Julian Rose stresses the importance of the EIB’s support for European lessors during 2014 – and why UK asset lenders seem under-represented

Among at least a dozen relevant EIB loan announcements in 2014 were:

• €150 million to support the recovery of SME investment through DLL in Netherlands and the rest of Europe;

• €750 million for projects in France to mitigate the effects of climate change though a number of finance companies including Crédit Agricole Leasing & Factoring;

• In Portugal, support for microenterprises through Millennium BCP (Banco Comercial Português), with the launch of a micro leasing product, the first of its kind in Portugal and Europe;

• €80 million to finance small and medium-sized Romanian companies through Unicredit and BCR Leasing; and

• £100 million to support SME investments in the UK through SG Equipment Finance.  

Following several years of close working with Leaseurope, the EIB Group now has a strong commitment to working with leasing companies. Over £1 billion of new support through leasing has been put in place during 2014 with 12 announcements of new projects.

The EIB loans provide liquidity where it is constrained but they can also deliver low cost funding. The EIB’s excellent credit rating, backed by the European Union, allows it to borrow at advantageous rates, meaning it can offer good terms when lending through intermediary partners such as leasing companies. The loan rate varies between projects reflecting the credit rating of the counterparty.

EIB loans are limited to 50% of onward lending to businesses. There’s no requirement for the financial institution to match the rate of the EIB loan but the benefit of the low rate has to be passed through to customers. Minimum participation size is typically around €30 million of EIB support, hence €60 million of new lending in total. There are some constraints on the participation of captive finance companies but this may not rule out all cases.

The EIB issued a new invitation to financial intermediaries to apply for EU finance for SMEs under the EU’s Competitiveness of Enterprises and SMEs Programmes (COSME). The invitation remains open and it’s clear that the EIB is keen to have more UK projects.

The EIB Group’s work isn’t limited to its loans programme for small businesses. It can also provide loan guarantees which can work at a portfolio rather than individual agreement level, and purchase asset backed securities (indeed the EIF is supporting the British Business Bank’s ENABLE programme).

There are many specialist programmes to support the Bank’s priorities that include climate action and innovation and skills, as well as access to finance for smaller businesses.

The UK’s apparent underrepresentation in the EIB schemes may be accounted for by a number of factors. Bank-owned lessors might well not have a pressing need for liquidity or low cost funding, but they might still wish to consider loan guarantee options. Many non-banks might be too small to meet the minimum scale but several firms might collaborate in a proposal, possibly together with a public body or a sector trade association.

With around 30 projects involving leasing companies already announced in the past two years, it seems likely that more funders both in the UK and elsewhere in Europe will be considering whether any EIB schemes could help support their customers in 2015. 

Julian Rose is the founder of Asset Finance Policy Ltd, previously he was Head of Asset Finance at the UK Finance & Leasing Association. www.assetfinancepolicy.co.uk