Cédric Bovy (SOWALFIN) Cédric Bovy's presentation at the Operational Training Session held on the 16/17 April 2015 in Maribor.

1. Upfront Guarantee :
A useful alternative to the supplementary
guarantee
Cédric Bovy – Litigation Officer, SOWALFIN

2. 1
Context of Sowalfin
Group

3. About Wallonia
- Covering a territory of 17,000 km² and home to 3,560,000
people
- Wallonia: About 100,000 enterprises among which more
than 90% of micro-enterprises (employing between 1 and 10
persons)
- GDP 2013 : EUR 84.651 millions

4. SOWALFIN
SOWALFIN is a public limited company created by the Walloon
Government in 2002. Its main shareholder is the Walloon Region.
The company aims to promote the creation, development and
transfer of SME’s in Wallonia by providing specific and tailored
financial products, acting as a one-stop-shop dedicated to the
public financing of SME’s.
Around 1.3 billion € is dedicated to walloon SME financing.
Target:
SME criteria :
- < 250 employees:
- Turnover below EUR 50 millions ;
- or total balance sheet below EUR 43 millions ;
and not being considered as being in financial difficulties
according to European criteria

5. SOWALFIN
(SMEs)
Guarantee and
cofinancing
with banks
Risk capital
(9 Invests)
Subsidiaries
SOCAMUT
Micro-entreprises
and self employed
SOFINEX
Exports
NOVALLIA
Innovation
SOWACCESS
Business
transfer
The Group

6. Three main financial activities :
- Partial (up to 75%) and additional direct guarantee (and counter –
guarantee) on bank loans
- Cofinancing (beside bank loans) through subordinated loans
- Venture capital through the coordination of 9 public investment
funds
Subsidiaries:
-SOCAMUT: financing micro-enterprises and self-employed
(micro-credit)
- SOFINEX: financing exportation and internationalisation of
Walloon SMEs
- Novallia: financing innovative projects within SMEs
- Sowaccess: business transfer platform
International:
- Transeo: European association for business transfer

7. 3
La garantie et le
cofinancement
sous forme de
prêt subordonné
de la SOWALFIN,
maison-mère
Direct guarantee for
SMEs 2

8.  Partial : 75% maximum of a bank loan
 Supplementary : after realization of the collaterals on the bank
loan according to a sharing loss principle
 Term : maximum 10 years
 Fee (paid « one-shot »):
same term as the bank loan (with a max. of 10 years): annual
guarantee fee of 1 %
Shorter term (with a min. of 1 year): annual guarantee fee of
1,10%
 Amount : Maximum EUR 1.500.000 per guarantee (de minimis
European Regulation).
 Upfront guarantee: fixed amount and not % (max 25% of a bank
credit with a maximum of EUR 500.000) for investments in
tangibles assets (real estate, machinery, …)
Guarantee on bank loans

9. Granted guarantees as of December 31, 2013
• EUR 430,1 millions covering bank credits amounting to EUR
1.021,71 millions
• 2.498 SME’s
Outstanding amounts as of December 31, 2013
• 918 SME’s for an outstanding amount of EUR 121,93 millions
Per year
350 projects approved by our Credit Comittee
Guarantee since 2002

10. 3
La garantie et le
cofinancement
sous forme de
prêt subordonné
de la SOWALFIN,
maison-mère
Principles of the
Upfront guarantee
and comparison with
the supplementary
guarantee
3

11.  Guarantee consists of a fixed amount, not a percentage
 Fixed amount : maximum 25 % of nominal amount of the
bank loan with a maximum of € 500,000
 Investments in tangible assets only (eg. buildings,
equipment goods,…)
 Value of collaterals (estimated by bank) must be superior
or equal to the nominal amount of the SOWALFIN upfront
guarantee
 No full coverage of the bank’s net risk at credit issuance

12.  Maximum term : to be determined case by case. Nominal
amount of upfront guarantee must never be over 80% of the
remaining balance of the bank loan (European obligation).
 Fee: 1.50% of nominal amount of the upfront guarantee
multiplied by duration of the guarantee in full years.
 Guarantee not supplementary => direct payement of guarantee
in case of termination of credit or eg. bankruptcy,…

13. Comparison between the supplementary guarantee
and the upfront guarantee
Supplementary guarantee Upfront guarantee
Bank loan (15 y term) € 1,000,000 € 1,000,000
Mortgage (estimated value
of building)
€ 650,000 € 650,000
Bank’s net risk € 350,000 € 350,000
SOWALFIN Guarantee 50% - 6 years € 175,000 - 6 years
Fee rate 1.10% 1.50%
Fee € 27,500 € 15,750
Bank final risk at credit
issuance
€ 175,000 € 175,000

14. Case 1 : realization of building € 650,000
Supplementary guarantee Upfront guarantee
Credit remaining balance at
termination
850,000 850,000
SOWALFIN guarantee 175.000
Realization of building 650,000 650,000 (850,000 – 175,000)
Non covered risk 200,000 (850,000 – 650,000) 25,000 (850,000 – 175,000 – 650,000)
SOWALFIN guarantee 100,000 (200,000 x 50%)
Bank final loss 100,000 (200,000 – 100,000) 25,000

15. Case 2 : realization of building € 675,000
Supplementary guarantee Upfront Guarantee
Credit remaining balance at
termination
850,000 850,000
SOWALFIN guarantee 175,000
Realization of building 675,000 675,000 (850,000 – 175,000)
Non covered risk 175,000 (850,000 – 675,000) 0 (850,000 – 175,000 – 675,000)
SOWALFIN guarantee 87,500 (175,000 x 50%)
Bank final loss 87,500 (175,000 – 87,500) 0

16. Case 3 : realization of building € 600,000
Supplementary guarantee Upfront guarantee
Credit remaining balance at
termination
850,000 850,000
SOWALFIN guarantee 175,000
Realization of building 600,000 600,000(850,000 – 175,000)
Non covered risk 250,000(850,000 – 600,000) 75,000 (850,000 – 175,000 – 600,000)
SOWALFIN guarantee 125,000 (250,000 x 50%)
Bank final loss 125,000( 250,000 – 125,000) 75,000

17. Example : a subordinated loan (SOWALFIN)
together with an upfront guarantee on a
bank loan
An industrial small company takes the opportunity to buy
a warehouse – price: € 870,000 + additional costs €
130,000
- Own share: € 100,000
- SOWALFIN subordinated loan 10 years : € 100,000
- Bank loan 15 years : € 800,000 with upfront guarantee
of 25% for 5 years => € 200,000. Fee € 15,000. Credit also
covered with other collaterals as mortgage and mortgage
mandate, estimated to € 522,000.