SERVING THE FUTURE Bpifrance French Public Guarantee Scheme

SERVING THE FUTURE Bpifrance: French Public Guarantee Scheme A comprehensive support institution for SME development JLGC conference 24 th november 2014

From public policies to adapted guarantee instruments O 4. 3/15/2018 The guarantees as a central piece of the support scheme 03. Titre de la présentation 01. 02. PLAN BPIFRANCE presentation: Main features Guarantee allocation: Beyond product definition, attitude and partnership 2

01 . Bpifrance main features What is bpifrance? Structure Values Organization Titre de la présentation 3/15/2018 3

01. What is Bpifrance ? A new institution, and a bank for tomorrow’s growth, using accumulated experience l Group established in 2013 … l Presidential objective l Symbolic sign to entrepreneurship , with a heayweight institution dedicated to this task (assets € 42 billion) l Target core : fast growing and innovative companies l Supports the whole of the SMEs population l … from the addition of pre-existing entities , with proven efficiency over decades l Guarantee scheme and lending activity l Innovation support l Equity investment activity from another French public institution, the « Caisse des Dépots et Consignations » l A mission : serve the future l Not merely and addition, but a source of dynamics l Institution up to the challenges of « post global crisis » recovery l Impulse optimism in economic actors, and give incentive to private banks to support them 3/15/2018 4

Equity structure All the French public financing tools come together Created by law, Bpifrance is owned by the Caisse des Dépôts and the French State. Bpifrance is organised around two separate primary business activities : Bpifrance Financement and Bpifrance Investissement. 3/15/2018 5

Our values : . PROXIMITY 90% of all decisions are taken regionally, where entrepreneurs are located. DRIVE Personalised support to entrepreneurs, providing them with the means to succeed. SIMPLICITY The implementation of a financing continuum, simpler and more accessible than before. OPTIMISM Motivated and enthusiastic teams, striving to make entrepreneurship a positive experience. 6

A new comprehensive, multi -instrument support institution Our policy: to invest, finance, guarantee and follow up enterprises, from very small to large, from home market to export INNOVATION SUPPORT DIRECT FINANCING Direct support (grants and soft loans) to enterprises’ innovation programs For all material and immaterial investments, working capital needs, together with banks and leasing companies GUARANTEE On bank loans, Bpifrance loans and equity investments Equity investments As minority shareholder, in SMEs and large companies, through specialized funds, or with partner funds Titre de la présentation 3/15/2018 EXPORT STIMULATION Follow up and provision of services for international development (in relation with UBIFRANCE, (support network), and foreign risk insurance (Coface) 7

. Overview of 2013 activity € 10 BN Allocated financing € 8 BN guaranteed bank loans € 1 BN Capital investment 3/15/2018 € 4 BN in short term loans € 3. 7 BN in investment loans € 1. 3 BN in development loans € 750 M in innovation financing Of which: € 2. 5 BN in business start-up loans (guarantee funds) € 800 M in cash flow consolidation € 111 M invested directly in innovation capital € 121 M invested directly into SMEs € 368 M invested directly in mid-caps and large caps € 444 M invested in partner funds 8

Organization: a strong regional anchoring A strong partnership with regional authorities Bpifrance works in collaboration with regional authorites, to develop financial solutions adapted to territorial specificities. CREATIVE ENERGIES ARE IN REGIONS. 90 % OF DECISIONS ARE TAKEN LOCALLY. l Regional authorities are present in Bpifrance’s governing bodies: Board of Directors, National Orientation Committee (NOC) and Regional Orientation Committees (ROC). l Regional authorities provide many financial tools for businesses (guarantee, financing, innovation regional investment funds…). l All French Regions operate a co-guarantee scheme with Bpifrance, through a complete processing and risk management set up. . 3/15/2018 9

Network structure Bpifrance, closer to entrepreneurs 42 regional offices 90% 1 of all decisions are taken regionally Specialised contact reaching out to businesses 3/15/2018 10

02 . Guarantees : A central piece of the business model Public guarantees scheme: State’s objectives for a return on its financial involvment Outreach Synergies with other financial instruments Titre de la présentation 3/15/2018 11

Guarantees : a central element of the system Guarantees serves as factor of economic stimulation, and serve ambition to make a positive return for the state l As a public scheme, the guarantee serves a purpose of economic development l Role of mobilizing energies and financial means l. Stimulation to entrepreneurship: encouragement to initiatives, « new blood » , new ideas l. Facilitation for bankers : higher coverage for riskier projects (start ups, innovation, export…) l Accepting a reasonable rate of default in guarantee portfolios allows to support more projects l SME risk can be reduced, but not totally avoided l. Do not cast away the possible future Google or Apple! l. SME and innovation risks analysis do not abide to scientific rules and integrates elements of hazard l Our objective : give a chance to all projects, with serious and motivated actors l Funding the guarantee system is profitable for the State point of view, as detailed in the next slide 3/15/2018 12

Guarantees allocation create a stimulating business model on State support + Tax Returns - Social Benefits PROJECTS & SUPPORTED INVESTMENTS Profit Employment + GDP Increase State / Regions / E. U. Added Value Multiplier Bpifrance risk Guarantee Fund From 3 to 22, according to risk expectation on type of project Titre de la présentation Guarantee share 3/15/2018 Financing to SMEs 40% to 80% according to project type 13

Guarantees: position as a central element of the system A successful outreach l Large range of application and beneficiaries l Loans (short, medium and long), Mezzanine, and equity l Covers from 40 % to 80% of the lender’s risk l Targets both valuable borrowers lacking collateral, and fast growing enterprises l Successful implementation l Over 72 000 guaranteed files yearly l € 8 billion of financing guaranteed in 2013 l Outstanding liabilities of € 12, 2 billion l Risk sharing with over 150 partner banks l Serves the largest part of Bpifrance customers (90%) l From Start ups, small companies (EU SME definition, up to 250 employees)… l Up to larger companies on specific products (guarantee on investments abroad, « mezzanine loans » , performance bonds) 14 3/15/2018

Guarantees mean synergies and leverage effect on other financing instruments l The guarantee coverage allows to extend the whole range of Bpifrance financing to more SMEs l A leverage effect operates on other instruments: net final risk can leverage mor financing l All stages of enterprises life are supported l An adapted resource exist for each stage of development and project l Better sustainability of the institution l Guarantee improves the business model of other activities, and allows a larger customer base for lending and equity activities l Risk reduction increases opportunities, making challenging projects acceptable l Operating costs at group level are reduced by common due diligences and instruments. l Guarantee clients improve deal flow for other offer of financing l The large supported population of guaranteed SMEs offers visibility on clients for other Bpifrance products l Use of accumulated data from previous operations creates a rich customer base 3/15/2018 15

Impact of guarantees on product engineering 3. A specific financing, only provided in France by Bpifrance : the « development loan » , or « contrat de developpement » l It belongs to the category of Mezzanine loans : a new mix « guarantees / lending » l They are long term loans (7 years), with a long grace period, based on intangible investments, and requesting NO guarantee from the borrower. l Patient capital, specially designed for financing intangible assets and immaterial investments l Offer is made possible thanks to an internal guarantee scheme covering 80 % of risk l A seducing form of financing l They can bridge the gap for enterprises not ready to deal with an investor l They offer “easy” money for investments l They do not apprehend the borrowers assets, which can be used for obtaining more classic loans from banks l A successful implementation l Created only 10 years ago, this type of loans represent now 25 % of loans provided by Bpifrance. l Suits perfectly active, successful and profitable enterprises , representing most of the pertfolio 3/15/2018 16

03 . Guarantees : From aspects of public policy to adapted instruments Titre de la présentation 3/15/2018 Public guarantees scheme: Historic positioning Contra-cyclical actions New priorities : export and innovation 17

From state policy objectives to application of guarantees. Traditional targets The core targets for the use of guarantees: - Traditional credit constrained companies - Specific targeted applications for the new driving actors of economic growth - The first age of the Guarantee support - Contra-cyclical guarantees (crisis) - Supporting Exporting champions - Strenghtening innovative enterprises 18

01. The « classic » guarantee offer, related to historic missions l Guarantee on Start ups financing l For new companies , or less than 3 year old entities l risk coverage : 60 % on loans, personal loans, leasing and short term facilities l Guarantee on investment financing l Companies of more than 3 years of age for renewal or capacity investment l Risk coverage: 40 % on medium or long term loans and leasing l Guarantee on financing for SME equity transfer l Company shares bought by new owner(Change of generations, « new blood » ) l Risk coverage : 50 % on loans, personal loans l Guarantees on financing working capital needs l Provide permanent resources in growing enterprises, improving financial structure l No restructuring for non sustainable enterprises l Risk coverage: 50% on loans l Guarantee on financing international development l Finance investments dedicated to export production l Finance, through mother company, the financial needs of foreign subsidiary l Risk coverage: 50 % on loans, counter guarantee on some bank bonds 3/15/2018 19

. 01. Policy driven guarantee instruments: answering SME needs through the global crisis (2009 -2010) Restructuring financial profile for a sound positive exit from the crisis Risk coverage quota increase - Extended eligibility (companies size, sectors, temporary risk profile) - Support to demand stricken companies - Operational changes adapted to a crisis situation - Guarantee on short term facilities - Guarantee on the medium term loans for working capital needs Allowing the implementation of a 20

3. The « anti crisis » special scheme (2009 -2010) l Risk coverage increase l Up to 90% (instead of 50%) l Specfic funding l Process respecting EU regulationl, with temporary loosened rules l Eligibility extension: l Large companies could benefit from this support l Unitary risk limit increased l Operational improvements for this scheme l Specific mediation committeee in Regions l Concerted action with all public creditors and banks l Variable fee, based on borrower’s quality (French central bank rating system) l Guarantee offer applicated to more financing l For short term facilites confirmation l For medium term loans on Working Capital Needs l Recorded success l Acceptable losses observed on the population l Survey from beneficiaries attest survival for half of beneficiaries was due to this specific support 3/15/2018 21

Two examples of enforcing policy objectives with adapted use of guarantees. Support to export driven companies Guarantee on incentive financing Guarantee on foreign subsidiary equity Guarantee on the implementation of a financing continuum, - Support to innovative enterprises - Guarantee on pre –equity preparation phase financing Guarantee on innovation loans Guarantee for innovation targeted equity funds Guarantee on industrialization phase of innovation Guarantee on financing market approach and I. P. . - 22

Focus on… expanding your business internationally ESTABLISHING INTERNATIONALLY We finance your development: We make your prospecting easy: ·Bpifrance Export Loan ·Bpifrance minority share acquisition ·Coface guarantee for bonds and prefinancing ·UBIFRANCE export development support ·Coface prospecting insurance: covering the potential financial risk of your export development FINANCE YOUR DEVELOPMENT MARKET PROSPECTING SECURE YOUR PROJECT We help your export investment to succeed: ·UBIFRANCE establishment support ·Establishment back-up through the VIE (international business volunteer program) ·Coface investment insurance ·Bpifrance international project guarantee We insure your Export project: ·Coface credit insurance: a comprehensive insurance for your contract ·Coface exchange insurance : neutralises your risk In each phase of your company’s development, we provide financing, guarantee, insurance, investment and support solutions that are complementary and adapt to your plans for conquering new markets. Titre de la présentation 3/15/2018 23

Financing making decisions easier for exporters How to motivate enterprises to invest in a international development effort ? l The constraint: l Initial budget for exploring a foreign country can be high: traveling costs, legal advice, costly executives time… l Many SMEs are dissuaded by expected initial expenses , from 50 000 to 100 000 € l The answer: l Immediate delivery of a long term loan, without request for collateral, covering initial expenses l Avoids weakening the cash position of the SME l No request of collateral to secure the loan l If attemps fail to set foot in the target country, reimbursement over 6 or 7 years is easy l Investments in equity (purchase of local company, or creation of subsidiary) can also be financed l by the same type of mezzanine loan l Or via classic bank loan l A specific project guarantee is offered to SMEs l Based on invested equity in subsidiary l Covers economic risks causing default l Complements COFACE guarantee (on political risk) 3/15/2018 24

Focus on… Supporting and facilitating innovation projects, MAKE YOUR STRATEGY SUCCESSFUL We encourage the entry of investors: ·Seed loans ·Direct share acquisition ·Qualification as an We accompany you in: ·Confirming the feasibility We help your innovative business project to materialise: of your innovative project ·Preparing the package and the partnership for your collaborative project EXPLORE THE FEASIBILITY CARRY OUT YOUR PROJECT We accelerate industrial and commercial launches : ·Innovation loan and facilitate obtaining bank loans: ·Bank loan guarantee REINFORCE YOUR CAPITAL ·Pre-creation support TRANSFORM YOUR IDEA “Innovative Business”, giving access to FCPIs (mutual funds for innovation) We finance the development of your project: Individually ·Development and innovation aid ·Financing of the Research Tax Credit In partnership ·Aid for collaborative projects Internationally ·Development of international collaborative innovation The different financial solutions proposed by our teams can be provided in the form of grants, reimbursable advances, interest-free loans, profit-sharing loans, share acquisition and guarantees on bank intervention, depending on the risk and the state of advancement of your project Titre de la présentation 3/15/2018 25

Motivate enterprises to step ahead in their innovation projects l The challenge: l Facilitate the decision for firms to engage the (costly) initial steps l Financing patent purchase, R&D budget, access to visibility on the innovation feasability l Negotiating costs and intellectual property protection l Setting adequate diligences for a collaborative project with another company l The answer: l Immediate delivery of a long term loan, without request for collateral, covering initial expenses l No immediate consequence on the cash position of the SME l No allocation of the company’s assets to secure the loan l If attemps fail to set foot in the target country, reimbursement over 6 or 7 years is easy l Financing the early seed phase: developping prontotypes l Equity partners cannot be convinced before sufficient convincing development is reached l This period (crossing the death valley) can be deadly if funds are short l The answer: l Innovation costs can be supported by a similar mezzanine loan, if business plan is credible 3/15/2018 26

04 . Guarantees allocation: Beyond product definition, Attitude and partnership Titre de la présentation 3/15/2018 Public guarantee scheme: Establishing active cooperation with banks Building motivations 27

4. Improving private financing involvement in the country’s modernization Developping partnerships with private financial intermediairies, and motivation for entrepreneurs. l A regular relation is established with financial intermediaries l Creates trust, strong personal relation and illustrates common interest l Constant dialogue with the 1000 skilled technicians in our network l Additional visibility on risks, from accumulated experience, offered to the partner l A Successful multiplier effect on public money l For each € of risk or lending from Bpifrance, private partners are providing another € l Simplicity of message l « Partnership and risk sharing offered for all cases, even for riskier projects » l One stop shop for all the banker’s clients l Streamlined processes l A reliable and continuous support encourages initiatives of entrepreneurs l Bpifrance rules sets limits to the pressure of banks on personal guarantees l Constant networking with all actors of SME support environment, creating opportunities l Culture of success in our communication (club « excellence » ) stimulates other SMEs 3/15/2018 28

Image and concept , as a reference for efficiency Cumulated experiences and skills have to create value and credibility for a guarantee scheme l Cumulated different skills (on financing, on technology, on international practices ) help finding the best form of support for a project and in the most rational way. l Entrepreneurs are accompanied , during their growth, by interlocutors of the same group sharing the same attitude in favour of entreprenarial support. l Such factors add credibility on the risk mitigation effect brought by presence of Bpifrance in projects l Risk sharing and risk mitigation (reducing the probability of risk occurrence) are now essential to convince bankers l The construction of the institution’s image helps mobilize the indispensable presence of commercial banks to serve SMEs needs. 3/15/2018 29

Image and concept , as a reference for efficiency The « all inclusive development institution » : a meaningfull benchmark for international counterparts. l Active Peer to peer dialogue and relationship with similar institutions l Participation in EU associations and programs (EUREKA, EUROSTARS) l Specific Work Groups (AECM, Montreal Group with 6 major Development institutions of Canada, Bresil, Russia, Mexico, China, India) l Bilateral cooperation l Active policy of concluding agreements : exchange of good practices, organization of support to collaborative projects l Increasing number of multi-object cooperation through various financial instruments l. Provision of Technical Assistance, to set up or adapt schemes and processes. l So far, 18 direct assignments on guarantee entities, or innovation support agencies in Africa, and Central Europe and thematic studies through European programs. 3/15/2018 30

Thank you for your attention Jean- Louis Leloir International expertise Direction of International affairs and Development Bpifrance jl. leloir@bpifrance. fr tel + 33 1 41798396 cellular: + 33 680485659