Access to appropriate forms of finance continues to be one of the most serious constraints on innovation by firms. Financing constraints are also one of the key bottlenecks for Europe's R&D investment gap mainly stemming from insufficient private sector R&D spending. The relatively high risks related to investments in research and innovation (R&I), difficulties of the financial sector to assess the potential of new technologies and the reluctance of financial institutions to lend money without collateral hamper innovation and the growth of innovative companies.
The financial crisis has made access to finance for innovative companies even more difficult, as banks have become more risk-averse than ever. As a result, risk capital for private investments in R&I is very scarce. In particular, innovative companies with rapid growth potential face enormous difficulties in finding external finance in Europe, but even for established companies working on new technologies in key areas (e.g. energy and climate change, biotechnology), private capital sources are limited.
In addition, public financial support for RDI at national level is scarce, very fragmented and cyclical depending on the availability of budget resources in the EU Member States.
EU financial instruments should address the financing needs of innovative projects and companies. These vary considerably, depending on the sectors, types of innovation and stages of business development.
For start-up and technology transfer, there is strong need for public support to leverage private seed and start-up funds to fill the gap where public research grants stop and private finance is not yet available due to the risks involved. For innovative companies with high growth potential, limited access to growth finance is a key bottleneck.
For more established innovative companies (large, mid-sized or small), access to risk-sharing finance (loans, mezzanine capital, equity-type finance) in support of their R&I investments is crucial for them to stay competitive. Such higher risk finance is also needed to complement the funding of major infrastructure and demonstration projects that implement new technologies in key European policy areas (e.g. implementation of the SET-Plan).
At EU level, the current Risk-Sharing Finance Facility (RSFF) under FP7  has clearly demonstrated its added value: Public funding from the EU budget combined with the EIB's financing capacity has successfully leveraged 15 times the original amount (for risk coverage) for R&I investments.
 The RSFF is an innovative credit risk sharing scheme jointly set up under FP7 by the EC and the EIB to improve access to debt financing for private companies or public institutions promoting activities with a higher financial risk profile in the fields of research, technological development, demonstration and innovation.
(1) Implementation as of end Q1 2012
Total approved loans: € 9 624 million (98 projects)
Total signed loans: € 7 479 million (76 projects)
(2) Expanding the scope and scale of the existing Risk-Sharing Finance Facility (RSFF)
On 5 December 2011, the Commission and the EIB agreed an amendment to their RSFF cooperation agreement. demand for loans has far exceeded expectations, and the terms of the amendment give the RSFF more leverage and hence enable it to allocate more loans in future. The amendment also launches a pilot scheme for making loans to innovative SMEs and makes possible a renewed focus on supporting research infrastructures.
- RSFF for SMEs and small mid-caps: the Risk-Sharing Instrument (RSI)
The RSI aims to encourage banks to provide loans of between €25 000 and €7.5 million to SMEs and smaller mid-sized firms (mid-caps) undertaking research, development or innovation, with loan periods of from two to seven years, and with the risk finance covering investments in assets (tangible or intangible) and/or working capital.
The EIB has mandated the European Investment Fund (EIF) to implement the RSI.
The EIF, in turn, enters into individual agreements with banks following the submission of applications to the EIF under an open call for expressions of interest (see http://www.eif.org/what_we_do/guarantees/RSI/index.htm ). Applicant banks are treated on a first-come, first-served basis, subject to their meeting the requirements of the EIF's standard screening and due diligence procedures.
Under the terms of each agreement, the EIF provides, in return for a fee, a guarantee to the bank concerned against loan defaults. For each default, the bank receives 50% of the amount of the loan outstanding. Some 10 or so banks are likely to be involved, and the RSI plans to reach up to 500 beneficiaries by the end of 2013 with a total loan volume of around €1 billion.
- Research Infrastructures
Research infrastructures play a crucial role in promoting knowledge and technology in Europe, bringing together a wide diversity of scientists and disciplines. In 2006, ESFRI published a roadmap identifying 35 priority EU-scale infrastructures required in key scientific areas. The RSFF is helping boost the emergence of these new research facilities, and the amendment will enable loans to be made not only to the infrastructures themselves but also to their suppliers and to enterprises commercialising their results and services.