A NEW FINANCIAL INSTRUMENT FOR SMES IN THE CULTURAL AND CREATIVE SECTORS FROM SUMMER 2016
The Creative Europe Programme (2014-2020) of the European Commission has earmarked €121 million for a financial mechanism acting as insurance to financial intermediaries - a Financial Guarantee Facility. Access to finance is more challenging for SMEs in the cultural and creative sectors (CSS) perhaps due to the intangible nature of their assets and collaterals, and lack of training on the part of financial intermediaries in addressing the sector's specifics and requirements. One of the main aims of the Scheme is to help banks understand the creative industries and how to assess their businesses, and ultimately increase trust in their business models.
It was estimated that the financing gap in the CCS for the 2014-2020 period could amount to €1.1 to €1.9 billion per year. The new Financial Guarantee Facility, which will operate from summer 2016, will offer financing to CCS initiatives to improve access to financial products for SMEs, and stimulate the offer of financial intermediaries (e.g. banks). The expected leverage effect will provide over €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.
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.
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 Guarantee 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 within that 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 creative sectors included are:
- architecture, archives and libraries, artistic crafts
- audiovisual - 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 TO FIND OUT MORE?
You can find out more details about the benefits and workings of Creative Europe's Financial Guarantee if you click here.