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Bpifrance: French Public Guarantee Scheme
A comprehensive support institution for SME development
JLGC conference
24th november 2014
SERVING THE FUTURE
19/04/232
Titre de la présentation
Guarantee allocation:Beyond product definition, attitude and partnershipO4.
From public policies to adapted guarantee instruments03.
The guarantees as a central piece of the support scheme02.
BPIFRANCE presentation:Main features01.PLAN
01.Bpifrance main features
19/04/23Titre de la présentation
3
What is bpifrance?
Structure
Values
Organization
A new institution, and a bank for tomorrow’s growth, using accumulated experience
Group established in 2013 … Presidential objectiveSymbolic sign to entrepreneurship , with a heayweight institution dedicated to this task (assets € 42
billion)Target core : fast growing and innovative companies Supports the whole of the SMEs population
… from the addition of pre-existing entities , with proven efficiency over decades Guarantee scheme and lending activityInnovation support Equity investment activity from another French public institution, the « Caisse des Dépots et
Consignations »
A mission : serve the futureNot merely and addition, but a source of dynamicsInstitution up to the challenges of « post global crisis » recoveryImpulse optimism in economic actors, and give incentive to private banks to support them
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01. What is Bpifrance ?
All the French public financing tools come together
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Equity structure
Created by law, Bpifrance is owned by the
Caisse des Dépôts and the French State.
Bpifrance is organised around two separate
primary business activities : Bpifrance
Financement and Bpifrance
Investissement.
.
PROXIMITY90% of all decisions are taken
regionally,where entrepreneurs are located.
DRIVEPersonalised support to
entrepreneurs,providing them with the means to
succeed.
SIMPLICITYThe implementation of a financing continuum,simpler and more accessible than before.
OPTIMISM
6
Our values :
Motivated and enthusiastic teams,striving to make entrepreneurship a positive experience.
Our policy: to invest, finance, guarantee and follow up enterprises, from very small to large, from home market to export
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Titre de la présentation
A new comprehensive, multi -instrument support institution
INNOVATION SUPPORTDirect support (grants and soft loans) to
enterprises’ innovation programs
GUARANTEEOn bank loans, Bpifrance loans and equity investments
DIRECT FINANCINGFor all material and immaterial investments,
working capital needs, together with banks and
leasing companies
Equity investmentsAs minority shareholder,
in SMEs and large companies,
through specialized funds, or with partner funds
EXPORT STIMULATIONFollow up and provision of services for
international development (in relation with
UBIFRANCE, (support network), and foreign
risk insurance (Coface)
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Overview of 2013 activity
€ 10 BNAllocated financing
€ 4 BN in short term loans€ 3.7 BN in investment loans€ 1.3 BN in development loans€ 750 M in innovation financing
€ 8 BN guaranteed bank
loans
€ 1 BNCapital investment
€ 111 M invested directly in innovation capital
€ 121 M invested directly into SMEs
€ 368 M invested directly in mid-caps and large caps
€ 444 M invested in partner funds
Of which:€ 2.5 BN in business start-up loans (guarantee funds)€ 800 M in cash flow consolidation
.
A strong partnership with regional authorities
Bpifrance works in collaboration with
regional authorites,
to develop financial solutions adapted to
territorial specificities.
Regional authorities are present in Bpifrance’s governing bodies: Board of Directors, National Orientation Committee (NOC) and Regional Orientation Committees (ROC).
Regional authorities provide many financial tools for businesses (guarantee, financing, innovation regional investment funds…).
All French Regions operate a co-guarantee scheme with Bpifrance, through a complete processing and risk management set up.
.
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Organization: a strong regional anchoring
CREATIVE ENERGIES ARE IN REGIONS.
90 % OF DECISIONS ARE TAKEN LOCALLY.
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Network structure
42
regional offices
90%
of all decisions are taken regionally
1Specialised contact reaching out to businesses
Bpifrance, closer to entrepreneurs
02.Guarantees :A central piece of the business model
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11
Public guarantees scheme:
State’s objectives for a return on its financial involvment
Outreach
Synergies with other financial instruments
Guarantees serves as factor of economic stimulation, and serve ambition to make a positive return for the state
As a public scheme, the guarantee serves a purpose of economic development Role of mobilizing energies and financial meansStimulation to entrepreneurship: encouragement to initiatives, « new blood », new ideasFacilitation for bankers : higher coverage for riskier projects (start ups, innovation, export…)
Accepting a reasonable rate of default in guarantee portfolios allows to support more projects SME risk can be reduced, but not totally avoidedDo not cast away the possible future Google or Apple!SME and innovation risks analysis do not abide to scientific rules and integrates elements of hazard Our objective : give a chance to all projects, with serious and motivated actors
Funding the guarantee system is profitable for the State point of view, as detailed in the next slide
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Guarantees : a central element of the system
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Titre de la présentation
Guarantee Fund
Bpifrancerisk
State /Regions /
E.U.
40% to 80% according to project type
Guarantees allocation create a stimulating business model on State support
Multiplier Guarantee share
From 3 to 22, according to risk expectation on type of project
Financingto SMEs
PROJECTS & SUPPORTED
INVESTMENTS
Profit
Employment
Added Value
+ Tax Returns
- Social Benefits
+ GDP Increase
A successful outreach
Large range of application and beneficiariesLoans (short, medium and long), Mezzanine, and equityCovers from 40 % to 80% of the lender’s riskTargets both valuable borrowers lacking collateral, and fast growing enterprises
Successful implementationOver 72 000 guaranteed files yearly€ 8 billion of financing guaranteed in 2013Outstanding liabilities of € 12,2 billionRisk sharing with over 150 partner banks
Serves the largest part of Bpifrance customers (90%)From Start ups, small companies (EU SME definition, up to 250 employees)…Up to larger companies on specific products (guarantee on investments abroad, « mezzanine
loans », performance bonds)
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Guarantees: position as a central element of the system
The guarantee coverage allows to extend the whole range of Bpifrance financing to more SMEsA leverage effect operates on other instruments: net final risk can leverage mor financingAll stages of enterprises life are supportedAn adapted resource exist for each stage of development and project
Better sustainability of the institutionGuarantee improves the business model of other activities, and allows a larger customer base
for lending and equity activities Risk reduction increases opportunities, making challenging projects acceptableOperating costs at group level are reduced by common due diligences and instruments.
Guarantee clients improve deal flow for other offer of financing The large supported population of guaranteed SMEs offers visibility on clients for other Bpifrance
products Use of accumulated data from previous operations creates a rich customer base
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Guarantees mean synergies and leverage effect on other financing instruments
A specific financing, only provided in France by Bpifrance : the « development loan », or « contrat de developpement »
It belongs to the category of Mezzanine loans : a new mix « guarantees / lending »They are long term loans (7 years), with a long grace period, based on intangible investments, and
requesting NO guarantee from the borrower.Patient capital, specially designed for financing intangible assets and immaterial investments
Offer is made possible thanks to an internal guarantee scheme covering 80 % of risk
A seducing form of financing They can bridge the gap for enterprises not ready to deal with an investorThey offer “easy” money for investments They do not apprehend the borrowers assets, which can be used for obtaining more classic loans from
banks
A successful implementation Created only 10 years ago, this type of loans represent now 25 % of loans provided by Bpifrance.Suits perfectly active, successful and profitable enterprises , representing most of the pertfolio
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3. Impact of guarantees on product engineering
03.Guarantees :From aspects of public policy to adapted instruments
19/04/23Titre de la présentation
17
Public guarantees scheme:
Historic positioning
Contra-cyclical actions
New priorities : export and innovation
.
Traditional targets
Specific targeted applications
for the new driving actors of economic
growth
- The core targets for the use of guarantees:
- Traditional credit constrained companies
- The first age of the Guarantee
support
18
From state policy objectives to application of guarantees
- Contra-cyclical guarantees (crisis)
- Supporting Exporting champions
- Strenghtening innovative enterprises
Guarantee on Start ups financingFor new companies , or less than 3 year old entities risk coverage : 60 % on loans, personal loans, leasing and short term facilities
Guarantee on investment financingCompanies of more than 3 years of age for renewal or capacity investmentRisk coverage: 40 % on medium or long term loans and leasing
Guarantee on financing for SME equity transferCompany shares bought by new owner(Change of generations, « new blood »)Risk coverage : 50 % on loans, personal loans
Guarantees on financing working capital needsProvide permanent resources in growing enterprises, improving financial structureNo restructuring for non sustainable enterprisesRisk coverage: 50% on loans
Guarantee on financing international developmentFinance investments dedicated to export productionFinance, through mother company, the financial needs of foreign subsidiaryRisk coverage: 50 % on loans, counter guarantee on some bank bonds
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01. The « classic » guarantee offer, related to historic missions
.
Support to demand stricken
companies
Restructuring financial profile for a sound positive
exit from the crisis
- Risk coverage quota increase
- Extended eligibility (companies size, sectors, temporary risk profile)
- Operational changes adapted to a crisis situation
- Guarantee on short term facilities
- Guarantee on the medium term loans for working capital needs
20
01. Policy driven guarantee instruments: answering SME needs through the global crisis (2009-2010)
Allowing the implementation of a financing continuum
Risk coverage increaseUp to 90% (instead of 50%)Specfic funding Process respecting EU regulationl, with temporary loosened rules
Eligibility extension:Large companies could benefit from this supportUnitary risk limit increased
Operational improvements for this schemeSpecific mediation committeee in RegionsConcerted action with all public creditors and banksVariable fee, based on borrower’s quality (French central bank rating system)
Guarantee offer applicated to more financing For short term facilites confirmationFor medium term loans on Working Capital Needs
Recorded successAcceptable losses observed on the populationSurvey from beneficiaries attest survival for half of beneficiaries was due to this specific support
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3.
The « anti crisis » special scheme (2009 -2010)
.
Support to export -driven companies
Support to innovative enterprises
- Guarantee on incentive financing- Guarantee on foreign subsidiary
equity - Guarantee on the implementation
of a financing continuum,
22
Two examples of enforcing policy objectives with adapted use of guarantees
- Guarantee on pre –equity preparation phase financing
- Guarantee on innovation loans- Guarantee for innovation targeted
equity funds- Guarantee on industrialization
phase of innovation - Guarantee on financing market
approach and I.P..
We make your prospecting easy:
UBIFRANCE export development support Coface prospecting insurance: covering the potential financial risk of your export development
We finance your development:Bpifrance Export Loan
Bpifrance minority share acquisitionCoface guarantee for bonds
and prefinancing
We insure your Export project:
Coface credit insurance: a comprehensive insurance for your contractCoface exchange insurance : neutralises your risk
We help your export investment to succeed:
UBIFRANCE establishment supportEstablishment back-up through the VIE (international business volunteer program)Coface investment insuranceBpifrance international project guarantee
MARKET PROSPECTING
ESTABLISHING INTERNATIONALLY
FINANCE YOUR DEVELOPMENT
SECURE YOUR PROJECT
19/04/2323
Titre de la présentation
Focus on…
expanding your business internationally
In each phase of your company’s development, we provide financing, guarantee, insurance, investment and support solutions that are complementary and adapt to your plans for conquering new markets.
How to motivate enterprises to invest in a international development effort ?
The constraint: Initial budget for exploring a foreign country can be high: traveling costs, legal costs, legal advice, costly
executives time…Many SMEs are dissuaded by expected initial expenses , from50 000 to 100 000 €
The answer: Immediate delivery of a long term loan, without request for collateral, covering initial expensesAvoids weakening the cash position of the SMENo request of collateral to secure the loanIf attemps fail to set foot in the target country, reimbursement over 6 or 7 years is easy
Investments in equity (purchase of local company, or creation of subsidiary) can also be financed by the same type of mezzanine loan Or via classic bank loan
A specific project guarantee is offered to SMEsBased on invested equity in subsidiaryCovers economic risks causing defaultComplements COFACE guarantee (on political risk)
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Financing making decisions easier for exporters
We help your innovative business project to materialise:
Pre-creation support
We accompany you in:Confirming the feasibility of your innovative projectPreparing the package and the partnership for your collaborative project
We encourage the entry of investors:
Seed loansDirect share acquisition Qualification as an “Innovative Business”, giving access to FCPIs (mutual funds for innovation)
We finance the development of your project:
IndividuallyDevelopment and innovation aidFinancing of the Research Tax Credit
In partnership
Aid for collaborative projects
InternationallyDevelopment of international collaborative innovation
We accelerate industrial and commercial launches :
Innovation loan
and facilitate obtaining bank loans:
Bank loan guarantee
TRANSFORM YOUR IDEA
REINFORCE YOUR CAPITAL
CARRY OUT YOUR PROJECT
MAKE YOUR STRATEGY
SUCCESSFUL
EXPLORE THE FEASIBILITY
19/04/2325
Titre de la présentation
Focus on…
Supporting and facilitating innovation projects,
The different financial solutions proposed by our teams can be provided in the form of grants, reimbursable advances, interest-free loans, profit-sharing loans, share acquisition and guarantees on bank intervention, depending on the risk and the state of advancement of your project
The challenge:Facilitate the decision for firms to engage the (costly) initial steps Financing patent purchase, R&D budget, access to visibility on the innovation feasabilityNegotiating costs and intellectual property protectionSetting adequate diligences for a collaborative project with another company
The answer:Immediate delivery of a long term loan, without request for collateral, covering initial expenses
No immediate consequence on the cash position of the SMENo allocation of the company’s assets to secure the loanIf attemps fail to set foot in the target country, reimbursement over 6 or 7 years is easy
Financing the early seed phase: developping prontotypesEquity partners cannot be convinced before sufficient convincing development is reachedThis period (crossing the death valley) can be deadly if funds are short
The answer:Innovation costs can be supported by a similar mezzanine loan, if business plan is credible
19/04/2326
Motivate enterprises to step ahead in their innovation projects
04.Guarantees allocation:
Beyond product definition, Attitude and partnership
19/04/23Titre de la présentation
27
Public guarantee scheme:
Establishing active cooperation with banks
Building motivations
Developping partnerships with private financial intermediairies, and motivation for entrepreneurs.
A regular relation is established with financial intermediariesCreates trust, strong personal relation and illustrates common interest Constant dialogue with the 1000 skilled technicians in our networkAdditional visibility on risks, from accumulated experience, offered to the partner
A Successful multiplier effect on public moneyFor each € of risk or lending from Bpifrance, private partners are providing another €
Simplicity of message« Partnership and risk sharing offered for all cases, even for riskier projects »One stop shop for all the banker’s clientsStreamlined processes
A reliable and continuous support encourages initiatives of entrepreneursBpifrance rules sets limits to the pressure of banks on personal guaranteesConstant networking with all actors of SME support environment, creating opportunities Culture of success in our communication (club « excellence ») stimulates other SMEs
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4. Improving private financing involvement in the country’s modernization
Cumulated experiences and skills have to create value and credibility for a guarantee scheme
Cumulated different skills (on financing, on technology, on international practices ) help finding the best
form of support for a project and in the most rational way.
Entrepreneurs are accompanied , during their growth, by interlocutors of the same group sharing the
same attitude in favour of entreprenarial support.
Such factors add credibility on the risk mitigation effect brought by presence of Bpifrance in projects
Risk sharing and risk mitigation (reducing the probability of risk occurrence) are now essential to
convince bankers
The construction of the institution’s image helps mobilize the indispensable presence of commercial
banks to serve SMEs needs.
19/04/2329
Image and concept , as a reference for efficiency
The « all inclusive development institution »: a meaningfull benchmark for international counterparts.
Active Peer to peer dialogue and relationship with similar institutions
Participation in EU associations and programs (EUREKA, EUROSTARS)Specific Work Groups (AECM, Montreal Group with 6 major Development institutions of Canada,
Bresil, Russia, Mexico, China, India)
Bilateral cooperationActive policy of concluding agreements : exchange of good practices, organization of support to
collaborative projectsIncreasing number of multi-object cooperation through various financial instruments
Provision of Technical Assistance, to set up or adapt schemes and processes.So far, 18 direct assignments on guarantee entities, or innovation support agencies in Africa, and
Central Europe and thematic studies through European programs .
19/04/2330
Image and concept , as a reference for efficiency
Thank you
for your attention
Jean- Louis Leloir
International expertise
Direction of International affairs and Development
Bpifrance
jl.leloir@bpifrance.fr
tel + 33 1 41798396
cellular: + 33 680485659
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