A new financial instrument for SMEs
The Creative Europe Programme (2014-2020) of the European Commission has earmarked EUR 121 million to a financial mechanism acting as insurance to financial intermediaries. This programme offers financing to CCS initiatives to improve SMEs' access to financial products and stimulate the offer of financial intermediaries (e.g. banks). The expected leverage effect will provide over EUR 600 million in loans and other financial products.The scheme is managed by the European Investment Fund (part of the European Invesment Bank), on behalf of the European Commission.
Access to finance is more challenging for Small and Medium Enterprise (SMEs) in the cultural and creative sector (CCS) as compared with conventional SMEs. Some of the reasons could be, the intangible nature of their assets and collaterals, the limited size of the market, and the lack of training (on the part of financial intermediaries) to address the sector's specificities. It was estimated that the financing gap in the CCS for the 2014-2020 period could amount to EUR 1.1 to EUR 1.9 billion per year. Between 280,000 and 476,000 SMEs in the CCS may not obtain financial intermediary loans due to a lack of collateral only.
How does the CCS Guarantee Facility work?
To encourage the creation of portfolios, the European Commission has committed to partially cover financial intermediaries' potential losses when they engage with CCS projects. Coverage will reach up to 70% of individual loans' losses and up to 25% for portfolios using two models:
- the provision of guarantees to financial intermediaries to cover portfolios of loans
- the provision of counter-guarantees to Guarantee Institutions giving guarantees to financial intermediaries to cover portfolios of loans or project-based loans.
In addition to the guarantee in place, the European Investment Fund will also contract a capacity-building provider to train financial intermediaries, with a view to increasing their understanding of CCS peculiarities.
What can the financial intermediaries offer?
A variety of financial products can be proposed by the financial intermediaries: investment in tangible or intangible assets, business transfers, or working capital.
What are the benefits for financial intermediaries and CCS SMEs?
The facility would offer the possibility to build diversified and risk-mitigated portfolios of loans to financial intermediaries wishing to engage with CCS initiatives. In addition, intermediaries would have the opportunity to brand themselves as "the CCS financial intermediary" in their respective markets.
As far as the cultural and creative SMEs are concerned, they will more easily access loans since financial intermediaries will be trained to understand and address their specificities. In addition, SMEs will take this opportunity to improve their business plan and structure.
Who is eligible?
Financial intermediaries will be able to submit an application to an open call of expression of interest that will remain open during the whole duration of the programme. Once a financial intermediary is operating under the facility in its market, companies active in the cultural and creative sector, located in the countries participating in the Creative Europe programme and responding to the definition of small and medium-sized enterprises will be able to apply for a loan or a guarantee by approaching the financial intermediary operating in its market.
Eligible activities are market or non-market oriented, disregarding the type of legal structure that carries them out. Such activities include the creation, production, dissemination and preservation of goods and services which embody cultural, artistic or creative expressions. The sector includes architecture, archives and libraries, artistic crafts, audiovisual (including film, television, video games and multimedia), cultural heritage, design, festivals, music, performing arts, publishing, radio and visual arts.
The facility will start rolling out in summer 2016.
Where can I find out more?
More information on countries entering the scheme and selected financial intermediaries will be posted here. For additional details, refer to the Creative Europe Programme, EU Access to Finance portal and the presentation of the guarantee facility.