Supplementing Private Financial Institutions Both in Quality and Quantity with a Stable Supply of Long-term Funds
Dedicated to Long-term Funding
If SMEs are to grow and prosper, they must continually invest capital appropriately and consolidate their financial strength. To do this, they need to be able to raise long-term funds in a stable manner.
However, SMEs are at a disadvantage to larger enterprises in gaining access to funds from capital markets. In addition, private financial institutions tend to prefer short-term loans of one year or less, thus making it difficult for SMEs to raise sufficient long-term funds.
The SME Unit specializes in long-term funds. Over 50% of the Unit's loans have lending periods of longer than five years, with fixedinterest rates that make it easier to map out repayment schedules.
By covering those areas that private financial institutions find it hard to cover, the SME Unit meets the long-term funding needs of SMEs, which are a vital component of the Japanese economy.
Stable Supply of Business Funds
The SME Unit's lending volume tends to rise sharply during a credit squeeze or when financial institutions are positioned for risk aversion (examples include the post-"Bubble" financial adjustment phase and periods of strategically tight lending) and declines when credit becomes easier to obtain.
Over the years, the Unit has provided SMEs with stable, long-term business funds by supplementing activities of private financial institutions whose lending attitudes and activities are subject to impact by changes in prevailing business conditions.
Promoting Special-purpose Loans Based on Government Policies to Meet the Needs of the Times
By providing finance through the Great East Japan Earthquake Recovery Special Loans and Safety-Net Loans, the SME Unit assisted with the financing requirements and business reconstruction needs of SMEs experiencing a harsh business environment, including those SMEs that sustained damage during the Great East Japan Earthquake.
Subordinated Capital Loans
The SME Unit supports reinforcing the financial standing of SMEs engaged in new business, business reconstruction or so forth, by applying the Provision Scheme for Challenge Support and Capital Enhancement (Subordinated Capital Loans) in cooperation with private financial institutions. Liabilities under this Provision Scheme may be treated as shareholders' equity under the borrower classifications determined by financial institutions. They are expected to have a "pump-priming" effect on co-financing with private financial institutions.
Use of these loans has steadily expanded since the program was established in FY2008.
Support for Overseas Investment
The SME Unit provides active support for the overseas expansion of SMEs, such as providing Loans for Overseas Investment, offering support for local currency denominated fundraising by SMEs' overseas subsidiaries and branches through the Standby Letter of Credit Program, offering management consulting services and holding business network meetings abroad.
In FY2013, Loans for Overseas Investment were utilized by 400 companies, for a total of 24.8 billion yen, while the Standby Letter of Credit Program was utilized by 35 companies, for a total of 1.9 billion yen.
Supporting New Businesses
The Unit provides active support to SMEs looking to develop new businesses with high growth potential, such as venture companies, through Loans to Foster Growth of New Businesses. Since the system began in February 2000, 293.2 billion yen has been loaned to 6,658 SMEs (as of March 31, 2014). In addition, the Unit also offers an unsecured loan system through acquisition of new share options issued by companies.