Culture and Creativity
Culture and creativity are the beating heart of our identities and act as valuable forces for social mobility and innovation. Yet there is a perception problem: Small businesses in culture and creativity cannot be profitable. We disagree. By guaranteeing a portion of loans to SMEs in the cultural and creative sectors, we are putting our money where our mouth is. During 2018, our guarantee facility (CCS GF) in this area exceeded expectations. What is more, we have opened a window (CCS Capacity Building) to help banks and funds better support these businesses. And this is crucial. According to the EC, the funding gap for SMEs in this sector is estimated at up to EUR 4.8bn.
Highlights
The second full year of the cultural and creative facility
In 2018, the CCS GF really came into its own, with demand substantially exceeding expectations. Thanks to EFSI support, signatures under the programme hit EUR 84.1m by the end of the year (up from EUR 50m in 2017), reaching nine countries and expected to generate EUR 952.6m of debt financing to SMEs, after only two years of implementation.
…including our first in Denmark
Danish sovereign investment fund Vaekstfonden has launched a new loan product supporting more than 80 SMEs in the cultural and creative sectors, thanks to a DKK 52.5m (EUR 7m) guarantee from the CCS GF. Up until now, Vaekstfonden has not targeted SMEs in these sectors, but with the help of the guarantee and the CCS capacity-building services, it expects to set in motion dedicated marketing campaigns and raise the profile of cultural and creative SMEs in Denmark.
Building stronger financial intermediaries
In 2018, financial institutions have deepened their understanding of this valuable sector through a new capacity-building window under the CCS GF. This means everything from assessing risk on an SME with intangible assets to looking at how they can support new cultural and creative areas within their own financial activities.
“Our long careers in the fashion industry were not enough to convince the banks. Fashion is simply not a hot topic for financing.”
Ine Verhaert, co-founder of KAAI
Antwerp, Flanders, Belgium. Carrying your life.
Financing purpose: production. EIF financing: Cultural & Creative Sectors Guarantee Facility (CCS); EFSI.
Capacity building in 2018. Our story.
First, we needed someone to work with. In 2018, we selected international consultancy Deloitte Luxembourg and culture and creative policy and economic specialist KEA European Affairs, to provide the capacity-building services under the CCS GF.
This is a broad sector with many challenges. Their mission is to increase financial intermediaries’ understanding of the needs of the cultural and creative sectors - through technical assistance, knowledge-building and networking measures. Including:
• Assessing the credit risk associated with SMEs in the cultural and creative sectors given the intangible nature of the collateral assets;
• Understanding the business models and specificities of the cultural and creative sectors and their sub-sectors;
• Assessing applications for debt financing from SMEs in these sectors;
• Raising awareness about the CCS GF among eligible SMEs
• Broadening the financial intermediary’s financing activities to new sub sectors
• Acquiring expertise in new fields of activity of projects within the CCS (e.g. co-productions, international projects, etc.).
In 2018, we signed six financial intermediaries up to the CCS capacity-building services.
What is the CCS Capacity- Building Window?
Together with the CCS GF, this window helps financial intermediaries better serve creative and cultural SMEs by providing high-level consultancy and support. It was rolled out in 2018 and is open to all financial intermediaries signed up under the CCS GF.
So why has this sector been underserved in the past?
SMEs in this sector often lack tangible assets against which to secure a loan. Their output is early-stage or prototype in nature. Many SMEs in the cultural and creative sectors operate in a niche market of a small size, creating a lack of critical mass. They have specific cash flow patterns and lifecycles. Personal collateral is typically requested when providing finance to the cultural and creative sectors. There is a shortage of reliable data, which limits the possibilities of SMEs in the sector to get funding. Few banks understand the specific nature and business model of SMEs in this sector, hence the need to create more awareness and build capacity in this area.
“The digital world is often considered to be beyond parents’ control and associated with bad influence. We want to challenge that assumption.”
Editora OQO
Pontevedra, Galicia, Spain.
Financing purpose: production of books. EIF financing: Cultural & Creative Sectors Guarantee Facility (CCS).
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