Individual investment tranches of the Széchenyi Capital Investment Fund may rise to EUR 750,000.
Budapest, 27 May 2013. The European Commission’s decision has granted Hungary special permission to expand, subject to certain conditions, its SME risk capital programme financed from EU funds. In the future, the Széchenyi Capital Investment Fund (SzCIF) may, subject to EU approval, also carry out bigger-ticket investments; with the involvement of co-investors, the individual tranches of investments made by the SzCIF may easily rise to as much as EUR 750,000.
The European Commission’s decision has corroborated the fact that EU funds, which also stop a gap in capital finance, are essential for the strengthening of the capital position of small and medium-sized enterprises in Hungary, because for some businesses with capital demand of between HUF 75 and 200 million, there are no other alternatives of obtaining funding of this proportion. In possession of the Commission’s permission, the SzCIF may involve co-investors in certain investments.
By granting its permission, the European Commission allowed the SzCIF operating under the aegis of the New Széchenyi Plan to introduce further investment facilities aimed at satisfying capital demand in the SME sector in Hungary.
“As Hungary was the first to launch EU-financed risk capital investment programmes in the EU, a number of other member states can rely on our successes and experience in adopting their respective practices. Initiated by Hungary, this new type of approval granted to the SzCIF has opened up another window of opportunity for Hungary to be the first among the EU member states to adopt and operate a solution that is likely to set an example. Our experience may play a key role already in the planning phase of the allocation of funds during the next budgetary cycle of the EU”, said Sándor Csepreghy, deputy state secretary responsible for development programmes.
Under the authorisation awarded by the European Commission, the SzCIF will announce three new capital investment facilities, which allow for the possibility that, relative to an earlier EUR 200,000 de minimis level, capital on a much higher scale, i.e. as much as EUR 750,000, can be raised. Target SMS’s eligible for refundable capital finance will be SME’s operational in Hungary for a period of at least two years and with a sales turnover of not more than HUF 2 billion that are in need of capital finance in order to fulfil their growth and development plans. The SzCIF may raise funding on a stand-alone basis or jointly with co-investors.
“It was clear already at the inception of the Széchenyi Capital Investment Fund that there was also demand for investments well beyond the de minimis level on the part of businesses operating successfully in the traditional sectors. As a rule, risk capital funds operational in the domestic market look for investment niches offering investment opportunities of over EUR 1 million; by contrast, private investors and business angels mainly seek investment opportunities representing not more than a few million forints. The landscape between the two is one with unsatisfied demand for financing with an undercapitalised industrial sector.
The fund managers based on Jeremie funding can, in part, satisfy this demand in the case of companies with outstanding growth potential; however, the businesses operational in the traditional sectors have been unable to raise capital to finance their planned development or stabilise their operation despite the fact that they play a very important role in Hungary’s economy. The above situation has been confirmed by a market gap analysis. This is exactly why the European Commission has granted Hungary special permission for the expansion of its capital programme”, explained Imre V. Csuhaj, president-CEO of the Széchenyi Capital Investment Fund.
(Ministry of National Development)
