A new partnership between the European Investment Bank (EIB), Northstar Europe and Office du Ducroire Luxembourg (ODL) will result in the very first EIB facility to provide buyer credit financing for European small and medium enterprises (SMEs) and Midcap exports.

The €50 million facility agreement, announced last Friday, will see the Bank join forces with public private partnership Northstar Europe S.A. Luxembourg to ensure 'buyer credit financing' availability to European SME and Midcap exporters. The partnership with Northstar, which has been providing loans ranging from €500,000 to €10 million since 2009, represents the inaugural engagement of the EIB in export financing to support the internationalisation of European SMEs and Midcaps.

By offering small buyer credits, the new programme will fill a market gap and improve the working capital management of exporters, whilst providing access to buyer credits on the best terms for importers.

The concept for such a facility was originally instigated from a market gap study on SME financing under the Italian Presidency of the Council of the EU, held from July to December 2014. This was then supported during the subsequent Latvian Presidency, held for the first six months of 2015 until Luxembourg took it up in July earlier this year.

Whilst holding the EU Presidency, the Luxembourg Government was able to give the operation the go-ahead by agreeing that Office du Ducroire, the Luxembourg Export Credit Agency (ECA) be part of it. By providing its securitisation guarantee product to the EIB, it will contribute to the creation of a new concept in the EIB's offers of funding structures.

The new facility will allow Northstar to combat the issue of high administration costs in 'small' ECA-backed structure loans by assiting eligible EUropean exporters of capital goods and equipment in increasing the movement of their products with the backing of competitive financing for their buyers throurgh buyer credit loans. By providing 'small' structured loans through a streamlined approach to buyer credit lending and narrowly focused product suite, Northstar will therefore expect to ensure these loans become more financially viable for larger credit suppliers.

"This initiative fills an identified gap in financial markets, offering vendor finance for ‘small’ export sales on the best terms," commented EIB Vice-President Pin van Ballekom upon signing the agreements last Friday. "We believe that this unique partnership approach, combining the strengths of the EIB, the Export Credit Agencies and Northstar, will create value and make a difference for exporting European SMEs. The EIB is and will remain committed to supporting European businesses in their internationalisation strategies."

"With this novel facility from the EIB and with its commitment to helping increase European exports and provide more concentrated backing for the internationalisation of European SME and Midcap producers, we will contribute to the creation of a more level playing field for the smaller European exporter," added Matthias Wietbrock, Managing Director of Northstar Europe S.A.

With the backing of ODL, financing will be provided by Northstar, from EIB funding, to importers of European goods globally under an Export Purchase Loan Agreement.

 

Photo by ODL (L-R: Matthias Wietbrock, Director General of Northstar Europe; Arsène Jacoby, President of Office Ducroire Luxembourg; Pim van Ballekom, Vice President of EIB)