The European Investment Fund (EIF) and Arion Bank have signed the first InnovFin SME Guarantee agreement for innovative Icelandic SMEs and small mid-caps.
The InnovFin agreement will enable Arion Bank to provide loans to innovative companies in Iceland over the next two years with the support of a guarantee provided by EIF and backed under Horizon 2020, the EU Framework Programme for Research and Innovation. The EU support for innovative Icelandic companies is expected to generate a portfolio of EUR 107 million of bank loans. The guarantee provided by EIF under the agreement covers 50% of the loan amount provided by Arion Bank.
The aim of the InnovFin SME Guarantee is to encourage banks or other financial institutions to lend to SMEs and small mid-caps (up to 499 employees) in need of investment and/or operating capital to finance research, development and innovation activities, with EU financial support. Financial institutions are being selected by EIF following a call for expression of interest for financial intermediaries across Europe.
The European Investment Fund (EIF) is part of the European Investment Bank group. Its central mission is to support Europe's micro, small and medium-sized businesses (SMEs) by helping them to access finance. EIF designs and develops venture and growth capital, guarantees and microfinance instruments which specifically target this market segment. In this role, EIF fosters EU objectives in support of innovation, research and development, entrepreneurship, growth, and employment.
Arion Bank is a universal relationship bank with operations in Iceland. Arion Bank's main business sectors are retail banking, corporate banking, asset management and investment banking, and the Bank has a strong market position in all areas. In addition, Arion Bank has key strategic subsidiaries in the fields of payment solutions, fund management and insurance. Arion Bank has a nationwide branch network – 25 branches – of which 7 are in the Greater Reykjavik area and the loan book is 94% domestic. In recent years, Arion Bank has played an active role in developing the innovation environment in Iceland by investing in one of Iceland's largest VC funds and its start-up accelerators Startup Reykjavik and Startup Energy Reykjavik, which is co-owned with some of Iceland's main energy companies.
The InnovFin SME Guarantee Facility provides guarantees and counter-guarantees on debt financing of between EUR 25,000 and EUR 7.5 million in order to improve access to loan finance for innovative SMEs and small mid-caps (up to 499 employees). The facility is managed by EIF, and is rolled out through financial intermediaries – banks and other financial institutions – in EU Member States and Associated Countries. Under this facility, financial intermediaries are guaranteed by EIF against a proportion of their losses incurred on the debt financing covered under the facility.
