Credit Finance for Tech companies in Europe - Presentation by Alex McCracken, Director of Silicon Valley Bank at the NOAH 2014 Conference in London, Old Billingsgate on the 14th of November 2014.

1. Access to Credit in Europe
14 November 2014

3. SVB is at the heart of the innovation economy
SVB Capital Proprietary and Confidential. 2
Lending to over 50%
of venture-backed
companies
Valuations for over
1000 409a filings
annually
Investing for private
clients and
institutional partners
Advising over 15k
companies, funds
and entrepreneurs
#1 #1
#1 = Market Share Leader
61B

4. Credit in Europe – perspective matters
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5. Type Sections or Title of Entire Presentation
‘Insert-Header and Footer’ Georgia 10pt 4

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• Bank financing remains most important funding source for SMEs in EU
• UK lending to SMEs is increasing
• But new lending to SMEs in EU dropped 35% in 2008 -2013 to €649bn
• Total loans out decreased 9% to €4.2trillion
• Problem, since 99% of companies in EU are SMEs < €50m turnover
• Now stabilising - In the volume of new EU bank loans of <€1m was flat
compared with the same month a year earlier
Credit summary

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- Access to credit varies across Eurozone
- In Greece, Spain, Ireland, Italy and Netherlands, 20%-32% of
SMEs cite access to finance as most pressing problem
- In UK, Austria and Germany, much lower at 8%
- Loan growth slowing as higher capital requirements & stricter risk
regulations for banks contribute to tighter credit regime
- EU monetary policy, e.g. lowering of interest rates, is not reflected in
bank lending rates in a number of member states
- Location of SME and risk appetite of banks = key factors in lending
Banking regulations restricting credit

9. UK +ve
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• SME borrowing +16% in last year
• £7.4 bn new SME borrowing in Q2 14 = 16% higher than Q2 13
and highest quarterly amount since 2011
• Increase in borrowing across most industry sectors and regions
• Approval rates constant (77% for small, 92% medium)
• Average borrowing rising
• Interest rates broadly stable at 3%-5%

10. UK end Q214:
ê Total SME borrowing = £112 bn
ê Term loans = £89 bn (79%)
ê Overdraft = £10.8bn (10%) + facilities undrawn = £12bn (11%)
ê Smaller businesses = £38bn + Medium businesses = £62bn
During Q2 14:
ê New loans = £1.6bn for Smaller businesses + £4.1bn for Medium
ê Use of overdrafts = £4.9bn for Smaller + £5.9bn for Medium
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11. Benelux
Belgium = Anti-crisis measures to increase credit for SMEs;
- Export Credit guarantee scheme (Belgacap)
- Reduced public payment delays and system for cash advance on
payments to SMEs
- Loan Guarantee schemes with banks
- Subordinated low interest loans for innovative projects.
Netherlands - benign loan conditions for SMEs
Luxembourg - Good access to finance for SMEs and state aid
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+ ve

12. Scandinavia
Denmark:
- New fmeasures provide funding for startups & SMEs
- 600m DKK loan guarantee scheme
- ‘Seed 2.0’ for startups seed loans matched by private funding
Sweden:
- Credit rationing lifted & companies now better access to capital
- 10 principles of the Small Business Act
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+ ve

13. - Funds for SMEs reinforced during crisis via ERDF
- Over 20 000 enterprises, mostly SMEs, received credit or guarantees
total EUR 14 billion
- but "Wirtschaftsfonds Deutschland" stimulus ended 2010
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Neutral

14. France
ê French volume of early financing still below EU average
ê Access to finance still difficult for SMEs , but Guarantee schemes and
stronger VC now improving SME access to finance
ê “Investments for the Future‟ = EUR 800 million for SMEs
ê Further funds from Innovation Agency (OSEO) and the Caisse des Dépôts et
Consignations
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-ve but improving

15. Spain
- Since mid-2009 bank credit to private sector dropped 9.2% (€172bn)
- Problematic as SMEs employ 75% of workers
- Bank criteria for new loan approvals now stricter
- 27% of SMEs cite access to finance as their main pressure
- 80% of SMEs experienced increase in the cost of finance
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- ve

16. 15
Alternative lending in Europe
- SMEs considering alternative lenders for funding
- UK =largest (47% transactions), France (25%) ,Germany (12%)
- UK = £1.4bn in 2014, and £5bn in 2015 (20% for SMEs)
- Key differences by alternative lenders from banks:
- non-amortising, bullet structures
- flexibility + speed
- range of debt structures (mezz, unitranche)

17. 16
P2P lenders
£400m+ lent
€50m+ lent
€50m+ lent
€200m+ lent
£500m+ lent £300m+ lent

18. Venture lenders
€1m- €25m
$1 billion+ committed in UK, Germany, Scandinavia and Benelux since
2004
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19. Contact
gbrady@svb.com
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