The EU is to make it easier for companies to raise essential finance for investment.
The changes to the EU’s rules on government support are a response to the fact that, since the 2008 financial crisis, around a third of small and medium-sized companies around Europe have been unable to obtain the funding they need to grow and develop.
By and large, start-ups and growing businesses are still heavily dependent on traditional bank lending, which has been severely cut back as a result of the credit crunch.
Bridging the funding gap
The market failure has affected the development of companies from the start-up stage onwards, making it hard to invest in new ventures and reducing working capital for day-to-day operations.
The overall aim is to introduce rules that are simple, flexible and will provide quicker access to risk finance for small firms, enabling them to bring new products and ideas to market.
EU rules on state support for business – designed before the credit crunch to ensure a level playing field for companies – have limited the ability of EU governments to help companies unable to raise finance in the private sector.
The Commission’s new guidelines are intended cut red tape, helping bridge the funding gap and allowing EU countries to set up schemes that will make it easier for companies to access a wider range of funding support, such as equity and guarantees.
The Commision's hope is that such national schemes will give private investors more incentive to invest in small and medium-sized companies. The changes are seen as an important contribution to the EU’s efforts to re-launch economic growth.
Larger amounts of aid – up to €15m per firm – will be exempt from Commission scrutiny, compared to a maximum threshold of €1.5 million per firm per year today. The change will allow the Commission to focus on cases with the most impact on competition.
The new rules, which follow extensive consultation with EU governments, will apply from 1 July 2014 and are part of a wider overhaul of EU competition regulations.
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