A total of €99 million of EU structural funds were used to improve the access of SMEs to capital from 2014 to 2020.
€49.5 million of this was used for loans and guarantees through the Estonian Business and Innovation Agency. €49.5 million was used to create EstFund, the fund of funds aimed at supporting the equity investments of SMEs, which is managed by the European Investment Fund (EIF).
According to Minister of Finance Jürgen Ligi, it is in the interest of the state that small and medium-sized enterprises receive financing on better terms than the market can offer. “Studies have shown that start-ups or companies located further away from the centres find it difficult to get loans from banks because of the risks associated with them,” he said. “This is why the state has supported the growth of such companies through loans, guarantees and credits over the years.”
All of the funds earmarked for SMEs were covered by contracts in 2014–2020, and it is estimated that over €10 million will be returned to the state budget from these loans and guarantees in the coming years.
Minister of Economic Affairs and Industry Erkki Keldo confirmed that both financial instruments, i.e. the loans and guarantees as well as the EstFund, had served their purpose, but that as the problem persists, all the funds recovered must be used to support companies again.
“Small and medium-sized companies are still facing difficulties in raising capital, which is why the support of the state to provide them with favourable financing opportunities and financial risk-sharing remains necessary,” said Keldo. “The aim is to support the growth of our companies, foster innovation and contribute to the overall health of the economy.”
The Minister also highlighted the impact assessment of the business and innovation grant carried out by Civitta. This indicated that the increase in the value added of companies that received the grant or a loan was ca 40 percent. We are ranked 4th in terms of growth compared to other Member States.
“This shows that the support of the state contributes very directly to the increase in the competitiveness of our companies,” said Keldo. “EstFund has also contributed to the development of our venture capital market, as confirmed by the recent State of European Tech report. Estonia has become the world leader in venture capital financing, as it has accounted for 1.17 per cent of GDP over the past decade.”
According to the decision, the funds recovered from EIS guarantees and loans will be channelled to new guarantees and loans over the next 8 years and, at the end of the EstFund, the recovered funds will be channelled to the national fund management company SmartCap for the development of the Estonian capital market. As a result of the decision, the financing agreements of both the EIF and the EIS will be renewed.
691 companies were supported, 962 contracts were concluded and €178 million was made available (the leverage effect of guarantees) in 2014–2020 within the scope of the loans and guarantees of the EIS. Three sub-funds were established within the scope of the EstFund of the EIF and the total amount of the investments of the funds was €61.53 million: 1) a venture capital fund managed by the United Angels Co-Investment Fund 2) a growth capital fund managed by the Tera Ventures Fund and 3) a business angels co-investment fund Equity United.
The agreement to channel the recovered funds of the EU programming period 2014–2020 granted as loans and guarantees to companies back into the financial instruments of SMEs was made at the economic cabinet meeting held today.
Gallery of the meeting: https://www.flickr.com/photos/stenbockimaja/albums/72177720322371317
