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Project Presentation

Project Presentation. Andrea Maccanico. Training Capacity Building CEI Know How Exchange Program. SMEs’ weakness IFIs’ role What we can achieve . First step, April 2011, Trieste Second step, March – May 2012, Tirana, Belgrade, Kiev Third Step, TA & A2F. Meet our friends

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Project Presentation

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  1. Project Presentation Andrea Maccanico

  2. Training • Capacity Building • CEI Know How Exchange Program

  3. SMEs’ weakness • IFIs’ role • What we can achieve

  4. First step, April 2011, Trieste • Second step, March – May 2012, Tirana, Belgrade, Kiev • Third Step, TA & A2F

  5. Meet our friends IFIs and related Funds and Commercial Banks • Understand them Products, Services, Information, Opportunities and TA Programs available for SMEs • Get ready for the next step How to select qualified SMEs and how to approach IFIs

  6. Listen carefully • Do not hesitate to ask for clarifications • Always bear in mind our target • Never underestimate Networking

  7. EBRD & IFC Support for SMEs • Access to Finance • TA Programs • Trade Facilitation Services

  8. How to apply for financing (IFC/EBRD) • Requirements & Funding Criteria • Project Structure • Types of funding available • Project Cycle

  9. Information required for Financing (IFC/EBRD) • Investment Proposals • Project Information, Market & Sales, Feasibility Information • Financial, Environmental & Regulatory Information

  10. IFI approach: Who, Where, When • How to edit a project presentation • Selecting viable projects and qualified SMEs

  11. EBRD funding criteria To be eligible for EBRD funding, the project must: ►be located in an EBRD country of operations ►have strong commercial prospects ►involve significant equity contributions in-cash or in-kind from the project sponsor ►benefit the local economy and help develop the private sector ►satisfy banking and environmental

  12. Project structure • The Bank tailors solutions to client and project needs and to the specific situation of the country, region and sector. It assigns a dedicated team of specialists with expertise in project finance, the region and sector, law and environment.

  13. Project structure • The EBRD funds up to 35% of the total project cost for a greenfield project • or 35% of the long-term capitalisation of an established company

  14. Project structure • Additional funding by sponsors and other co-financiers is required. • The EBRD may identify additional resources through its syndications programme

  15. Project structure • Typical private sector projects are based on at least one-third equity investment • Significant equity contributions are required from the sponsors. Sponsors should have a majority shareholding or adequate operational control. In-kind equity contributions are accepted

  16. EBRD does not finance • Defence-related activities • Tobacco industry • Substances banned by international law • Stand-alone gambling facilities.

  17. Types of funding available • The principal forms of direct financing that may be provided by the EBRD are loans, equity and guarantees.

  18. Types of funding available Loans • Loans are tailored to meet the particular requirements of a project. The credit risk may be taken entirely by the Bank or partly syndicated to the market.

  19. Loans for smaller projects • Projects that are too small to be financed directly by the EBRD can still benefit from its investments and support.

  20. The EBRD supports local commercial banks, which in turn provide loans to SMEs. • Tools: credit lines, bank-to-bank loans, standby credit facilities and equity investments in the local banks. • SMEs should contact local banks directly to access finance and check local requirements and investment limits.

  21. Small and medium-sized loan financing • available from several Commercial Banks with which the EBRD has signed a loan or standby facility or in which the EBRD has made an equity participation. Loans to micro and small businesses • available from Banks across the EBRD region.

  22. MSE projects at the EBRD • EBRD’s Micro and Small Enterprise (MSE) lending programmes are designed to provide individual entrepreneurs and micro and small firms with access to finance that has traditionally not been made available to them

  23. MSE projects at the EBRD • EBRD’s MSE projects have a strong regional focus, supporting economic development and social stability in the countries of operation. • EBRD co-operates with existing commercial banks to build capacity for MSE lending operations and also sets up “greenfield” specialised microfinance banks.

  24. MSE projects at the EBRD • EBRD works with existing banks to develop staff and implement lending procedures tailored to the needs and possibilities of micro and small enterprises. • If there is an insufficient number of suitable partner banks, EBRD, together with partner institutions, establishes a new microfinance institution.

  25. MSE projects at the EBRD - Applying for a Loan • Loans are provided on a purely commercial basis. • To be considered for financing, businesses must have adequate cash-flow, market demand for their products, and sound management. • No loan is too small and collateral is a secondary consideration after the business has been analysed.

  26. MSE projects at the EBRD - Applying for a Loan Businesses looking to obtain loans through local banks should provide: • Sound business plans for establishing or expanding a company’s business. • Solid management with a proven track record.

  27. MSE projects at the EBRD - Applying for a Loan Businesses looking to obtain loans through local banks should provide: • Products that are competitive in the marketplace. • Information on owners/partners.

  28. MSE projects at the EBRD - Applying for a Loan Businesses looking to obtain loans through local banks should provide: • Financial history. • Security in the form of pledges, mortgages, etc.

  29. MSE projects at the EBRD - Applying for a Loan • Funds provided must be used in strict accordance with the aims stated in the original business plan. • In line with the EBRD’s mandate, banks ensure that all proposals pay due regard to environmental issues.

  30. MSE projects at the EBRD - Applying for a Loan Businesses looking to obtain loans through local banks should provide: • equity contributions, either in existing or new business, of around 35% are often required.

  31. MSE projects at the EBRD - Applying for a Loan Restriction • Funding cannot be provided to majority state-owned companies or for government-guaranteed projects.

  32. MSE projects at the EBRD - Applying for a Loan • Micro credits of US$ 50 to US$ 10,000, are generally available for a maturity of up to 12 months initially. • As companies build up a credit record, they become eligible for larger loans with longer tenors for a variety of purposes (trade, services and investment).

  33. MSE projects at the EBRD - Applying for a Loan • The firm’s debt capacity is analysed before loans are extended. • Individual entrepreneurs and firms may apply for micro credits.

  34. MSE projects at the EBRD - Applying for a Loan • Small loans are usually available in amounts of up to US$ 200,000 (higher in exceptional cases), with maturities of up to three years or exceptionally up to five years. • These loans, which may be for working capital and/or fixed assets, are provided to companies involved in trade, production or service industries.

  35. MSE projects at the EBRD - Applying for a Loan Potential borrowers • must have sufficient cash-flow from the project to repay the loan • exhibit good management skills • exhibit good business planning

  36. Types of funding available Equity • EBRD invest equity ranging from €2 million - €100 million in industry, infrastructure, and the financial sector.

  37. Types of funding available – Equity • EBRD uses innovative approaches and instruments and expects an appropriate return on investment. • EBRD only take minority positions and will have a clear exit strategy.

  38. Equity and quasi-equity instruments • Ordinary shares. • Preference shares. • Subordinated loans. • Debentures. • Income notes.

  39. Equity and quasi-equity instruments • Redeemable preference shares. • Listed and unlisted. • Underwriting of share issues by public or privately-owned enterprises. • Financing the transfer of shares in existing enterprises, only used in cases of privatisation where such a transfer improve efficiency. • Other forms.

  40. EBRD also participates in investment funds, which in turn invest in medium-sized companies that need to expand their business. • Equity funds are focused on a specific region, country or industry sector, have local presences and are run by professional venture capitalists. • Their main investment criteria are consistent with the EBRD's overall investment policy.

  41. Terms and conditions • The terms and conditions of EBRD investment depend on risks and prospective returns associated with each project. • They are also affected by the financial/ownership structure of the project company. • As the Bank has limited capital resources, it does not take long-term equity investments or controlling interests. Nor does it assume direct responsibility for managing the project company.

  42. Equity funds for smaller enterprises • To give entrepreneurs and small firms greater access to finance, the EBRD also supports financial intermediaries, such as local commercial banks, micro business banks, equity funds and leasing facilities.

  43. Equity financing • Equity finance is available from EBRD-supported private equity funds, donor-supported equity funds and directly from the EBRD. • Equity funds support all kinds of investments including business start-ups, expansion and acquisitions

  44. Equity financing • Some funds specialise in financing companies in need of restructuring, in distressed situations or mezzanine capital for a later stage. • Fund investments generally have a higher prospective return and require longer-term risk capital than standard EBRD projects. • Investment criteria are consistent with EBRD policy, but investment decisions are made by fund managers.

  45. EBRD-supported equity fundsContact fund managers to enquire about finance, to check specific fund requirements and investment limits. These links provide information about each fund along with contact details: http://www.ebrd.com/downloads/funding/micro_business_banks.pdf http://www.ebrd.com/downloads/funding/regional_fund_managers.pdf

  46. EBRD direct investment ETC/DIF • Equity finance up to €6 million for businesses lead by experienced local entrepreneurs may be available directly from the EBRD through the EBRD Direct Investment Facility. • The EBRD's Direct Investment Facility (DIF) demonstrates the viability of smaller businesses based in countries and regions at an early stage in the transition (ETC) to the market economy.

  47. EBRD direct investment Equity and limited debt financing may be available to attractive private sector businesses, especially those led by motivated and experienced local entrepreneurs. Investments may be in existing enterprises proposing to expand their businesses or product lines, or start-ups with an unusually strong business plan and sponsors with relevant business experience. Sponsors may contribute capital at least partially in kind, but are expected to make reasonable cash contributions as well.

  48. EBRD direct investment Through DIF, the EBRD can consider most opportunities to provide new equity capital to: • Fast growing companies that cannot expand with debt finance alone • Locally owned companies whose balance sheets require strengthening in order to enable them to take on additional debt • Companies led by motivated and experienced local entrepreneurs

  49. Investment terms (DIF) • Investment range generally between €500,000 and €6 million • Equity share target range is 25-30% but up to 49% • Preferred investment span is 3-5 years, but up to 7 years is possible • Flexible financing package including equity and debt (usually subordinated) • Clear prospect of exit through joint sale with other shareholders to third party or sale back to other shareholders

  50. Project requirements • Significant growth potential • Experienced sponsors and management with a proven track record • Strong competitive prospects in relevant local/regional markets • Sound financial basis and well-structured financing plans • Well-developed and specific business plans • Evidence of capacity to implement business plans • Realistic entry valuation • Willingness to share corporate governance including EBRD Board membership and role for EBRD in key strategic decisions • Realistic exit strategy that will provide a performance based return for the EBRD • Prospective investment returns which are appropriate to equity and commercial risk

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