EIF signs two guarantee agreements with Budapest Bank and Budapest Leasing providing support for Hungarian SMEs

European Investment Fund (EIF) Chief Executive, Mr Richard Pelly and the Chairman and Chief Executive of Budapest Bank, Mr Sean Morrissey, today signed two guarantee agreements in Budapest to support Small and Medium-sized Enterprises (SMEs) in Hungary under the EU Competitiveness and Innovation Programme (CIP).

The EUR 94 million guarantee contract for Budapest Leasing and EUR 108 million guarantee agreement for loans made by Budapest Bank to SMEs will allow Hungarian entrepreneurs to access finance and equipment to start up, develop and grow their businesses.

Commenting on the deals, Richard Pelly said: “We are delighted to be signing our first agreements with this leading SME bank in Hungary. With these signatures, we aim to address the difficulties which SMEs are currently facing in the Hungarian market and to contribute to the economic recovery by stimulating growth.

Considering that every EUR 1 of first loss guarantee support we are allocating today will support EUR 17 of SME loans, I am confident of achieving a broad and positive impact on the Hungarian market.”

“Budapest Bank commercial business strategy focuses on comprehensively serving the banking and financial needs of Small and Medium-sized Enterprises. Budapest Bank Group has formulated growth plans for this year, and our commercial and leasing businesses - serving the SME sector that has already started to grow - play a crucial role in them. Signing these agreements with EIF is an important step in realizing our plans,” said Sean Morrissey.

“We continue working with our SME clients as long-term partners, and support them with our services, as well as our expertise. Besides traditional solutions, we provide new, innovative products, either in joint operations like institutions as the EIF , by participating in subsidy programs or developing own, unique solutions. Due to the institutional guarantee, available through our agreements with EIF, the range of companies with access to financing and the financing line available will grow. As a result we expect considerable expansion of loan disbursement” pointed out Viktor Tóth, Head of Budapest Bank Business, the bank’s commercial business.

With this agreement, Budapest Bank loans disbursed to SMEs will automatically include a free of charge institutional guarantee of EIF, while the length of underwriting and the required administration does not change. The guarantee applies to a 3-year reception period; the minimum duration is 12 months and is applicable for disbursements in HUF and CHF as well.

In certain cases, the security required for an SME loan can even be halved, whereas in case of financial leasing self-funding requirement can significantly decrease; it can even be 50% less. As a result, companies with less collateral and self-effort will become financeable, thus SMEs in need of capital to finance the launch of investments or to start growing their businesses can count on a significant expansion of resources.

There has been a high demand for CIP funding so far: To date, half of the total CIP funding available for the seven year programming period has already been utilised. With today’s signatures, there are now 30 intermediaries in 15 countries participating in CIP and further demand is quite strong.

More than 120,000 loans have been provided to businesses across Europe so far, with the majority of these loans helping entrepreneurs to start new businesses. Over 100,000 SMEs have benefited from CIP support to date and over 60% have been able to carry out product and process innovation thanks to this funding.

EIF Chief Executive, Richard Pelly, who was awarded a medal honouring his achievements regarding SME support in Hungary already in the 1990s, has made a particular effort to lead the EIF’s expansion through CIP into new markets in Central and Eastern Europe. 

About the EIF

EIF's central mission is to support Europe's small and medium-sized businesses (SMEs) by helping them to access finance.  EIF primarily designs and develops venture capital and guarantees 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. The EIF total net commitments to venture capital and private equity funds amounted to over EUR 5.4bn at end 2010. With investments in over 300 funds, the EIF is the leading player in European venture capital due to the scale and the scope of its investments, especially in the high-tech and early-stage segments. The EIF commitment in guarantees totalled over EUR 14.7bn in close to 160 operations at end 2010, positioning it as a major European SME loan guarantees actor and a leading micro-finance guarantor. 

About CIP

The Competitiveness and Innovation Framework Programme (CIP), which spans from 2007 to 2013, has been put in place to boost European productivity, innovation capacity and sustainable growth, whilst simultaneously addressing complementary environmental concerns.

Within the framework of the CIP, the European Investment Fund (EIF) has been allocated EUR 1.1bn to be split between venture capital – with the High Growth and Innovative SME Facility (GIF) - and guarantees – with the SME Guarantee Facility (SMEG).

Under the SMEG, financial institutions are encouraged to enhance access to finance for SMEs.  The facility offers an excellent tool to allocate additional financing volumes for those SMEs that would not otherwise have access to resources and financial engineering instruments because of the increased lending risk entailed.  As such, the SMEG complements and broadens EIF’s own product offering.

The EU CIP SMEG Facility gives the EIF the opportunity to support sustainable job creation and entrepreneurship in European SMEs.

About Budapest Bank Group (a GE Capital Company)

Budapest Bank was established in 1987 as one of the first commercial banks when the two-tier banking system was created in Hungary. Since 1995, GE (General Electric Company) as owner provides solid background for the bank. Budapest Bank offers a full range of financial and banking services for consumers and small- and middle-sized businesses. The Hungarian Financial Supervisory Authority has ranked Budapest amongst the eight large banks in Hungary. Amongst its various acknowledgements Budapest Bank was selected The Bank of the Year 2010 Hungary by the Financial Times’ The Banker magazine.

Budapest Bank Group includes the following key, fully owned affiliates: Budapest Fund Management, Budapest Auto Finance and Budapest Leasing. Budapest Leasing established in 1992, is one of the country's leading asset leasing companies. It provides operative and financial leasing solutions for obtaining production equipment, machinery and commercial vehicles. 

Press contacts: 

For further information on EIF, please contact David Yormesor, d.yormesor@eif.org

For further information on Budapest Bank and Budapest Leasing, please contact CS.TÓTH, Marianna, Head of Public Relations, marianna.cs.toth@ge.com, or visit http://www.budapestbank.hu/info/budapestbank/index_eng.php