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How Does The European Investment Fund Help SMEs?

Any company, even if it specializes in marketing or PR, needs investment at a certain stage of its development. EIF is the European Investment Fund (EIF) which was set up in 1994. The goal of the EIB is to have a positive impact on the future of Europe (both its social cohesion and integrity) by encouraging sound investment opportunities.

Established in 1958 under the terms of the Treaty of Rome, the European Investment Bank (EIB) is a non-profit lending institution whose shareholders are the member states of the EU.  Their relative power base is determined by their relative GDP when they join the EU.

One important arm of the EIB is the European Investment Fund (EIF) which was set up in 1994.  Although the EIB is its majority shareholder, 29% of the EIF is held by the European Commission and 9% is in the hands of privately-owned EU financial institutions.

Available Funding for SMEs from the EIF

It is acknowledged that small- and medium-sized enterprises make an important contribution to the economic prosperity of a country from providing employment opportunities to advancing innovative research and development.

It is important to remember that the EIF doesn't finance investment directly, but it plays an intermediary role. As a result, the funding available depends on the private institutions in partnership with the EIF, and this varies from country to country.

Funding Opportunities in the UK

For the UK, there are 130 separate schemes, funded by privately-owned financial institutions, which offer guarantor loans, micro-loans and/or venture capital. Generally, would-be investors are looking for companies which foster entrepreneurship and innovative ideas for goods and services.

The eligibility criteria for this European fund vary from scheme to scheme. Financial institutions might stipulate that:

  • the SME is located in a specific region of the UK,
  • is at a certain stage of development. For example, a start-up or an established company which has reached a set annual turnover,
  • is working in a certain sector or field,
  • the size of the loan available also varies from scheme to scheme – from thousands to hundreds of thousands of pounds.

Applying for Funding

Like any loan application, would-be borrowers must first do their research to make sure that they – and their business – meet the criteria for the funding they're interested in. They would have to draw up a business plan to prove that they have the necessary skills, experience and vision.  This would illustrate how the investment would be used to improve and/or expand their business and would increase their chances of having their loan application approved.

Such a loan can be a long-term financial commitment, and business owners must be confident that they'll be able to pay back the sum borrowed without putting their business at risk by over-stretching themselves.  When the difficulty is a temporary cash flow problem because of seasonal variations in sales and/or delays in customer payments, this type of financing isn't the best solution. In such cases, it's often much better to apply for short term loans in the UK.

Applications to a direct lender can be made online in a matter of minutes, and their approval is similarly fast.

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