Communication from the Commission to the Council, the European Parliament, the European Economic and Social committee and the Committee of the Regions - Implementing the Community Lisbon Programme : Financing SME Growth - Adding European Value {SEC(2006) 841} {SEC(2006) 842} {SEC(2006) 856}
Date: 2006-06-29
Institutions: European Commission
Subjects: EU programme, added value, competition, economic and social cohesion, financial aid, financial market, financing method, job creation, small and medium-sized enterprises

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 29.6.2006 
COM(2006) 349 final 

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL, THE 
EUROPEAN PARLIAMENT, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 

Implementing the Community Lisbon Programme:  

Financing SME Growth – Adding European Value  

{SEC(2006) 841} 
{SEC(2006) 842} 
{SEC(2006) 856} 

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COMMUNICATION FROM THE COMMISSION TO THE COUNCIL, THE 
EUROPEAN PARLIAMENT, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 

Implementing the Community Lisbon Programme:  

Financing SME Growth – Adding European Value 

TABLE OF CONTENTS 

1. 

2. 

3. 

4. 

5. 

6. 

Supporting the Lisbon process.................................................................................. 3 

A better environment for risk capital investment................................................... 4 

More debt finance for SMEs ..................................................................................... 7 

The EU contribution to SME financing ................................................................... 8 

Better governance at national level .......................................................................... 9 

Conclusions ............................................................................................................... 11 

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1. 

SUPPORTING THE LISBON PROCESS  

The partnership for growth and jobs is the flagship policy of the European Commission. Its 
success  depends  on  Europe’s  small  and  medium-sized  enterprises  (SMEs)  achieving  their 
potential,  for  they  are  crucial  in  fostering  the  entrepreneurship,  competition  and  innovation 
that leads to sustainable growth and development. Further, the conclusions of the spring 2006 
European Council emphasised that a fully integrated financial market and sufficient access to 
finance are crucial for the growth of small and medium sized enterprises. The Lisbon process 
offers  a  framework  within  which  to  improve  access  to  finance,  through  reforms  at  national 
and EU levels.  

This improvement is needed despite the fact that the features of a world class environment for 
SME finance can already be found in many Member States. In the recently published world 
top  20  ranking  on  capital  access,  half  are  Member  States1.  One  of  the  main  challenges  is 
therefore to spread good practices across the EU. 

In  improving  access  to  finance,  the  diversity  of  European  SMEs  is  an  asset.  They  are  as 
different in their cultures as in the ways they innovate. Some provide cutting-edge technology, 
while  others  make  incremental  adaptation  of  processes  and  products  or  develop  new 
marketing  strategies.  Still  others  hardly  innovate  at  all,  yet  their  contribution  to  society  is 
indispensable.  This  diversity  entails  different  financing  needs  of  individual  SMEs.  It  also 
creates potential for Member States to improve their policies by learning good practices from 
each other, so making access to both risk capital and debt finance easier. 

Europe needs to work on the availability of risk capital to SMEs with high growth potential. 
After a strong decrease from €4.2 billion in 2001 as a result of the bursting of the technology 
bubble, European venture capital investment in early stage firms has stagnated at around €2 
billion.  If  the  increase  in  the  number  of  investments  in  companies  in  their  expansion  phase 
since 2004 gives cause for some encouragement, European stock markets appear to fall short 
of  providing  a  passage  to  the  next  stage  for  a  significant  number  of  successful  companies 
whose continued growth is so important for the EU.  

A  recent  survey2  has  shown  that  14  per  cent  of  the  23  million  SMEs  registered  in  the 
European Union need better access to debt finance, for they can still encounter difficulties in 
seeking a loan or a microcredit for their next project.  

On the demand side, many entrepreneurs need guidance on the advantages and disadvantages 
of  alternative  forms  of  finance  and  on  how  best  to  present  their  investment  projects  to 
potential  financiers.  Investment  readiness  programmes,  too,  need  to  build  on  best  European 
practice.  

Overall,  Europe  needs  to  develop  a  mindset  in  which  entrepreneurs  and  financiers  alike  are 
more willing to take and to share risk. 

1 
2 

Best Markets for Entrepreneurial Finance, Milken Institute, 2005 Capital Access Index, October 2005 
Flash Eurobarometer 174 survey, September 2005 

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Solving this problem is crucial, for SMEs are essential sources of innovation and job creation, 
the  engines  of  European  growth,  whose  activities  promote  structural  change  and  improved 
welfare for the whole of Europe.  

Complementing the Communication on modern SME policies, this Communication presents a 
set of actions on financing innovative SMEs. It builds on the Commission’s work to improve 
the  functioning  of  the  single  market,  to  foster  investment  in  research  and  in  its 
commercialisation, and on previous Communications on SMEs’ access to finance.  

2. 

A BETTER ENVIRONMENT FOR RISK CAPITAL INVESTMENT 

The  future  of  European  competitiveness  depends  on  an  integrated,  open,  and  competitive 
financial market that also covers risk capital, and in particular, that part of risk capital markets 
that is generally referred to as venture capital3.  

For  growth-seeking  entrepreneurs,  external  financing  becomes  necessary  when  their  initial 
funds have been exhausted. Knowledgeable private investors are critical for the launching of 
entrepreneurial  businesses,  but  there  is  a  serious  and  persistent  lack  of  business  angels  and 
other seed investors in Europe. Business angel investments in Europe are estimated to be less 
than 10% of those in the United States. 

The seed investment decision is based largely on subjective appraisal of the prospects of the 
entrepreneur. Accumulated experience is important in making such judgements, which is why 
individuals  with  a  successful  track  record  as  entrepreneurs  are  often  best-placed  to  evaluate 
and  back  new  opportunities.  They  should  be  encouraged  to  become  investors  –  business 
angels. Europe has too few business angels, just as it has too few private venture capital funds 
that also invest in the seed stage.  

The  lack  of  seed  investors  is  partly  due  to  low  returns  that  make  such  investments 
unattractive.  The  10-year  return  on  overall  venture  capital  investments  was  6.3%  in  Europe 
compared with 26% in the US4. These low rates of return clearly cannot generate the levels of 
private investment that Europe needs. Yet the failure to develop seed and start-up investments 
in particular prevents new enterprises from reaching a size where they can attract expansion 
capital.  Rigidities  in  product  and  labour  markets  reduce  returns,  and  gaps  in  the  financing 
chain prevent many start-up firms from achieving their growth potential. 

The  lack  of  private  funding  sources  in  seed  and  start-up  phases  is  partly  compensated  by 
public investors or public-private partnerships. The financial instruments of EU programmes 
have also been used for such purposes and the new state aid rules will help in targeting state 
aid to overcome the market gap. Yet effective public investment needs to form partnerships 
with  private  investors  and  lack  of  private  investors  prevents  many  start-up  firms  from 
achieving their potential. 

3 

4 

Risk capital markets cover informal investors (business angels), venture capital funds and growth stock 
markets. For a full glossary, see annex II. 
Figures up to the end of 2004. There are methodological and data differences behind these figures, but 
this  does  not  change  the  conclusions  concerning  the  low  European  figure.  Sources:  “Venture  Capital 
Returns  Held  Steady  At  Year-End  2004”,  NVCA  11.4.2005,  and  “Pan-European  survey  of 
performance”, EVCA 27.10.2005. 

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The  Member  States  are  invited  to  create  incentives  for  private  investors  that  are  willing  to 
invest  in  enterprises,  including  by  using  public  funds  to  target  co-investment  with  business 
angels.  The  Commission  will  identify  and  spread  good  practices  that  can  help  improve  the 
conditions for business angel investment. 

Tripling early-stage investment by venture capital funds 

The gap in early-stage financing inhibits SME growth in the EU. United States early-stage 
venture  capital  investment  stands  around  0.04%  of  GDP.  This  level  has  already  been 
reached or exceeded by Sweden, Denmark and the United Kingdom in 20045. For the rest of 
the EU to reach it would mean that the EU would be able to invest about €6bn a year. This 
would amount to a tripling of current levels. Such levels were briefly achieved in the past, 
but  the  challenge  is  to  reach  them  on  a  sustainable  basis.  Some  of  these  investments  may 
hold the key to Europe’s future. 

Reforms  outlined  in  this  Communication,  such  as  removing  obstacles  to  cross-border 
investments, and the efficient use of funding sources, would help to achieve this target. 

Comparison  with  the  United  States  reveals  a  large  scope  for  improvement,  especially  in 
technology.  In  the  US,  total  venture  capital  investment  in  technology  is  four  times  that  of 
Europe. Further, the average investment in Europe is €0.9m against €6.1m in the US, limiting 
the potential for growth.6 To enhance its competitiveness on a global scale, Europe needs both 
a substantial increase in venture capital funding and in the scale of investments.  

In Europe, venture capital seems to fund projects earlier and with smaller amounts than those 
in the USA, and, as already noted above, it also produces lower returns.7 This might partially 
reflect the fact that European venture capitalists more than their US counterparts fund projects 
before they are ready for the commercial pressures that come with it. This could be linked to 
the shortfall in appropriate sources for very early stage investment. 

Further  problems  are  caused  by  the  fragmentation  of  the  market.  As  a  result,  many  funds 
cannot  become  sufficiently  specialised  and  their  management  teams  cannot  develop  the 
special sectoral expertise required for successful investments. The result is a venture capital 
market that is far less efficient than in the US. Yet the differences between the returns of the 
top and the bottom European venture capital funds are large. The top funds can consistently 
provide appropriate returns and attract private investors. 

Europe is also risk averse and lacks a growth culture. Neither firms nor funds are aggressive 
enough in pursuing growth.  

In the single market, professional venture capital managers should be able to raise capital and 
invest  across  borders  without  incurring  unfavourable  tax  treatment  or  extensive  legal 
documentation. This is not yet the case in Europe. 

5 
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“Money 

“Annual Survey of Pan-European Private Equity & Venture Capital Activity” 2004. 
See 
PriceWaterhouseCoopers. 
"Profitability of venture capital investment in Europe and the United States", European Economy series 
of Economic Papers, no 245. 

for  Growth:  The  European  Technology 

Investment  Report 

2005”, 

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A  key  aspect  of  any  successful  venture  capital  investment  is  the  exit  strategy  –  the  point  at 
which  the  venture  capitalist  can  transfer  their  investment  to  others,  releasing  funds  to  be 
recycled to new ventures. Unfortunately the European market is also weak at this stage. Easier 
EU-wide access to growth stock markets is needed, for firms to be able to list easily and for 
stocks  to  be  readily  accessible  to  qualified  investors  from  all  around  the  EU.  Such  easier 
access  to  financing  through  stock    markets  could  provide    opportunities  for  the  flotation  of 
firms  seeking  to  broaden  their  capital  base  on  competitive  terms.  Initial  public  offerings  of 
stock provide a natural  exit route for venture capital investors and give valuation guidance for 
sales to other companies. Although initial public offerings in Europe have picked up recently, 
activity in a stronger equity culture would be at a  higher level. There are alternative listing 
opportunities established by European stock exchanges that allow growth companies to raise 
capital.  It  would,  however,  clearly  benefit  all  market  participants  if  these  exchanges  could 
develop further by operating across borders, providing liquidity and achieving a critical mass 
for advisory services. 

The fact is that without liquid exit markets for venture capital, with a critical mass of advisory 
services  around  them,  venture  capital  funds  will  always  face  difficulties.  Their  weakness 
strangles the growth of key SMEs. The Commission, the Member States and the exchanges 
should therefore work together to ease the cross-border operations of financial exchanges, to 
remove  obstacles  to  the  use  of  competing  clearing  and  settlement  systems  and  to  apply 
common  rules  to  trading.  Otherwise,  expected  returns  will  be  reduced  and  growth 
opportunities put at risk. Promising small firms miss opportunities to grow into medium-sized 
and large ones, reducing the dynamism of the European economy.  

To achieve the Lisbon goals, the Commission and the Member States have to work with other 
stakeholders  to  transform  the  face  of  risk  capital  investment  in  Europe.  The  “Risk  Capital 
Summit 2005” in London identified the following key areas for action:  

•  Business angel investment needs to be encouraged; 

•  Venture  capital  funds  need  to  become  larger  and  more  professional  and  need  to 

cooperate closely with innovation sources; 

•  Europe needs to overcome the fragmentation of the venture capital market; 

•  Europe needs liquid growth-oriented stock markets; 

•  Entrepreneurs need to become more growth-seeking and investment-ready; 

•  Governments need to reward success with their policies. 

The  EU  needs  to  create  an  environment  that,  despite  the  cyclical  nature  of  the  industry, 
achieves sustained growth in the level of venture capital investment. This needs a favourable 
regulatory environment for the whole financing chain, from pre-seed through to investor exits. 
Further, public intervention needs to be  targeted on building the commercial market.  Public 
investment to compensate for market failure should as far as possible be at arm’s length, so 
that investment decisions are solely driven by market discipline, and in partnership with the 
private sector. The Commission and the Member States need to work in partnership to achieve 
this aim. 

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3. 

MORE DEBT FINANCE FOR SMES 

European  banks  and  guarantee  societies  are  experienced  in  financing  later  stages  of  firm 
development. This strength needs to be leveraged to ensure growth and employment. The new 
capital requirements for banks (‘Basel II’) have reinforced the trend for banks to emphasise 
the  need  for  thorough  risk  assessment  of  their  clients.  This  has  created  a  changing 
environment  in  which  European  SMEs  need  to  maintain  a  close  dialogue  with  financial 
institutions. The Commission continues to support this dialogue. 

Effective competition in the financial markets improves access to finance by lowering the cost 
of capital. The Commission has launched inquiries in the financial services sector, examining 
whether  competition 
the 
in 
Commission’s initiatives to remove regulatory barriers from the single market. 

these  markets.  These  actions  complement 

is  working 

Member  States  are  invited  to  implement  good  practices  in  the  use  of  guarantees  to  support 
bank lending in full compatibility with EU State aid rules. In particular, guarantees should be 
used  to  help  innovative  SMEs  finance  research  and  innovation  (including  eco-innovation), 
and for business transfers. Loan guarantees lower the risk of bank lending, and partial, well-
targeted, public guarantees can have a large effect on lending to SMEs. Guarantees can also 
be countercyclical, helping to maintain banks’ lending volumes in a downturn. 

Member States are also invited to ensure that national legislation facilitates the provision of 
microfinance (loans of less than €25 000). Such loans offer an important means to encourage 
entrepreneurship through self-employment and micro-enterprises, in particular among women 
and  minorities.  This  instrument  favours  not  only  competitiveness  and  entrepreneurship,  but 
also social inclusion. 

In different phases of their life cycle, SMEs may encounter specific financing needs, such as 
strengthening their balance sheet or financing business transfers. Mezzanine finance (hybrids 
of  loans  and  equity)  offers  scope  for  innovative  solutions  to  such  problems.  For  example, 
mezzanine instruments can avoid the dilution of ownership while being effective in financing 
growth;  they  may  help  meet  the  need  for  stronger  balance  sheets  to  address  banks’ 
expectations in the new financial environment; they may also help finance business transfers 
(this is all the more important since, as entrepreneurs retire, over 600 000 SMEs every year 
are expected to change ownership8 and many transfers require financing that is attractive for 
all participants). 

Member  States  should  therefore  encourage  the  expansion  of  the  hybrid  market,  keeping  in 
mind that these are not soft loans, that it is critical to avoid crowding out private financing, 
and  that  they  should  ensure  that  government  programmes  are  sustainable  and  do  not  distort 
the market. The Commission will identify good practices in the use of hybrid instruments. 

Dialogue and healthy capital structure 

Capital  structure  that  has  too  much  debt  and  too  little  equity  makes  firms  riskier  and  is  a 
barrier to investment. Taxation that favours debt to the detriment of retained earnings and new 
equity  has  been  recognised  as  an  obstacle  to  building  stronger  balance  sheets.  The 
Commission invites the Member States to consider the possibilities for a more neutral taxation 

8 

Final Report of the Expert Group on the Transfer of SMEs, July 2002. 

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of the different forms of financing. 

To enhance the dialogue between banks and SMEs, the Commission’s Round Table provides 
opportunities to discuss and adopt common views. The Commission invites Member States to 
replicate such forums at national level.  

4. 

THE EU CONTRIBUTION TO SME FINANCING  

The main EU instruments to promote entrepreneurship and innovation, and to improve SMEs’ 
access to finance, are the Competitiveness and Innovation Framework Programme (CIP) and 
the Joint European Resources for Micro to Medium Enterprises (JEREMIE) of the structural 
funds.  The  Seventh  Research  Framework  Programme  will  include  measures  to  help  SMEs 
meet certain research-related financing needs.  

The  CIP  will  provide  some  one  billion  euros  through  its  financial  instruments,  which  are 
expected to leverage around 30 billion euros of new finance for SMEs. The new programme 
will  offer  flexibility  in  its  venture  capital  investments,  enabling  it  to  be  used  in  support  of 
side-funds  linked  to  business  angels.  At  the  same  time,  it  will  provide  support  for  banks  to 
package and sell off portfolios of SME loans, thus releasing lending capacity. The CIP will 
support the take-up of environmental technologies, in particular through co-investment in risk 
capital  funds  that  provide  equity  for  firms  investing  in  eco-innovation.  It  will  also  provide 
guarantees for debt finance, mezzanine finance and microcredits to SMEs. In all, 350 000-400 
000 SMEs are expected to benefit from these facilities between 2007 and 2013. 

The JEREMIE initiative will combine grants from the European Regional Development Fund 
with  loan  capital  and  other  sources  of  finance  to  support  the  creation  and  expansion  of 
innovative  micro,  small  and  medium-sized  enterprises  as  part  of  EU  regional  policy.  It  will 
also support technology transfer and links between business, universities and research centres, 
and will improve the availability of micro-credits targeted at those who may not have access 
to  commercial  credit.  Funding  from  instruments  established  through  JEREMIE  may  also  be 
combined with business support and institution-building measures financed by the Structural 
Funds. 

The Seventh Research Framework Programme (2007-2013) will support key areas of research 
increasing Europe’s potential for innovation and competitiveness. Opportunities for SMEs are 
provided by the Cooperation and Capacities programmes. The Risk Sharing Finance Facility 
will  provide  additional  volume  and  more  risk-taking  capacity  for  Community  lending  for 
research investment. 

The  Commission  will  closely  cooperate  with  the  European  Investment  Bank  (EIB)  and  the 
European  Investment  Fund  (EIF)  when  implementing  its  financial  instruments  and  in  using 
JEREMIE. From its own reserve, the EIB will notably provide a risk capital mandate of one 
billion euros to the EIF between 2007 and 2013. To reach the full potential, the Commission 
invites  the  Member  States  to  increase  the  funds  flowing  to  risk  capital  by  making  efficient 
regional use of JEREMIE. 

To  enhance  pre-seed  and  seed  financing,  the  Commission  will  also  promote  cooperation 
between  Commission-financed  activities  like  Europe  INNOVA  and  PRO-INNO  Europe  and 
networks  such  as  the  European  Business  Angels  Network  (EBAN).  The  widest  possible  use 

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should  be  made  of  the  lessons  of  good  practice,  whether  by  the  Member  States,  the 
Commission, or non-governmental operators. 

The Commission is currently reviewing the state aid rules for risk capital to allow additional 
flexibility  for  Member  States,  notably  higher  thresholds  and  possibility  to  allow  follow-on 
investments. In addition, state aid rules for research, development and innovation, including 
rules  to  support  young  innovative  companies  both directly  and  through  support  services  are 
being reviewed. 

On the taxation obstacles to venture capital fund investments, the Commission will convene 
an expert group to identify cases of double taxation and to reflect on ways to overcome them. 
The  Commission  is  also  working  to  remove  tax  obstacles  which  companies  face  when 
investing across borders. 

Building  long-term  policies  on  SME  access  to  finance  requires  policy  evaluation  based  on 
quantifiable results. Improved data make it easier to evaluate policies and their results at EU 
and national levels. This is essential to select the best approaches, to avoid red tape, to create 
a stronger equity culture and to increase asset mobility. The Commission sees the importance 
of having solid data on SME finance and to use such data to monitor the impact of the new 
financial  environment  on  SMEs  access  to  finance  and  thus  to  ensure  a  follow-up  of  this 
communication. 

Support from the EU financial instruments 
an example of success 

A  company  focusing  on  smart  cards  that  was  founded  in  1991  received  business  angel 
backing  in  1995.  As  the  company  got  off  the  ground,  it  received  venture  capital  funding  in 
1999 through a prominent venture capital fund with backing from Community funds. 

The venture capital fund sold its share in December 2004, returning over 18 times the original 
funds invested. Freed funds could be returned to the available pool of funds for investment. 

The  company  is  now  a  leading  independent  supplier  of  components  and  technology  in  the 
semiconductor market and operates worldwide logistics services. 

5. 

BETTER GOVERNANCE AT NATIONAL LEVEL 

Despite  the  quality  of  some  aspects  of  the  financial  environment  in  many  Member  States, 
SME  access  to  debt  finance  and  venture  capital  remains  difficult  in  others.  Based  on  the 
concrete proposals outlined above, mutual policy learning is essential to help Member States 
to  improve  the  performance  of  their  financial  systems.  Microeconomic  conditions,  such  as 
labour  market  rigidities,  can  affect  the  return  on  investments.  The  Commission  therefore 
welcomes the commitment of the Member States to implement reforms in the Lisbon National 
Reform Programmes.  

SMEs  suffer  from  unclear  bankruptcy  laws,  slow  justice  systems  and  weak  creditor  rights. 
Member  States  are  therefore  invited  to  improve  their  legal  systems  and  judicial  processes 
affecting  capital  markets  and  continue  their  efforts  to  reduce  red  tape  and  improve  the 
regulatory environment for SMEs. In particular, the new Member States have an opportunity 
to rapidly improve their financial systems by adopting global good practices. 

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Member States are invited to study schemes that provide fiscal and social charge advantages 
for entrepreneurs, employees and investors in innovative SMEs in full compatibility with EU 
State  aid  rules.  However,  it  is  important  that  such  incentives  are  carefully  balanced  so  that 
they  do  not  create  thresholds  (like  a  sudden  need  to  pay  much  higher  social  charges)  that 
make it more difficult for small firms to grow to medium-sized or large ones.  

Because investments, in particular in risk capital, are made for long periods, Member States 
should  aim  for  stable  policies  that  provide  certainty  for  investors.  This  lowers  the 
effectiveness of short-term policy measures and argues for long-term solutions.  

Both  the  Member  States  and  the  venture  capital  industry  need  to  work  to  increase  the 
attractiveness  of  venture  capital  as  an  asset  class  for  institutional  investors.  Venture  capital 
investments that promise to generate appropriate returns may fit well the long-term strategies 
of  pension  funds  and  insurance  companies.  Member  States  should  not  prevent  institutional 
investors  from  diversifying  their  portfolio  to  venture  capital  investments.  National 
implementation  of  the  Occupational  Pensions  Directive  and  its  ‘prudent  man  rule’  should 
allow occupational pension funds to make a professional decision on their exposure to venture 
capital  investment.  This  and  the  identification  of  remaining  obstacles  would  help  reap  the 
benefits of the single market. 

Easier cross-border investments in venture capital 

In a single market, professional venture capital managers should be able to raise capital and to 
invest  across  borders,  without  incurring  unfavourable  tax  treatment  or  encountering  heavy 
bureaucratic  burdens.  This  is  currently  not  the  case  in  the  EU.  With  25  sets  of  operating 
conditions,  raising  venture  capital  funds  and  investing  across  borders  is  complex  and 
expensive. As a result, European venture capital markets are fragmented and can miss growth 
opportunities.  

Concrete and pragmatic steps are needed to overcome the legal, regulatory and tax barriers in 
the way of cross-border venture capital funds. 

Efforts to provide EU-wide recognition for nationally regulated venture capital funds have so 
far  met  with  little  success.  An  industry  expert  group  will  shortly  report  on  the  legal  and 
regulatory barriers to cost-efficient market access for venture capital fund managers. 

The Member States need to engage with this issue. To this end, the Commission will invite 
the representatives of the Member States to discuss further steps. 

On  the  demand  side,  European  entrepreneurs  are  too  often  unaware  of,  or  insensitive  to, 
investor concerns. This prevents them from presenting their projects to potential investors in 
the  most  convincing  way.  Professionally-run  investment  readiness  programmes  can  prepare 
entrepreneurs both to understand the benefits and constraints of different forms of finance and 
to make the best presentation of their projects. The Member States are invited to implement 
such  investment  readiness  programmes,  in  cooperation  with  local  organizations  such  as 
networks of investors and advisors with expertise that could be used more widely.  

To  support  the  Member  States,  the  Commission  will  organise  exchanges  of  experience, 
specific round tables between financial institutions and SMEs, expert groups on best practice, 
reports  and  studies.  In  doing  so,  it  will  pay  specific  attention  to  the  single  market  for  risk 
capital. 

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6. 

CONCLUSIONS  

Better  access  to  debt  and  equity  finance  will  help  all  SMEs  to  achieve  their  potential.  The 
policies outlined in this Communication offer a solid basis for this improvement, leading to 
more jobs and growth. In particular, if finance for innovative, growing firms is not available, 
the EU will be unable to achieve its ambitious growth and jobs targets.  

The  Lisbon  partnership  offers  a  framework  within  which  the  Member  States  can  improve 
access to finance for SMEs, not least by identifying and exploiting good practice.  

The challenge is now to make this happen and the Commission will monitor progress on SME 
finance and provide a first report in 2009 that will feed into the reporting on progress with the 
renewed Lisbon strategy. 

For growth and jobs, Europe needs: 

1. More growth through risk capital investments. To this end the Commission will: 

(1)  Work towards a single market for venture capital funds that allows investments across 

borders without red tape. 

(2) 

(3) 

Enhance  investor  cooperation  in  seed  investment,  paying  particular  attention  to 
business angels, by identifying and spreading good practices. 

Favour  the  emergence  of  more  professional  venture  capital  funds  making  larger 
investments,  also  when  implementing  Community  instruments  (CIP  instruments, 
JEREMIE). 

The Community institutions and the Member States should create the conditions that allow 
the  sustainable  tripling  of  investment  by  venture  capital  funds  in  seed  and  start-up 
companies by 2013. 

2. More bank finance for innovation. To this end the Commission will: 

(4) 

(5) 

(6) 

Organise a Round Table between banks and SMEs to review the current situation and 
to suggest ways to improve the scope for long-term banking relationships; 

Use  Community  instruments  to  leverage  lending  programmes  targeting  innovative 
SMEs; 

Invite  experts  to  evaluate  the  advantages  of  tax  relief  systems  for  young  innovative 
companies. 

3. Better governance. To this end the Commission will: 

(7) 

(8) 

Invite stakeholders to implement good practices when using public funds for venture 
capital investment; 

Develop  tools  and  indicators  to  evaluate  the  effects  of  policies  on  SME  financing 
across Europe; 

(9) 

Identify and spread good practices in investment readiness programmes. 

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