The Entrepreneurship 2020 Action Plan highlights six key areas where action is needed to remove existing obstacles impeding the creation and the growth of new businesses in Europe. These include the access to finance for small and medium-sized enterprises (SMEs): without adequate funding and without liquidity, no business can operate, invest and grow.
Entrepreneurs often face difficulties raising capital in the early stages of their businesses when they need to commercialise research and development and test innovative business models. Historically, SMEs have relied on bank loans to cover these costs. For the last 10 years however, the bank credit constraints that resulted from the economic crisis, have greatly impeded this practice.
In this context the Entrepreneurship 2020 Action Plan shows that is important to increase the quality and financial returns of start-up projects. Financial support for testing, demonstrating and piloting new technologies, strengthening venture capital, angel investments, incubators and loans for high potential SMEs are some of the areas where action is possible.
The European Commission offers support in these areas under Horizon 2020 and especially under the Programme for the Competitiveness of Enterprises and SMEs (COSME). COSME aims to simplify the access for SMEs to finance in all phases of their lifecycle – from creation to expansion including business transfer.
A successful entrepreneurial ecosystem is also dependent on the existence of early stage investors (venture capitalists, business angels) that provide seed and first round equity investments. They also support the entrepreneurs and give advice during the five first years of the company. They play an important role in the financing of SMEs and should be supported in this by the Member States’ legislation (simplification of tax legislation for example).
Social economy actors and social enterprises are also important drivers of inclusive job creation and social innovation. While they face similar problems as most SMEs, they may encounter additional difficulties for accessing capital which the European Commission addressed in the Programme for Social Change and Innovation (PSCI)
The COSME and PSCI programmes are reinforced under the European Structural Funds.
In an upcoming policy brief, more details will be provided on these two programmes as well as on the actions specifically implemented to improve access to finance for SMEs. The brief will also give insight to Interreg Europe projects dealing directly or indirectly with this issue, mainly through best practices on cross border exchange regarding the regional situation of startups, innovation ecosystems and business financing.
The Policy Learning Platform is the second action of the Interreg Europe programme, established to boost project results and increase policy impact of investments on growth and jobs. The Platform is a space for continuous learning where regional actors in Europe can tap into the knowhow of experts and peers.
Image credit: Photo by Tim Evans on Unsplash
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