The credit rating,
necessary to Access
public funding
SME credit ratings have become an eligibility criterion for accessing public funding. Given that institutions do not have sufficient resources to immediately assess the suitability of all SMEs applying for funding after the pandemic, SME credit ratings issued by ESMA-supervised rating agencies such as INBONIS are used as essential credit standards for the granting of public loans, as they speed up processing and make the whole process transparent and objective.
Submitting a credit rating that demonstrates the viability of one’s own company, as required by the European Union, is already part of the process of obtaining public funding. The following table details some examples where European, national and regional public bodies are using credit rating agencies to assess SMEs applying for support and ensure that public resources and guarantees go to truly viable companies, capable of repaying the amounts provided.
Public funds
that require a credit
rating in Spain
Support Fund for Industrial
Investment (FAIIP)
The FAIIP, managed by SEPIDES, provides returnable financial support to promote industrial investments and is endowed with 600 million euros by 2021. In order to access this fund, companies are required to have a minimum credit rating of B. The contribution is made through ordinary loans, equity loans and/or equity participations.
The projects eligible for FAIIP financing are:
- Creation of industrial establishments
- Relocation of industrial establishments
- Upgrades and/or modifications to production and process lines
Fund for the Recapitalisation
of Companies Affected by COVID-19
The Recapitalization Fund managed by COFIDES, endowed with €1 billion, is designed as a temporary public financial support vehicle to restore the solvency of companies with a turnover of between 10 and 400 million euros which, although viable in the medium/long term, have been hit by the pandemic and are unable to obtain financing through other channels. As these are companies in difficulty, the minimum rating required is CC. The contribution is made by means of ordinary loans, equity loans and/or equity participations.
Subsidised Lines of the Valencian
Institute Of Finance
- IVF Subsidized Financing Line – Invierte Gran Empresa Industrial: Offers loans of up to 5 million with direct aid of up to 10% for the financial year 2022 for a total amount of 20,000,000 euros. To access this line of financing, a credit rating of B is required.
- IVF-AFIN Invierte Gran Empresa Turística subsidized line: Loans for companies in the tourism sector that include a non-refundable tranche of up to 20%. To access this line of financing, a credit rating of B is required.
- IVF Invierte Pyme React-EU ERDF subsidized line: Operations co-financed with European funds that incorporate direct aid of up to 20%. In this case, a positive credit rating facilitates access to financing.
Recovery programs
that require a credit rating
in France
The second part of the Recovery Plan, which includes the Prêts Participatifs Relance and the Obligations Relance, requires a minimum corporate credit rating of BB-, issued by a rating agency, or an equivalent Banque de France rating of 5+.
Equity loans
Equity loans are intended for SMEs and ETIs with a turnover of more than €2m. They are intended to finance long-term investments in companies (external or organic growth) without consuming their cash flow. Repayable over a period of 8 years, they have the particularity of having a minimum amortization allowance of 4 years on the capital. They are distributed by the banks, which transfer 90% of the debt to an umbrella fund and benefit from a 30% state guarantee. These characteristics allow them to be considered as quasi-equity by the Monetary and Financial Code and positively improve all the ratings with which companies are confronted, thus reassuring their financial partners.
Obligations Relance
Aimed at SMEs and SMIs with sales of more than €16 million, €1.7 billion of private financing are mobilized to finance the long-term development of companies without changing their capital. As with the PPRs, the maturity is 8 years, with the main advantage of being repayable in full. Thanks to the state guarantee, these bonds have a much lower cost than similar products such as mezzanine debt. The relance bonds are distributed by 7 groups of management companies, covering all the territories.
European funding
that requires
a credit rating
InnovFin SME
InnovFin SME Guarantee provides financial intermediaries with guarantees and counter-guarantees on debt financing in order to improve access to finance for innovative small and medium-sized enterprises and mid-caps (up to 499 employees). This facility is implemented by the European Investment Fund, and companies wishing to benefit from this financing require a B credit rating.
Access to Funds Next Generation EU
The post-pandemic economic recovery and transformation programs from the Next Generation EU funds, which involve the mobilization of an unprecedented amount of European funds, must be distributed diligently and urgently by public administrations.
Providing a positive credit rating can mean the difference between getting public funding and not getting it.
