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Boosting business

 

Prior to the recently announced attempts by the G20 and other world leaders to drag the global economy out of the financial crisis, the EU Commission had already announced plans to help small and medium-sized enterprises (SMEs) prosper and flourish.

 

By Ian Reddin Published 26 May 09
 

With the introduction of the Small Business Act (SBA) for Europe in June last year, it was promised that: “Small companies across Europe can look forward to a new instrument to do business in the single market.” EU Internal Market and Services (EIB) Commissioner Charlie McCreevy said: “The SPE (European Private Society) is transparent, flexible and will offer a strong label everywhere. I therefore encourage the Council and the European Parliament to quickly reach an agreement on the Commission’s proposal.”

 

To show political willingness and to recognise the central role of SMEs in the economy, the EU put a comprehensive range of policies in place with the objective of simplifying, modernising and diversifying the range of instruments available to support SMEs. The SBA has been enacted to recognise the role of entrepreneurs, micro-enterprises, family-run businesses and socio-economic enterprises by listing 10 guiding principles which member countries should apply to administrative procedures to ease the burden on SMEs.

 

Under the SBA, member states should work towards a reduction in the time needed to register new enterprises to a maximum of just one week and the issuing of licences and permits should be completed within one month. These measures are in addition to the previously announced European commitment to a 25 per cent cut in the administrative burden on SMEs by 2012. It was also proposed that special one-stop shops be set up to assist in business start-up and recruitment procedures. Some of the above requirements are already working models in Portugal with Empresa na Hora (Company in an hour), and even Empresa Online, whereby certain professionals and Cartão de Cidadão (Citizens’ Card) holders can set up a business online.

 

To help promote a single free trade global market and assist SME expansion into international markets, the EU has also made available a series of measures which will offer more resources to gain funding where it is most needed: research and development and innovation. In hard terms this should translate into easier access to public contracts and more finance for turning environmental challenges into business opportunities.

 

With the creation of new SMEs in mind, the EU plan also initiated a work-experience scheme which offers the opportunity to young people who are interested in starting a business, the chance to spend time in an existing SME within member states. The Erasmus programme for young entrepreneurs hopes to create a more comprehensive SME network and upgrade skills and standards.

 

To aid the expansion of SMEs into other member countries, the SBA includes a new statute which allows companies to operate, and start up, across borders according to uniform legal provisions to be adopted by all the member states. This measure is aimed at saving time and money for enterprises that do business in member countries.

 

Another proposal put forward by the European Commission is to lower VAT rates for labour intensive services which is hoped to have a positive effects for businesses such as hairdressing, catering and repair services.

The Act also recognises the crippling effect late payments can have on SMEs and intends to simplify existing provisions in order to ensure that businesses in this sector receive payment within 30 days and the Commission is also proposing a revision to the Late Payments Directive.

 

State aid for SMEs

In January this year, the EU announced the temporary relaxation of rules governing the amount of aid that individual member governments can give to individual SMEs. Up until the end of last year, member states were obliged to notify the EU Commission of all cash injections, loans and subsidies given to SMEs which surpassed the value of €200.000, but due to the “exceptional economic conditions” of the current global crisis, this limit has been temporarily raised to €500.000 for a period of two years.

 

 

The EU also relaxed rules that required SME loan rates to follow market rates, allowing government sponsored support to be offered at reduced or preferential rates, a measure considered crucial for helping small and medium-sized enterprises to stay in business under present conditions. New guidelines have also been introduced which allow governments to offer SMEs up to €2,5 million in venture capital.

 

According to the EU Competition Commissioner, Neelie Kroes, “These changes are justified given the exceptional economic conditions,” but he stressed that, “given that these are temporary circumstances, these measures must also be temporary.” The EU is hoping that bank and business lending will have recovered by 2010, at which time it is foreseen that the previous rulings will be reinstated.

 

SMEs explained

According to a Eurostate survey for key indicators for enterprisese in the non-financial business economy from 2005, small and medium-sized businesses account for over 99 per cent of all companies registered in the EU. An SME is defined as a company that employs no more than 249 people and has a maximum annual turnover of €50 million.

 

The SME can also be divided into three sub-categories, namely the micro-enterprise, one with fewer than 10 employees, the small enterprise, with between 10 and 49 employees and the medium-sized enterprise with no fewer than 50 employees and no more than 249.

 

SME registration

When a business applies for SME loans or funding, the bank or financial institute will require confirmation that it complies with certain criteria set out by the EU Commission. Many banks offer special loan and overdraft facilities to SMEs and, since the SBA was introduced, specialist companies have flourished in the EU bloc offering guidance and assistance in procuring aid and funding. Lenders are fully conversant with the EU regulations and requirements needed to qualify as an SME and any eventual financial assistance will be guaranteed by the European Central Bank.

 

As with all loans and funding agreements, conditions and terms will apply. Depending on the type of assistance required, the SME will need to furnish financial and operational information, and comply with all local and national laws, including company registration and certificates of competence (health and safety, insurance cover, etc.). By agreeing to certain compromises, such as committing to a policy of fair work and wages or reaching targets for the use of renewable energy, it may be possible to gain extra resources and better terms. The more an SME complies with EU targets and work policies, the better the opportunity for increased aid.

 

To avoid the repetition of giving the same information for individual loans and funding, for there are indeed many different schemes available, the EU Commission has set up a central SME registry service, or Unique Registration Facility (URF). By supplying the required information, participants will no longer have to submit their legal and financial information each time a new grant agreement is required. Once participants have been validated for existence as legal entities by the EU Commission’s central validation office, they will only have to submit their Participant Identification Code (PIC) for each application. To apply for registration, see CORDIS.

 

Portugal’s SMEs

Following a two year statistical survey of national SMEs, jointly carried out by various national institutes between 2005 and 2007, it was revealed that more than 62 per cent of the surveyed companies employed between 10 and 90 workers, 24,5 per cent between 91 and 170 workers and 12,7 per cent between 171 and 250 workers.

 

Taking into consideration that the EU only set guidelines which member states agree to follow, some national differences in the actual implementation of these recommendations can occur. According to a report by Luís Graça from the National School of Public Health in Lisbon, the national legal framework defines micro-companies as those employing fewer than five people and having a maximum €500.000 annual turnover, and LEs (Large Enterprises) as those that employ more that 200 people with a minimum annual turnover of about €10 million. The published Statistical Yearbook of Portugal still considers SMEs as those companies with fewer than 500 employees and an annual turnover below €10 million, only proving that there are differences in the interpretation of SME standards.

 

Local help for SMEs

Portugal has many local, regional and national associations that look out for the interests of SMEs, one of which is ACRAL, the Algarve Commerce and Retail Association. The association regularly holds meetings with members to advise them of new laws and regulations which might affect their business and constantly campaign for the rights of their members, locally and nationally, and is currently pressing the Ministry of Finance to assist SMEs that are having difficulties paying fiscal obligations, including IVA (VAT).

 

ACRAL also keeps in touch and works with other associations, both regionally and nationally, in order to meet its general objectives of representing, defending and promoting the common interests among its members.

 

One ACRAL member, a retailer based in the central Algarve, said that he was “more than satisfied” with the association. “As a foreigner, I sometimes have difficulty keeping up with all the changes in laws and regulations. I am aware of the bigger issues that they deal with, like trying to help us with outstanding VAT payments, but they also help on a local level. Their representative recently pointed out that my shop did not comply with health and safety regulations, even though I had been licensed to trade. I was missing a smoke detector system and was at risk of receiving a heavy fine if the authorities found out. She advised me exactly what was needed and then offered to send her friend round to fit a system. I did get other estimates for the work, but he was keen and offered a good deal. About a week after the work was completed, our town was visited by health and safety officers and, of course, my premises got the green light. I never did ask my ACRAL friend if she knew when the official visit would happen. I renewed my membership subscription last week.”

 

NERA is another Algarve business association, a non-profit entity set up under civil legislation with the objectives of supporting economic activities in the Algarve, particularly in the areas of technology, research and development, commerce, industry, associations, etc., assuring members privileged participation in decision making surrounding the development of programmes.

 

photo yaroslav B1

 CORDIS


The Community Research and Development Information Service for Science, Research and Development (CORDIS) is designated the official resource centre for EU Seventh Framework Programmes (FP7). The objective is to promote participation in European research activities, improve competitiveness and facilitate communications between participating members. CORDIS programmes and aid are targeted towards innovation and research, along with the development of products, in a wide range of sectors, including industry and technology, energy, sciences, agriculture and marine resources, environment and socio-economic matters. The scope is enormous, everything from research and development, marketing, manufacturing, recruitment and training, education and environmental protection.

The CORDIS website is packed with helpful information about what type of services are on offer to SMEs and also has a helpful checklist so a business can first verify whether it would qualify for funding.
The EU attempt to bring together member countries and share information and resources has seen the creation of a network that includes advice from expert evaluators, financial advisors and a central database that includes information from every single registered SME member. The website is presented in several language versions, including English, Spanish and Polish, but does not yet support Portuguese.
Much of the information is freely available, but to receive newsletters and e-mails from CORDIS, a simple free registration is required.
www.cordis.europa.eu
Starting up in Portugal

 Setting up a business in any EU member country will be subject to EU guidelines and national laws and obligations, but once legally established, applying for EU SME aid is fairly straightforward. Documentation and licensing is also simple, if not somewhat burdensome in Portugal. Here’s a quick glossary.
Registo Nacional de Pessoas Collectivas - RNPC
 National Company Registry
 Classificação Portuguesa de Actividades Económicas – CAE
 Classification of business activity
 Certificado de Admissibilidade
 The validation certificate permits and registers the company’s activities
 Cartão Provisorio de Pessoa Collectiva
 The provisional company identity card will allow the business to begin activities
 Declaração de Início de Actividade para Efeitos Fiscais
 Declaration of initiation of activity for tax purposes
 Registo Comercial
 Registery in the Commercial Registry which arranges for the obligatory publication of the company’s deeds in the Diário da República
 Segurança Social
 Social Security
Cadastro Comercial ou Industrial
 Registration record with the Directorate General of Commerce and Competition

All the steps necessary to set up a company are available online in English - http://www.portaldaempresa.pt/ - and most of these can be completed in a trip to the local Loja da Empresa (company shop).

Theoretically, it should be possible to complete a business start-up in just one hour and to legally commence trading operations, although a good knowledge of the Portuguese language is necessary. Many local accountants, solicitors and lawyers are well versed in company law and, for a reasonable fee, should be able to arrange all the necessary documentation.

 

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