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New guidelines for Member states to grand aid to companies

The European Commission has adopted new guidelines that alter the conditions under which a Member States can grant aid to facilitate access to financial resources to small and medium sized enterprises and companies with medium capitalization (midcaps). These companies, mostly growing and innovative, are having difficulties accessing capital, irrespective of the quality of work or business potential. Especially SMEs mainly rely on traditional bank loans, which are limited by banks’ refinancing capacity, risk appetite and capital adequacy. All this is further exacerbated by the banking crisis. The Commission estimates that a third of SMEs did not have access to the finances they need, resulting in a so-called funding gap.

The new guidelines should, according to Commissions’ Vice-President in charge of competition policy, Joaquín Almunia, »help bridge this funding gap by encouraging Member States to put in place well-designed aid measures. Such measures can give private investors the right incentives to invest more into SMEs and midcaps, enhancing their capacity to grow and create jobs«.

The new guidelines greatly expand the possibilities for Member States for grand aid, since aid may now be given to SMEs, small midcaps and innovative midcaps. The limit, by which a Member State can grand financial aid to a company without prior notification to the Commission, is raised from the current 1.5 million per year per company, to € 15 million per company. The number of financial instruments a member state can use to aid a company is also extended and includes equity, quasi-equity, loans and guarantees, which should better reflect market practices. The new guidelines also include a mandatory participation of private investors tailored to the development stage and riskiness of the company, which is aimed to ensure that State aid measures encourage rather than replace private investment.

Source:

http://europa.eu/rapid/press-release_IP-14-21_en.htm

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