The programme aims to strengthen the capital base of small and micro enterprises and start-ups by providing small-scale mezzanine financing. Under REACT-EU, enterprises funded by the already existing Micro-mezzanin fund II (MMF II) receive financing on more favourable terms.
For small enterprises and start-ups, too little equity capital is often an obstacle to accessing loan capital. With MMF micromezzanine funding, small and micro enterprises and start-ups can improve their capital adequacy ratio and thus increase their risk sustainability. This will make it easier for them to access further funding and start up a business.
The MMF provides micromezzanine financing in the form of silent participations of up to 50,000 euros. Enterprises belonging to the specific target group of the MMF, may benefit from a participation of up to 150,000 euros. Special target groups are enterprises that provide vocational training, are founded out of unemployment or are run by women or people from migrant backgrounds. Social economy enterprises with a commercial orientation and enterprises oriented to environmental protection are also particularly addressed.
Silent participations are issued by Mittelständische Beteiligungsgesellschaften (holding companies) operating in the individual Länder, which, as silent partners, participate in the enterprises for a period of ten years. Repayments are made in equal annual instalments for the first time after seven years. In return for the financing, companies must pay a profit-based remuneration of up to 1.5% of the deposit. In addition, non-profit remuneration of generally 8% per annum in relation to the nominal amount of the deposit must be paid quarterly.
Thanks to interest subsidies financed by REACT-EU, enterprises receive silent partnerships on much more favourable terms:
- For enterprises that have already received a stake before 30 July 2021 (existing enterprises), the non-profit remuneration will be fully assumed by REACT-EU by 31 March 2022. By 31 March 2022, fixed charges will therefore in principle be reduced to 0% for all existing enterprises from 8.00% per annum in relation to the nominal amount of the deposit.
- From 1 April 2022 to 31 December 2023, non-profit remuneration for existing companies will be reduced from 8% to 4.00% per annum. For enterprises receiving new contributions from 30 July 2021, the non-profit remuneration will be reduced to 4% per annum by 31 December 2023.