Brussels, 07/01/2014 (Agence Europe) - Cultural and creative sectors are missing out on billions of euro in bank loans, according to a study commissioned by the European Commission and published on 7 January. The aim of the study is to assist the Commission in developing effective strategies for cultural and creative ventures, so that such businesses gain better access to the funding they need for developing their activities. This comes within the context of the new “Creative Europe” programme, which took effect on 1 January 2014.
Despite a solid business plan, interesting commercial objectives and good risk profile, the cultural and creative businesses are still struggling to obtain bank loans. This is due to the imbalance that exists between supply and demand on the loan market, with banks still hesitating to lend money to businesses in the creative sector. Over the next seven years, the funding deficit could reach up to €13.4 billion - a deficit that corresponds to the amount of investment lost by companies that have requested a loan but had their request refused, or that have given up the idea of submitting a request as they lack sufficient collateral assets. As a result, a sector which is crucial to the European economy - producing faster than average growth and accounting for up to 4.4% of the EU's GDP - will see its growth significantly hampered, the Commission bemoans.
In the new Creative Europe programme, the Commission has envisaged a financial guarantee facility. Operational in 2016, this guarantee will specifically target small and medium-sized enterprises (SMEs), assisting them by sharing the risk on loans offered to them by banks. Creative Europe will set aside more than €120 million to fund the guarantee, which is expected to yield more than €750 million in affordable loans. The bulk of the programme's resources will continue to be allocated for non-repayable grants. In tandem with the guarantee, the Commission will support initiatives aimed at improving knowledge among lenders and borrowers about the factors which should be taken into account when assessing the credit-worthiness of SMEs in the cultural and creative sectors. Many lenders have insufficient experience in assessing the solvency of businesses with “intangible assets” such as intellectual property rights. Furthermore, banks are also hampered by a lack of reliable statistical evidence on the sector. The findings of the study show that, compared to the economy as a whole, European cultural and creative businesses actually have a better-than-average profit margin and solvency ratio. In order to circulate this kind of information more effectively, the Commission plans to set in place a project aimed at training financial sector professionals, as part of Creative Europe. Training is also needed, however, for those working in the cultural sector who often lack financial and management skills. Thus, 60% of respondents in a survey carried out as part of the study said they did not have a business plan. Of the 26% of respondents who have not looked for external finance in the past three years, 39% said they considered it as too complicated or time consuming. The Commission plans to work on this by supporting measures aimed at improving entrepreneurial skills for those working in the cultural and creative sector as part of the Entrepreneurship 2020 Action Plan. Such measures, which will take the form of training, exchange of best practice and coordination between those working in the sector, will allow creative SMEs to tap into private funds more easily, to contribute to the growth of their sector, and to improve their reputation as a “hotbed” of creativity and entrepreneurship, the Commission states. (IL/transl.jl)