Funding and Investment Opportunities for SMEs

An overview from the professionals

Whether you are a small or medium-sized enterprise (SME) in Ireland, Portugal, or elsewhere in the world, it’s important to know your options for growth. Whether it means accepting private investment in exchange for equity or if it means seeking out local grant programs for refundable or non-refundable funding, you need to understand the implications of each and whether your SME qualifies for a public (or private) cash injection to help fuel your company forward. 

For example, according to Vinny Reynolds, Managing Director at IPBN member company GRID Finance, a company that provides quick access to capital, advice, and tools to help small businesses grow, there are opportunities out there that you might not have considered, which is why Grid Finance provides SMEs with card-based revenue (think Stripe or Paypal) with short-term funding up to 12 months. It also offers business loans on income from food delivery programs like Just-Eat or Deliveroo, as retailers often need to fund the purchase of new stock, refurbishments, marketing efforts, or unexpected expenses quickly. “We know that flexibility is what SME business needs and we can provide it. We are open for business and are ready to help those businesses recover from the impact of Covid-19. All repayments are set as a percentage of the SME’s daily income, not a nasty chunky fixed monthly repayment that can put the business under pressure.” Vinny said. Two of GRID Finance’s most successful initiatives were launched during the Covid-19 pandemic were SME Recovery, and Lean On Me, both of which advocated for policy responses that supported SMEs nationally and locally.

Luis Escudeiro from IPBN member company ACT Solutions told the IPBN, “2022 is a great year for grants and investment incentives to help companies plan and execute their investment projects. In fact, for the first time, Portugal has three framework programs funded by the EU working simultaneously: Portugal2020, PRR, and Portugal 2030. These programs can give SMEs interesting funding alternatives for which you won’t have to trade equity or a percentage of your business.”

Portugal 2020

Portugal 2020 was planned to be available between 2014 and 2020, in order to help Portugal reach the Investment Priorities defined for this period while funding projects which aim to reach the proposed goals: increase competitiveness and international presence of SMEs, strengthen social inclusion and employment, reinforce human capital skills and knowledge, and promote sustainability and efficient use of resources. Luis says that there are currently programs that hold high value in the grant decision-making process, namely those in Productive Innovation, Qualification, Internationalization, and Technological Research and Development. The projects related to business innovation within the industrial or tourism sectors are deemed Productive Innovation while helping SMEs whose aim is to acquire new technology, certification for products or services, or achieving quality certification (i.e., ISO 9001) is classified as Qualification. There is also emphasis placed on helping SMEs strengthen their international presence through international market sales whilst simultaneously establishing a more competitive presence in the national market, considered Internationalization, and lastly, if the SMEs are intent on increasing their investment in research and development (R&D), through innovative projects with or without a consortium with Universities or Research Centres, it goes under the category of Technological R&D. 

While only Qualification and Internationalization are restricted to SMEs, they are eligible to receive higher incentives compared to bigger companies. These two programs provide non-refundable incentives, while Productive Innovation and Technological Research & Development offer hybrid Incentives: one part being refundable and the other non-refundable.

Portugal 2020 additionally values projects in the Sustainability sector, like circular economy, renewable energy, and other green initiatives. 

PRR - Resilience and Recuperation Plan 

Luis explained that the “PRR is a framework program intended to provide incentives to Investment Projects that will help restore economic growth after the Pandemic and is set to run until 2026. This instrument is based on three fundamental cornerstones: Resiliency, Climatic Transition, and Digital Transition.” The good news? The majority of the presented incentives from PRR will be available for SMEs with both refundable and non-refundable incentive types. Luis categorizes the areas of interest as Business Innovation and Capitalization, Industry Decarbonization, Sustainable Bioeconomy, and Companies 4.0.

Célia Esteves, Director of Systems and Processes at IPBN member company Yunit Consulting further explained that “the Portuguese Incentive Systems for Companies had, at the end of December 2021, a commitment rate of 156% and an execution rate of 88%. These numbers show that, despite difficulties, companies have made the investments they proposed and intend to continue investing.” She says that the PRR could be a good fit to finance your investment project especially if it has a level of maturity in the area of hydrogen and renewable gases, business innovation like sustainable tourism, or in industrial decarbonization as the 185 M€ hydrogen and renewable gasses investment budget has only financed the first 62 M€. According to Célia, other calls for submission in technological R&D, with a Technology Readiness Level (TRL)of 6 or more and tested technologies with a TRL of 8 or more will be announced soon. When it comes to business innovation, if an SME has a collaborative project that covers the entire innovation cycle, from R&D to commercialization, they could be in luck to receive funding down the line as the second phase of project submissions for this year are due to be submitted by the end of March. These projects represent 10,3 thousand M€ of investment, 42% concerning the thematic area of ​​energy. Considering the average incentive rate of projects in the Portuguese Business Incentive System 2020, 50%, we have a factor of at least 5 times more proposed investment than can be financed. In other words, everything is open.

In the area of Industrial Decarbonization, with a budget of 705 M€, there are many areas in which an SME can apply for funding. From low carbon processes to energy efficiency from renewable sources to technology in the low carbon economy and intelligent energy systems and energy storage, there’s definitely room to maneuver. The IPBN will be covering this topic in more detail at our annual St. Patrick's Sustainability Conference at the CCIP in Lisboa, so register here if you have an interest in the finer points. 

The process to fill out and submit applications for this type of funding should, in theory, be relatively simple, but that hasn’t been the case so far. Aside from rating at least 4 out of 5 in all or most of the criteria areas, the format and wording on the applications themselves are tricky, so having a professional on your side can make a huge difference to get your numbers where they need to be and when they need to be. 

Portugal 2030

Portugal 2030 is a new framework program funded by European Funds, planned to take place between 2021 and 2027, however, the program is anticipated to begin operating at some stage this year (2022). As the application calls are not open yet, it is still possible to disclose the fund’s priorities, even though the information regarding the grant is indeed limited. According to Luis at ACT Solutions, the areas of Knowledge and Innovation, Education, Qualification and Employment, Energy and Climate Change, the Blue Economy, Competitiveness and Cohesion for Rural National Territories and Peripheral Areas, and Agricultural Development are the areas that will be targeted for investment. These areas are mostly self-explanatory and there seems to be room for interpretation, as with any grant application process.

Overall: A Bird's Eye View

The important thing to be aware of is that in order to do it right, seeking help from a consultant is definitely a good bet. Luis’s advice is to “think about what you want to achieve and meet with different consultants. Find out the best fit for you and your objectives as they are the ones who will be working by your side, fine-tuning your strategy, and showing you the opportunities and different paths you can choose from.” 

Célia at Yunit Consulting seconds the sentiment and recommends that SMEs anticipate and prepare their investment project to submit at the first new funding opportunity. Consultants like ACT Solutions and Yunit Consulting are there to help survey the constraints and limitations of the business and identify the differentiating factors and the strategic definitions that will allow the companies to reach diversified and, preferably, demanding sectoral and geographic markets.

Derek F. Butler, CEO of Grid Finance told the IPBN, “We are driven by the belief that small businesses are the engine of change in society. GRID enables these creators and doers to generate economic activity that creates employment because of the products they have built and the services they deliver. The impact that business owners have on broader society is discreet, uncelebrated, and profound. They are the people worthy of backing and support as they are the true vehicle of change in our society.” 

Luis at ACT Solutions says, “At ACT Solutions we feel every company and every project is unique, and so is the structure and most adequate strategy. This means removing any excess weight the new projects might carry whilst supplying the key relevant information needed to understand the systems and frameworks in place.”

Suffice it to say that focusing on what you do best is key, especially when you can outsource the application work to the professionals, allowing you room to build your company up toward its full potential. 

If you’d like to share your thoughts on what it means to be a Portuguese SME and how you see the recovery process going, please take a moment to take this short survey. It should only take you about 5 minutes. Yunit Consulting, who is promoting this study, says,Your answer is essential for us to draw a real image of the Portuguese SMEs to assess the state-of-the-art: from human resources management, through sustainability or digital transformation strategies.”

 

For further information, here are the contact details of the three IPBN members we interviewed: ACT SolutionsGRID Finance, and Yunit Consulting.