"In order to take account of the needs of our members in the face of current challenges, we have adapted our offer to provide a concrete response to the needs identified", explained , chairman of the Mutualité de cautionnement (mutual guarantee scheme) at the presentation of Bounce, the new programme launched by the Mutualité, on Thursday. The programme, over the two years of its existence, will be able to cover up to 80% of the bank financing required by businesses, whatever their maturity, including transfers.

An 80% financing guarantee

In practical terms, the Bounce guarantee applies to all types of bank financing transactions. Up to €150,000, the guarantee will cover 80% of the financing obtained. Beyond that, cover will be reduced to 50%. For a single financing project, the scheme’s total commitment is limited to €500,000 over a maximum period of 10 years.

To obtain this cover, the entrepreneur must first provide proof of a financing plan backed by a bank. It should be noted that the Mutualité only intervenes on bank financing granted by Luxembourg partner credit institutions. To benefit from this guarantee, the entrepreneur must contact the Mutualité, providing the contact details of their bank advisor and a brief description of the project, or ask the bank advisor to contact the Mutualité directly. Once the information has been exchanged between the Mutualité and the bank, a decision will be taken within a week, "without any further action on the part of the entrepreneur", said Christophe Stein, CEO of the Mutualité de cautionnement. The cost to the entrepreneur is between 0.5% and 1% of the guaranteed amount per annum. A risk premium is payable when the guarantee is taken out by the entrepreneur, with no additional costs thereafter.

If the borrower is unable to repay the loan, the Mutualité de cautionnement will pay up to 80% of the balance of the loan to the bank.

Little-known lever

"This innovation meets the needs of entrepreneurs by providing a practical solution that helps them to mitigate risk, access finance more easily and develop their business," said , chairman of the Chamber of Commerce, the mutual scheme's main shareholder. Ernster, before becoming chairman of the Chamber of Commerce, was chairman of the Mutualité de cautionnement, an institution founded in 1969 following a joint initiative by the hotel and catering sector and the Luxembourg Confederation (formerly the Confédération Luxembourgeoise du Commerce) with the aim of supporting entrepreneurs throughout their projects.

"With its capital of €20m, the Mutualité is an extraordinary lever for helping businesses and the Luxembourg economy as a whole." Ernster noted, however, that this "extremely effective lever is under-utilised. Our offer needs to be better promoted in the Luxembourg economy. We could have a tremendous impact at a very low cost".

In 2018, under the chairmanship of Ernster, the Mutualité restructured the way it operates "with a view to simplifying its functioning and modernising it", Goeres stated. “We have opened up our organisation to all types of company and all types of financing. New products have been introduced, such as bonding on bank guarantees and refinancing of state aid. The latest measure implemented this year was to increase the standard rate to 50%, to cover half the risk borne by each entrepreneur.” Today, 60% of applications come from the trade and services sector. The hotel and catering and craft sectors each account for 20% of the customer portfolio. Its average guarantee is €65,000 for an average financing of €160,000 per project. In 2020, during the covid crisis, the Mutualité granted €12million in guarantees over 5 months.

Advice too

Guarantees are not the only service provided by the Mutualité. As a partner and integral part of the House of Entrepreneurship, it gives entrepreneurs access to free, dedicated support. They benefit from a wide range of services, including advice on setting up a business, advice on accessing financing and state aid, support in drawing up a business plan and assistance with transferring a business, to name just a few examples. "An entrepreneurial project cannot be summed up by financing alone", insisted , director of the House of Entrepreneurship.

Read the original French-language version of this news report