EU nations scrambling to support small firms during crisis[fr][de] 

The European institutions and national leaders have taken extraordinary measures to prop up domestic industries given the unprecedented nature of the current economic recession. 

To help provide lines of credit to small companies, the European Investment Bank has made €30 billion available over the next three years EIB (EurActiv 13/02/09). 

This complements efforts by the European Commission to redraft the Late Payments Directive (EurActiv 09/04/09).

Businesses are suffering serious cashflow problems due to the estimated €270 billion in unpaid invoices (EurActiv 12/05/09). 

However, it is at a national level that the real activity has taken place. Governments have become lenders of last resort. Some have cut employment taxes to boost jobs, while others have cut VAT to encourage retail sales. Still more have sought to stimulate demand by embarking on publicly-funded building programmes. 

Germany

Of the total €115 billion envisaged in Germany's January 2009 recovery plan, 15 billion were reserved for SMEs. But the largest slice of the cake - €75bn - went to large companies, including the much-debated auto bailout plan (EurActiv 04/02/09), bank subsidies and nationalisations.

The package included a scheme aimed at easing credit access for SMEs and a special fund for start-ups. The sums are managed by the state-owned development bank KfW (Kreditanstalt für Wiederaufbau).

Under the "credit and guarantee programme," companies with an annual turnover below €500 million can obtain low-cost loans for investments. However, the KfW explained that companies facing bankruptcy are excluded from funding, as bailouts are already included in the larger part of the donations.

The extent to which the SME funding will impact on the economy remains unclear. According to the Financial Times Deutschland, small businesses' interest in the programme is limited, as requests for funding have to be filed with retail banks, which are said to be ill-informed of the funding schemes.

So far, only about €2 billion worth of loans have been successfully granted, or under five percent of the €15-billion funding scheme for SMEs, according to the FTD.

France 

The French government launched a detailed plan in October 2008 which includes €22 billion for SMEs. €17 billion of this has been funnelled through banks, which have signed a deal with the government agreeing to use the funds to finance SMEs. Banks will have to produce monthly reports to demonstrate that they have fulfilled their obligations. 

A further €5 billion has been earmarked for the OSEO – a state body charged with boosting innovation and SME development – which will use the money to guarantee funding from banks and equity capital investors. The OSEO has received requests for assistance from 5,500 SMEs in the past five months and has granted loans to the tune of €450 million. 

In addition, the French government has decided to abolish a 'minimum annual tax' for SMEs with a turnover of less than €1.5 million by the end of 2011, and will waive business tax on equipment and property purachased before 31 December 2009. 

United Kingdom 

Stimulus plans for the economy in the UK centre on cutting business 'rates', a form of local taxation. A number of schemes have been rolled out across the UK's regions, with devolved governments in Scotland and Northern Ireland announcing measures to cut rates for some SMEs. 

The Scottish government has scrapped business rates altogether for companies whose premises have a 'rateable value' of under £8,000 (EurActiv 11/05/09). On top of this, there are discounts available for all firms whose premises have a combined rateable value of under £15,000. 

A scheme of this nature is not yet available to small businesses in England or Wales, but the Northern Ireland Executive has unveiled a plan to introduce 'Automatic Rate Relief' within the next financial year. 

The government has reduced the rate of VAT from 17.5 percent to 15 percent in an effort to stimulate business activity and consumer confidence. 

A new £1.3 billion 'Enterprise Finance Guarantee' has also been announced, which will support bank loans of between £1,000 and £1 million up to 31 March 2010. The guarantee can be used to support new loans, to refinance existing loans where the loan is at risk due to deteriorating quality of security, or to convert an existing overdraft into a loan to release capacity to meet working capital requirements. 

Italy 

In April, the Italian government has approved plan to increase the Fondo di Garanzia's (a warranty fund for grants) budget from €500,000 to €1.5 million. 

The decision is part of an 'emergency decree' aimed at helping enterprises avoid bankruptcy. Measures designed to streamline VAT payments and tackle late payments are also in the pipeline. 

SME lobby groups have asked for more credit, less red tape, and for accelerated implementation of existing pro-business laws. The government is working to simplify the job market and to boost workers' vocational training through an €8 billion fund for updating skills, counselling and wage supporting. 

Evidence is emerging in Italy which shows businesses led by women are faring better during the crisis than companies run by men. An Italian study published in March shows that a higher number of male managers closed their business compared to their female colleagues. 

Ireland 

Irish exporters are facing a combination of challenges, as the impact of the global credit crunch is compounded by the reduced value of the British pound. The UK remains the largest export market for Irish SMEs, and consumers in the Republic of Ireland are increasingly shopping in Northern Ireland, where goods are relatively cheaper due to the price of sterling and lower VAT rates. 

The Irish government put together an emergency budget last month where it announced a €100 million Enterprise Stabilisation Fund, which will make up to €500,000 available to help viable firms combat the financial crisis. 

SME lobby groups have called on the Irish government to guarantee up to 50% of loans to SMEs in order to insure banks against the risk of business default (EurActiv 11/5/09). 

The government has already guaranteed deposits in Irish banks and established a so-called "bad bank" to buy toxic assets from financial institutions in order to get credit flowing to businesses and consumers. 

Czech Republic 

The Czech government is focusing its efforts on improving the business environment, rather than targeting particular types of company or individual industries. The government has already abolished regulations which required tradesmen to pay some taxes in advance. 

To get credit flowing to exporting companies, loans are being made available through commercial banks and the Czech Export Bank. The government is also making it easier for SMEs to access EU funds. 

The newly-elected Czech leadership is expected to cut social insurance paid by employers, as part of its efforts to reduce the cost of labour for employers, while the parliament has lowered the tax base for companies. 

In a move designed to boost entrepreneurship, accounting requirements for microenterprises such as tradesmen have been reduced, and companies can now be formed within 24 days by following a streamlined set of ten administrative procedures. 

Romania 

The Romanian government has published a three-year macro-economic plan to tackle the crisis, which includes settling central and local government debts to private companies. It has also announced plans to recapitalise the state-owned banks CEC and EximBank as part of its efforts to boost credit activity. 

Unemployment assistance has been extended by three months and health contributions by employers have been suspended. Employees in 'technical unemployment', such as those working part-time due to production suspensions by some factories, can earn 75% of their wage tax-free for a maximum of three months. 

SME groups were up in arms last month following the introduction of a tax for all small firms. The National Council for SMEs stressed that the law is against the spirit of the Small Business Act, and the move was roundly criticised by economic commentators and tax consultants. 

The government is aiming to cut the number of taxes companies must pay in order to reduce red tape for SMEs. A report by PricewaterhouseCoopers said companies in Romania spend approximately 202 hours per year working to comply with tax requirements. 

Slovakia 

In Slovakia, €33 million has been provided to increase the basic capital of the Slovak Guarantee and Development Bank (Slovenská Záručná a Rozvojová banka - SZRB), which provides specialist support for SMEs. 

A further €11.5 million has been made available to Eximbank, which is extending loans to exporting SMEs, and €5 million has been earmarked to support between 500 and 750 entrepreneurs through a 'micro loan' programme. 

Relaxed state aid rules have enabled the Slovak authorities to channel more resources to SMEs from European structural funds. The government is seeking to link its support to energy-efficient innovations and technology transfer, and has begun to establish clusters of SMEs which can access major European funding programmes. 

As part of a plan to cut red tape – which was already well underway before the crisis began – Slovakia is exempting microenterprises from accounting requirements in cases where entrepreneurs do not have any direct employees and have a turnover of no more than €170,000. 

Retraining schemes for workers laid off are also part of the government's response to the crisis, with Slovakia hit particularly hard by the downturn in the automotive sector.