Spain is the first EU country to sign up to the ‘SME initiative’ offering €3.2 billion worth of cheaper loans to Small and Medium sized Enterprises (SMEs). Companies with less than 250 employees will be able to take advantage of this new loan in the coming few months – likely to be available by Summer 2015.
EU’s New Investment Plan for Europe
As part of the EU’s New Investment Plan for Europe, The Spanish regional governments will reallocate 800 million euros available from the European Structural and Investment Funds (ESIF) estimated to quadruple to €3.2 billion over the next three years.
Other EU member states are encouraged to follow Spain’s signing to this initiative and other innovative financial instruments, in favour of more traditional loans and grants.
Supporting SMEs in Spain and Europe
Spanish private sector employment is made up of 74% SMEs (EU average is 66%), and for all new jobs created in Spain, 85% have been from smaller companies indicating the importance of SMEs in Spain.
Reduced Risk for banks
Different from traditional grants, the EU initiative provides guarantees (up to 80% according to Hacienda) to banks and financial institutions to reduce risks linked to new projects. Any defaults will be part-covered by various partners : the Spanish contribution from their ESIF, then by the EU budget, then by the European Investment Bank (EIB) Group.
The SME Initiative thus hopes to create a stronger multiplier effect than traditional credits allowing investment and growth through cheaper and increased lending as well as an estimated 6,400 new jobs.
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