European Investment Fund, Leumi expand tech credit

Yifat Oron  photo: Eyal Izhar

The new agreement under the EU's Horizon 2020 program makes $600 million credit available to Israeli technology companies and companies investing in innovation.

The European Investment Fund (part of the European Investment Bank Group) and Bank Leumi will offer credit to technology and innovation companies amounting to $600 million. This is in the framework of the European Union's Horizon 2020 program for promoting research and innovation, in which Israel is a participant. A company that invests in innovation, employs fewer than 500 people, and meets the bank's criteria for obtaining credit, may be entitled to up to $8.8 million in finance, on preferred terms.

The European Investment Fund participates in the financing of 50% of the credit risk of banks in countries participating in the Horizon 2020 program. The Fund's cash comes from the participating countries, of which there are currently 20. This is the third year in which Bank Leumi has taken part in the program, under which it has provided more than 100 credit lines.

The current agreement between the European Investment Fund and Bank Leumi is an extension of their original contract, and raises the amount of financing available from $200 million last year and $100 million in 2016. "In 2016, we entered the program with financing amounting to $100 million, which was very quickly used up," says Yifat Oron, CEO of LeumiTech, Leumi Group's high-tech finance subsidiary, talking to "Globes".

The program provides finance to technology companies and to traditional industry companies with significant investment in innovation, that meet the Fund's criteria. "Until a few years ago, the amount of finance reaching high-tech in the form of credit, as opposed to equity, was negligible, amounting to less than 10%. Today, we see substantial companies taking credit as well, immediately after financing rounds. These are companies seeking to grow very rapidly, and so they want to choose a source of finance that will not dilute them, but that is also a source that grows with them, as their revenue grows. This is a track that most companies able to take advantage of it on the basis of their financial data do so," Oron says.

Many technology companies, however, do not meet the criteria for obtaining credit, because fairly stable financial numbers are required, something that is not characteristic of most startup companies. "Up to now, there have been more than 100 loans, and loans to high-tech are on average much larger than the general average, although there is a relatively smaller number of loans to the technology industry," says Oron.

Published by Globes, Israel business news - en.globes.co.il - on May 19, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

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Yifat Oron  photo: Eyal Izhar
Yifat Oron photo: Eyal Izhar
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