Page 39 - Annual Report 2010

37

Guarantees & Credit Enhancement

Caixa Capital Micro

“The support of EIF is an endorsement of our

innovative

approach to financing pre-seed

SMEs. It will help the development of numerous young and innovative micro-companies in Spain which would not have otherwise had access to finance

.”

Carlos Trenchs CEO, Caixa Capital Risc

Introduction

One window of the guarantee facility available under CIP aims at enhancing mezzanine financing to SMEs with high growth potential who have difficulties in accessing sources of finance because they are too young in their development to raise equity finance.

This facility was the perfect opportunity for Caixa Capi-tal Risc, “la Caixa” Group’s venture capital management company, to offer a convertible loan product tailor-made for early stage micro-enterprises, with a view to bridging a financing gap.

Strengthening the support given to entrepreneurs, EIF and Caixa Capital Micro, the newly created vehicle, signed a guarantee agreement under CIP aiming to help provide these convertible loans for pre-seed and start-up compa-nies in Spain.

Innovative young enterprises and newly created micro-enterprises can now have access to up to EUR 8m of convertible loans, guaranteed under the CIP programme.

Via these participative loans convertible to capital, EUR 50 000 are invested into the project's own funds, the project itself being the sole guarantee for the in-vestment. In contrast to other types of finance, the com-

pany is not assessed in the start-up phase and the total amount is paid upon signing the contract.

The loans can be converted to equity stakes if the bor-rower company manages to raise a venture capital fund-ing round within three years of receiving the loan.

Added value

This transaction will allow Caixa Capital Micro to make investments in over 150 newly created, innovative micro-companies based in Spain over the course of a three year period and, to date, eight companies have already benefited from the project. These include for example, a university spin-off active in the biotechnology sector and focusing on development of products aiming to improve food safety and an IT company developing software solu-tions for business performance optimisation.

The signature with Caixa Capital Micro exemplifies how EIF, through CIP, can provide specific tailor-made solu-tions to meet market and SME needs.

With the risk sharing provided by the CIP guarantee, many promising companies will be able to access finance and develop their activities, living up to their high growth poten-tial. It underlines EIF‘s key role as promoter of innovation, entrepreneurship and credit enhancement for SMEs.

Bridging financing gaps for start-ups