European support to small and medium sized companies

Small and medium-sized enterprises are a pillar of the European economy. They represent more than 99% of European companies and two-thirds of jobs in the private sector. The support of these companies is therefore essential for the European Union to continue to develop. It is for this reason that the European Union is committed to supporting small and medium-sized enterprises through the establishment of subsidies and financial instruments.

Cohesion policy 2014 – 2020

Every 7 years, the European Union reviews its strategy for allocating European funds to adapt to economic, social and environmental developments. This strategy aims to respond to the challenges of territories and populations and to the new challenges of the European Union. This strategy must be adapted to the situation of each of the Member States according to their economic context. Between 2014 and 2020, the cohesion policy 2014-2020 was put in place . This sets 11 thematic objectives on which the granting of funds is oriented. Improving the competitiveness of SMEs is one of the 11 thematic objectives of. Indirectly, SMEs are also supported by the support given to other thematic objectives: the strengthening of research, technological development and innovation, the promotion of sustainable and quality employment, information technologies and communication…. The question arises as to how the European Union is pursuing this strategy.

Various financial instruments have been put in place by the European institutions to carry out cohesion policy. Financial instruments aim to encourage investment in income-generating activities and savings while maximizing private investment, without excessive public support. This would make it possible to meet the objectives of cohesion policy: economic, social and territorial cohesion. Financial instruments represent a more efficient and sustainable alternative to complement traditional grant-based support. Unlike grants, which consist in allocating public funding to companies, financial instruments consist of loans, guarantees or even equity investments. The European Commission considers that these financial instruments are a more sustainable and more effective means of supporting growth while complementing the subsidies granted by the States and the EU This support to SMEs is mainly through funds: the Structural and Investment Funds European Funds (SIE Funds) and European Funds for Strategic Investments (EFSI).

Funds and the economic development of states

SIE funds aim to support the economic development of states and aim to invest in job creation and in a healthy and sustainable European economy and environment. It is made up of 5 different funds. These funds are said to be under shared management, that is to say a budget is allocated to the member states: each state decides on the methods of managing the funds allocated to it on its territory. In France, the funds are managed by the State and the Regional Councils. Among them is the European Regional Development Fund (ERDF).

The ERDF is one of the main providers of aid for the new strategy for SMEs aimed at fostering “an economy that works for people”, in the words of the European institutions. The European Union started from the observation that the social economy promotes growth and reduces poverty and inequalities. Being at the service of citizens would make it possible to achieve this objective and this requires strengthening small and medium-sized enterprises.

The European institutions have planned that around 20% of the European Regional Development Fund (ERDF) should be dedicated to SMEs

According to the European Union, investing in SMEs will allow them to access finance, benefit from targeted business support services, improve their access to global markets, tap new resources, invest in human resources and promote innovation. For the 2014 program, the European institutions have planned that around 20% of the European regional development (ERDF) was to be dedicated to SMEs. This fund will be maintained in 2021. How to benefit from the ERDF? The modalities for making a request for funds depend on the States. In France, the ERDF is managed by the regional councils. This implies that the request must be made from the region and that the regional councils will have the role of choosing who can benefit from the subsidies. In Ireland, the ERDF is implemented through two regional operational programs managed by the relevant Regional Assembly. Enterprise Ireland (EI) is responsible for the implementation and management of the relevant ERDF grants. A precise procedure must be followed to make a request for funds.

European funds for strategic investments is the central element of the Investment Plan for Europe, which aims to stimulate long-term economic growth and competitiveness in the European Union. The fund aims to help use public funds, including funds from the EU budget, to mobilize private investment for a wide range of projects in the EU, especially in areas such as infrastructure, research and innovation, education, health and information and communications technologies. This was created in July 2015 by the regulation on the European Fund for strategic investments and is managed by the European Investment Bank (EIB).

The EFSI pursues different goals. First, it aims to provide the EIB with increased risk-taking capacity for its investment operations. Second, it aims to address market failures and situations where investment activity is too low.

But who can participate in EFSI?

EU Member States can contribute to the EFSI by means of guarantees or cash. They can participate in these activities through investment platforms, which will be created to support groups of projects. Member States can also contribute to the financing of specific projects. In addition, they have the opportunity to participate through their national development banks. Other investors, both public and private, may participate in a project or in the investment platforms. But be careful, contributing to the EFSI does not give any right to influence the governance of the fund.

EFSI is open to a multitude of entities, whether they are from the private sector, the public sector, a financial institution, a platform or an SME. What procedure is used to request an investment request? This is not the responsibility of states but of the European Investment Bank. It should be noted that for the long-term budget 2021-2027, the EFSI aims to integrate the InvestEU program in order to regroup the financing of the EU budget in the form of loans and guarantees in a single structure. Therefore, the investment application process is set to evolve. Eligible final beneficiaries can be natural or legal persons established in an EU country or in an eligible third country. The European institutions have drawn up a list of beneficiaries. To request funding, project promoters should contact the partners responsible for implementing the funding directly. Regarding SMEs, micro-enterprises, social enterprises, they should contact a local commercial or public bank that offers financial products covered by the EU guarantee in their country or region. The local intermediary will let them know if a particular financing program is covered by the InvestEU Fund. The procedure to follow therefore depends on the quality of your business.

The European COSME program to support the competitiveness of SMEs has been allocated 2.3 billion euros under the 2014-2020 cohesion policy to support and finance all French and European SMEs in their phases of creation, growth, transmission and internationalization. In the same way as for the funds mentioned above, this programme did not end with the end of the European cohesion policy, it was integrated into the EU’s program for the single market by a Regulation of April 28, 2021 .

New European orientations

Reports were published in 2020 to assess the effectiveness of the funds put in place in the 2014-2020 cohesion policy as well as to suggest guidelines for future long-term policies. These findings revealed the need to simplify the administrative burden that had hitherto been a deterrent to initiating. Simplifying the rules for implementing cohesion policy is therefore essential to guarantee the mobilization of European funds for smart, sustainable and inclusive growth, and to bring it closer to the citizens of the European Union. However, it cannot be denied that cohesion policy has had a significant impact in the European Union and more particularly on the level of certain countries in which it represents up to 4% of their GDP.

The European Union has entered a new era for its cohesion policy at the start of 2021: what are the new European orientations from the beginning of this year until 2027?

While the 2014-2021 cohesion policy was oriented around 11 thematic objectives, the strategy which begins in 2021 covers 5 priorities:

• Innovation through supporting SMEs
• Climate change
• The development of digital infrastructures
• Social action: poverty reduction, support for quality jobs, education, equal access to health care and social inclusion
• The development of local projects

The main change between the 2014 and 2021 programming concerns the European Social Fund. Its field of action is broadened and will include the theme of aid to the most deprived, which until then fell under the prerogatives of the European Aid Fund for the Most Deprived (FEAD).

To support entrepreneurs in their projects, the Enterprise Europe Network (EEN) has been set up which aims to help businesses to make the most of the single European market and support them to enable them to develop internationally. It allows companies to find partners, information on European legislation or advice on European funding.

For any additional questions concerning aid granted to companies by the European Union, do not hesitate to contact the Eternoscorp team which remains at your disposal to answer your question but also to assist you with any request for financial aid. with institutions.