THE REPRESENTATION OF GUARANTEE INSTITUTIONS IN EUROPE AND THE AUSTRIAN EXAMPLE AUSTRIA WIRTSCHAFTSSERVICE GESELLSCHAFT MBH AWS

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1 THE REPRESENTATION OF GUARANTEE INSTITUTIONS IN EUROPE AND THE AUSTRIAN EXAMPLE AUSTRIA WIRTSCHAFTSSERVICE GESELLSCHAFT MBH AWS Bernhard Sagmeister, CEO of aws and Chairman of AECM XXII IBERO-AMERICAN FORUM FOR GUARANTEE SYSTEMS AND FINANCING FOR MSMEs, BOGOTÁ, 28 September 2017, Third Panel, Guarantee Systems in the World: Guest Countries

2 1. ABOUT AECM: SOME FACTS 42 member organizations from 26 countries, offering in 2016: 85,3 Billion total volume of outstanding guarantees in portfolio served more then 2,5M SME beneficiaries. Legal entity: International non-profit association Political representation at European level (European Commission, European Parliament, EIB Group, etc.) and at international level (OECD, World Bank Group, Bank for International Settlements, etc.) Promotion of the guarantee instrument around Europe and the World (AECM = founding member of the GNGI) Exchange of best practices on guarantee issues among its members and beyond (REGAR, ACSIC, etc.) Organization of different types of events (annual event, Operational Trainings Session-OTS). Furthermore AECM runs working groups on EU State Aid, Agriculture, Statistics, Banking Supervision, Structural Funds, SME Policy. Collection of information (general and statistics) from its members by surveys 2

3 2. THE AECM AND REGAR ANNUAL SURVEY ON GUARANTEE ACTIVITY Survey was introduced in spring 2016 and first outcomes were presented at annual event in June 2016 (Porto, Portugal), followed by the annual event in Madrid Objective: get trend indicators on the European guarantee activity Conducted on an annual base in order to gain time series Supra-regional comparison with REGAR (2016/2017): The comparison of AECM and REGAR-results aggregates incremento poco/mucho & disminuyo poco/mucho in AECM terms, meaning in general increasing or decreasing -trend. 3

4 2. BANK FINANCING (PAST) - COMPARISON OF OUTCOME OF THE AECM AND REGAR ANNUAL SURVEY ON GUARANTEE ACTIVITY OF 2017 REGAR In 2016 bank financing for SMEs AECM In 2016 bank financing for SMEs 4

5 2. GENERAL PROSPECTS - COMPARISON OF OUTCOME OF THE AECM AND REGAR ANNUAL SURVEY ON GUARANTEE ACTIVITY OF 2017 We see the general business prospects for SMEs in our country REGAR IN 2017 AECM IN 2017 Increasing general positive tendency comparing REGAR and AECM 5

6 2. FUTURE STRATEGIC FOCUS - COMPARISON OF OUTCOME OF THE AECM AND REGAR ANNUAL SURVEY ON GUARANTEE ACTIVITY OF 2017 In the next year our institution will focus on 2017 AECM 2017 REGAR Categories only given in the AECM survey Same categories for both AECM and REGAR surveys Categories only given in the REGAR survey 4

7 GUARANTEE SYSTEMS FOR INNOVATIVE ENTERPRISES IN AUSTRIA Bernhard Sagmeister, CEO XXII IBERO-AMERICAN FORUM FOR GUARANTEE SYSTEMS AND FINANCING FOR MSMEs, BOGOTÁ, 28 September 2017, Third Panel, Guarantee Systems in the World: Guest Countries

8 Business location Austria 8,6 Mio. Inhabitants 83,900 km² Total area 339 billion GDP 39,400 GDP per capita (# 4 in EU) 330,000 Companies 99,7% SMEs in Austria (acc. EU-Definition) + 8 % new companies per year

9 aws - Who we are? Austria s federal promotional bank for business financing founded in 2002 by federal law, as a merger of 4 promotional institutions dating back to Our Mission - Boosting Innovation & Growth: aws serves Austrian companies which focus on more riskrelated projects in context with innovation efforts (72% of aws projects) and growth steps (in average more than four times the usual annual deprecation). Currently aws offers approx. 80 different thematic programs and uses thereby financing instruments (loans, guarantees, grants, equity) and consultancy services. 9

10 aws priorities along the life-cycle of companies Growth & Industry Start-ups 5 4 Leaps in growth (e.g. internationalisation) 1 Entrepreneurial Spirit 2 Technology Transfer 3 Start-ups Introduction of new products and services starting from the first business idea (market transition) to company success.

11 aws financing portfolio ~ 25 % Grants Consultancy Services ~ 25 % guarantees ~ 2% Equity ~ 50% loans

12 In percent In percent In percent in percent Customer Perspective - Financing Effects of Guarantees Guarantee Loan Grant Guarantee Loan Grant Enabling financial viability of projects Enlarged project size Guarantee Loan Grant Accelerated project implementation Guarantee Loan Grant Improved Quality of project Comparing the three support schemes, public guarantees trigger from a customer s point of view extraordinary positive effects on business projects. In contrast to grants, guarantees are also budget-friendly.

13 Guarantees are even more important, as financing for SMEs gets more challenging Hypothesis: Demand-side: Speed of innovation and international competition increase exponentially Supply-side: Stringent Financial Market Regulation leads to collateral squeeze and shortage in venture capital Innovative Enterprises Federal budgets face comprehensive budget restrictions In consequence: Loss of innovation speed and international competitiveness Empirical Evidence: An annual survey carried out by aws demonstrates that Access to Finance for companies in general, but especially for innovative and growth-oriented companies gets more difficult in Austria.

14 Public Guarantees by aws in Austria The evidence of high efficiency of and growing demand for guarantees, leads to the fact that in Austria public guarantee schemes are enlarged: Guarantee volume 2017: ~50% increase compared to 2016 (~ EUR 300 Mio. p.a.) Guarantee beneficiaries 2017: ~ 25% increase compared to 2016 (~ 1200) aws Guarantees - facts: Most guarantees of aws (~98%) are issued with government support (=EU State Aid) Strong EU Cooperation: ~70% of the annual aws guarantee portfolio are counterguaranteed by EU. Target group: High-tech startups, ínnovation and growth projects in SMEs/mid-caps. Application Procedure: 1. loan application 2. guarantee application Company BANK 4. loan payment 4. verification of realization 3. provision of guarantee 14

15 Guarantees for High-Tech Startups aws Double Equity 20% Bank risk Bank Loan 100% 80% Public Guarantee Startup Equity Investment 100% Special guarantee product for high-tech startups loan guarantees up to the amount of actual equity investments (max. EUR 2,0 Mio. guarantee volume) Target Group: Young (innovative) startups not older than 6 years. Adequate management team skills proof of concept must be shown Specific Terms: Term period: up to 10 years Grace Period: up to 3 years No collateral required Credit Default: 8.7 % 1-y-average loss ratio Actual Portion of credit default payment: ~ 62% Indemnity by government ~ 20% Guarantee Fee by company ~ 18% Collateral and EU Counter Guarantees

16 Guarantees for Growth + Innovation Projects 20% Bank risk Bank Loan SMEs, mid-caps up to 80% Public Guarantee Loan guarantees up to 80 % guarantee rate for bank loans (up to EUR 25 Mio. guarantee volume) for high-level growth projects. Target Group: Projects: SMEs and Midcaps (acc. to EU Def.) Objective: Innovation and R&D, New markets, Internationalization, Take overs material and immaterial investments Specific Terms: Fixed repayment plan Average term period: 7 years Grace Period: 2 years Credit Default: 3.0 % 1-y average loss ratio Actual Portion of credit default payment: ~ 51% Indemnity by government ~ 22% Guarantee Fee by company ~ 27% Collateral and EU Counter Guarantees

17 Guarantees for innovative immaterial investment projects 50% or 20% Bank risk Bank Loan SME 50% or 80% Public Guarantee Loan guarantees up to: 80 % guarantee up to EUR 2 Mio. 50 % guarantee up to EUR 25 Mio. Target Group: Projects: Innovative Companies Objective: New business models, which rely exclusively on immaterial investments Specific Terms: Non-fixed repayment plan Term period: max. 5 years No collateral and fixed assets required Credit Default : 3.0 % 1-y average loss ratio Actual Portion of credit default payment: ~ 51% Indemnity by government ~ 22% Guarantee Fee by company ~ 27% Collateral and EU Counter Guarantees

18 Project assessment by aws In addition to usual criteria (credit rating, annual accounts, corporate planning), aws takes especially into account the Input- Output - Relation for project selection. Input=risk&management costs and Output=Economic Impact For measuring the economic impact of every business project, aws established a scoring-system. On average aws covers 1/3 of project risk, if the economic impact of projects is at higher level, risk-appetite of aws can be increased.

19 Project assessment by aws Scoring system Innovation Growth and Employment Ecology Diversity Score solid high very high excellent maximal Assessment criteria vary for different aws instruments

20 Summary and Perspectives Demand for Guarantee Systems will increase: Megatrends such as the increased speed of innovation leads to higher investment activities and international competition. At the same time, survey shows that Access to Finance for companies in general, but especially for innovative and growthoriented companies gets more difficult. In times of budget restrictions, guarantee instruments are the method of choice (also from a customer s perspective) to address the rising demand for innovation and growth financing. We have to convince, that impact has to be increased ( data is our new gold ) Professional assessment tools (Input:Output Relation) are key to increase the quality of project assessment in order to address projects with high economic impact. 20

21 Bernhard Sagmeister CEO T E b.sagmeister@aws.at Austria Wirtschaftsservice Gesellschaft mbh Walcherstraße 11A 1020 Wien Titel des Vortrags Name des Vortragenden Seite 21