How Innovative Companies Can Access Risk Finance From Europe?

Access to appropriate funding is often difficult. SMEs suffer the most. Maybe your innovative SME is in need of funding. Do you know that the European Commission encourages entrepreneurship by giving SMEs access to finance?

The Industrial Leadership pillar of H2020 is part of a strategy for European research and innovation policies. It aims at speeding up the development of technology and innovations.

The Industrial Leadership pillar has several objectives, one of them is “Access to risk finance”.

The goal is to help innovative European enterprises to grow and to make Europe more attractive to invest in. And we are going to see it in details here.

Get money through loans and guarantees from European programs

When the number of financial supports declines to help innovating enterprises, it results in market failures. This is what undermines European entrepreneurship and growth according to the European Commission. A favorable financial environment for companies, in particular for SMEs is then essential.

Risk investment occurs and is needed throughout the innovation life cycle of SMEs, from its start-up phase to its expansion phase.

The European Union now takes on complementing national arrangements with specific funding institutions to encourage entrepreneurship and innovation.

Two European programs are concerned here: H2020 and the EU program for the Competitiveness of Enterprises and SMEs ( COSME) throughout loans and guarantees.

H2020 focuses on the financing of research and innovation and support for startup companies, while COSME supports their internationalization and growth phase.

Access to risk and finance has an estimated budget of €413 million for 2017. With €397 million dedicated directly to the financial instrument.

Apply to joint initiatives and entrusted entities for funding

The new financial instruments have been designed on the basis of the Competitiveness and Innovation Framework Program (CIP) and the Seventh Framework Program (FP7). Those frameworks were successful in terms of boosting investment in science and innovation.

The new financial prospects for companies in H2020 rely on two principal mechanisms. The first one is the loan guarantee mechanism for granting loans to SMEs (from banks for example). And the second is financing in the form of venture capital.

Let’s look at the possibilities of injecting money into the projects you want to launch in your company.

InnovFin – EU Finance for Innovators

It is a joint initiative between the European investment bank (EIB) and the European Commission under H2020.

With InnovFin, the EU promotes a range of funds and advisory services to make finance available for research and innovation activities in Europe.

It consists of a range of fundings, from guarantees for intermediaries that lend to SMEs to direct loans to enterprises.

It aims at supporting the smallest to the largest research and innovation projects in the EU and countries associated to H2020.

The InnovFin products can be combined with other funds in the COSME program.

Financial institutions

Entrusted entities like the EIB and the European investment fund (EIF) are important actors in the implementation of financial instruments. This, because of their partnership with the European Commission.

The EIB provides loans to medium to larger companies. And it can also provide guarantees to banks lending to those companies.

It is important to know that the EIB also provides technical assistance and advisory services like strategic planning or business modeling to the companies that want funding. Those services are supposed to allow research, development, and innovation to become “bankable”, i.e. to bring profit and growth to the company.

Beneficiaries can be from a wide range of backgrounds:

• Private sector: large and small corporates, RDI clusters, industry associations, financial market associations, etc.
• Public sector: European Commission, member states, government agencies, etc.
• Public-private and semi-public: research institutes, foundations, NGOs etc.

The EIF also provides guarantees to banks lending to small and medium-sized firms. Besides, it invests in venture capital funds providing startups and fast-growing firms with equity.

Other financial measures in H2020

Apart from finance through the measure cited previously, H2020 also supports, in particular, SMEs and startups, to become more “investment-ready”.

It relies on various programs or initiatives, directed at SMEs and startups and their national support organizations:

• InvestHorizon is a program designed to increase investments made in Innovative European SMEs. The aim is to change the SME investment market. It relies on the presupposition that better deals will come from helping both SMEs and investors to get to know each other.

• Progress TT: “public research organization growing Europe through best practice solutions for technology transfer” is a pilot initiative promoting good practice for the commercialization of intellectual property.
• ACCESS4SMEs is a network of H2020 national contact points for SMEs. Its objective is to spread the knowledge on access to risk finance opportunities under H2020. Its goal is to help the SMEs to know where to apply to get money for their project.

We hope that reading this article you came to the conclusion that there are many opportunities to develop a project in your company.

Through funding applications to EU programs and bank loans guaranteed by the EU, you have a large choice.

If you are an innovative SME or a startup that wants to apply for those funds, maybe you will soon be in need of partners or providers for your projects. Then, don’t hesitate to search on Scientist to find your future R&D partner.