Access to private funding: the Creative Europe Financial Facility
CCS highly depend on intangible assets –such as intellectual property rights,
originality, novelty, creativity, etc.–, feature specific business models, need to
experiment and take risks in order to be able to innovate, create a value that
may cover large periods of time, and target a market demand that is uncertain
and variable depending on tastes
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.
Not only it is difficult to predict whether creative products will be successful but
there is still a fear amongst investors that artists will be more focused on their
creative success than commercial success (Creative Industries Council 2012).
“Access to Finance for the cultural and creative sector” was presented by IDEA
consult as part of the CreArt conference organised in Lecce in November
2014
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. According to this study conducted for the European Commission (EC),
the banking sector, lacking the know-how required to value all this, tends to
perceive the investment in the CCS as riskier than it actually is
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.The limited size
of the market and the diversity of the sector discourage it from developing such
know-how. On the other hand, creative entrepreneurs are sometimes reluctant
to agree on bank loans, fearing that the conditions set by the financial
intermediary may lead them to lose the control of the company.All these factors,
together with the complexity of the procedures to apply and the investment
they require, discourage cultural and creative entrepreneurs from applying for
external financing.
Strengthening the financial capacity of SMEs in the CCS is one of the priorities
of the Creative Europe Programme (2014-2020) that will be addressed through
the creation of a CCS Guarantee Fund, a financial instrument managed by the
European Investment Fund.This guarantee, which will be fully operational from
2016 and specifically target small and mid-sized enterprises, will share credit risk
with banks investing in portfolios of loans to organisations operating in the CCS.
€121 million will be set aside to fund the guarantee, which is expected to
generate more than €750 million in affordable loans.
The debt instrument proposed by CCS Guarantee Fund will be completed with
a capacity-building programme for financial institutions to acquire relevant
expertise in the evaluation of risks associated with financing the CCS.Technical
assistance and networking measures will also be provided.
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For a detailed analysis of the characteristics and financial needs of the cultural and creative sector, see
KEA (2010),
Promoting Investment in the Cultural and Creative Sector: Financing Needs,Trends and Opportunities
,
Report prepared for ECCE Innovation - Nantes Métropole
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Presentation available on:
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A study conducted for the European Commission (IDEA Consult & Ecorys (2013)
Survey on access to finance
for cultural and creative sectors
, pp.64-65) states that “CCS enterprises in general show a lower return on
shareholder funds compared to the total business economy, but have a higher EBIT (measure used by investors
to assess a company’s financial health) and profit margin.”The study highlights the importance of looking at
different levels of the value chain in CCS. Indeed, with respect to the return on shareholders’ funds, enterprises
active in creation and presentation are on average doing better than those active in education and preservation
or enterprises active in trade.They also perform well in terms of EBIT margin and profit margin.
