e. EUR 4m for LR s SMEs SAS JER LR Statut de SCR Co-investment Instrument: EUR 11m Leverage of 2 i.e. EUR 22m for LR s SMEs BPS Guarantee Instrument: EUR 14m Leverage of 8.4 i.e. EUR 117m for LR s SMEs I.e. a total of EUR 143m for LR s SMEs 11

12 1. Seed loan (Risk sharing: 50% - 50%) Innovative start-ups JEREMIE funds (0% interest rate) EUR 2m Financial Intermediary own resources (EUR 2m) + JEREMIE funds (EUR 2m) Loans SME/micro SME/micro SME/micro SME/micro SME/micro SME/micro Reimbursement SME/micro Combined resources: FI + JER = EUR 4m 12

13 Key characteristics of the instrument Seed loans JHF contribution: EUR 2m Purpose: Support innovation in the LR region, Start-up (Entrepreneurs with the objective to build up their SMEs in the next 6 months). Target: SME (less than 3 years since inception, or entrepreneurs with the duty to set up their SME in the next 6 months). Total amount of the loan: max EUR (interest free loan, without personal guarantee required) Eligibility: Assets, working Capital (in the framework of an expansion plan) Availability Period: 36 months Maturity of the loans: Min. 6 months, max. 48 months (including the grace period of 12 months) Others: Risk sharing between the JHF and the FI 50%/50%. State Aid: de-minimis regulation. 13

14 Seed loans instrument: first results October loans disbursed to innovative SMEs Total amount disbursed: EUR 660,000 (50% JHF i.e. EUR 330,000) Total amount invested by SMEs: EUR 1.8m (i.e. leverage of 5.4x) Loan amount in average: EUR 22,100 Impact on employment (maintain or created): 52 EIF added value: Reorganisation of the structure (reinforcement of the team, new IT monitoring system, etc.) First returns to the JHF expected in December 2011 (revolving nature) 14

15 2. Co-investment instrument (50% - 50%) Financial Intermediary selected by EIF. JHF JHF (EIF) (EIF) Co-investment Co-investment Funds Funds 100% 100% public public money money Decisional Decisional vehicle vehicle selected selected through through a a CfEoI CfEoI by by JHF JHF Private Private component component >50% >50% Minimum Minimum 5% 5% - - Maximum Maximum 50% 50% in in each each transaction. transaction. Co-investment players with a private component > 50% VC Fund(2) VC Fund(2) VC Fund(3) VC Fund(3) VC Fund(4) VC Fund(4) VC Fund(5) VC Fund(5) Investment decision into SMEs taken by the Decisional vehicle Max amount per deal < EUR 2.5 m SMEs SMEs based based in in L-R L-R Small Small enterprises enterprises (up (up to to expansion); expansion); Medium Medium enterprises enterprises (seed (seed + + start-up) start-up) 15

16 Key characteristics Co-investment Fund size of the co-investment vehicle: EUR 11 m, Purpose: Facilitate SMEs with high potential access to finance, Maturity of the fund: 10 years, Max amount for a SME: EUR 2.5 m over a period of 12 months, Sectors: All sectors (except the non eligible ones). Specific attention to innovative and technology SMEs with a high potential, Investment period: 31/12/2015, Stage of intervention : Small enterprises (up to expansion); Medium enterprises (seed + start-up), Co-investment vehicle + other co-investors act according to the pari passu principle, Fund distribution according to the cascade principle: JHF is entitled to paid-in capital + hurdle rate (at least 5%); thereafter carried interest split 80/20, State Aid: State Aid Scheme N 629/2009 amended by the N 415/

17 Co-investment instrument first results: October transactions signed with SMEs Total amount invested: EUR 5m (EUR 1.3m from JHF), leverage 3.8x Average amount per deal: EUR 635,000 EIF added value: Capital restructuring of the management company Reinforcement of the investment team (+ appointment of Key Persons) Commercial oriented Reporting in line with EVCA/AFIC. 17

18 3. Guarantee Instrument First Loss Portfolio Guarantee (FLPG) New Portfolio of loans EUR 14m stimulates EUR 117.6m of new SME lending Leverage of % Cap Rate of the Guarantee Guarantee Rate: 80% up to a Cap Rate Exemple: EUR 14m from the JHF 18

19 Key characteristics Guarantee JHF contribution: EUR 14 m, Purpose: Facilitate access to finance for SMEs by offering them better terms and conditions (price reduction and collateral requirement reduction), Guarantee rate: 80%, the guarantee covers the first loss up to a certain percentage (cap rate), Leverage: 8.4x, build up a portfolio of loans for around EUR 117.6m, Availability period (time to build up the portfolio): 36 months, Eligible SMEs: All sectors (except the non eligible ones). Eligible Loans: Investment + working capital (in the framework of an expansion plan), Loans Maturity : min. 12 months max. 96 months, State Aid: de-minimis 19

20 Guarantee instrument first results: October loans disbursed to SMEs Total amount disbursed: EUR 3.5m Average loan amount: EUR 210,000 Average loan maturity : 80 months EIF added value, negotiation of better conditions for SMEs in terms of: Collateral required by the bank Interest rate charged. 20

21 Example results in the region SAS JEREMIE LR has invested in MTC (MEDICAL TECHNI CONFORT), a Languedoc-Roussillon based SME, specialised in the design and manufacture of medical devices to improve patient and caregiver comfort. SAS JEREMIE LR has invested in ALCI, a Languedoc-Roussillon based SME specialised in the development of robotic applications for the food industry. ALCI offers automated solutions for the treatment of a wide of range of perishable and irregularly-shaped products. MEZOA (Entrepreneur with the obligation to set up a company within 6 months) MEZOA received a seed loan from CREALIA to develop new software for the video game market. This system will use a 3D model (flora, relief, etc ) as a basis for the scenery of video games. Before receiving such a loan, this project has been incubated for several months in Montpellier University (LIRMM-CNRS, Université Montpellier II). 21

22 Although initial difficulties, a great opportunity Creating a new tool for economic development Finding an answer matching State aid rules A weak financing network Few answers to our calls of proposal Efficiency, flexibility Leverage (x8) and private counterparts Recycling funds, as opposite to grants Collateral benefits Creating an interest from the banks for their SME clients More natural way for financing SMEs 22

23 Next steps New regional projects Create a biotech investment fund Invest in touristic projects Extend guarantee instrument Be ready for

24 Contact People to contact at Languedoc-Roussillon Managing Authority: Sébastien Massart Economic Adviser to the Préfet +33 (0) People to contact at EIF : Bruno Robino Head of Region, Regional Business Development b.robino@eif.org Aubin Bonnet Mandate Officer, Regional Business Development a.bonnet@eif.org Tel.: (+352)