Opening up potential new financing sources for film and TV companies in Europe, the European Commission and European Investment Fund (EIF) will launch a €121 million ($134.5 million) financing initiative to underwrite bank loans to small and medium-sized companies working in Europe’s cultural industries.
Available over the next six years, the facility, it is hoped, will generate more than €600 million ($667 million) in bank and other financial institutions’ credit finance, the European Commission said in a statement Thursday.
An effort to aid SMEs to start up or scale up, the guarantee facility will be extended to British lenders until negotiations are completed for the U.K. to withdraw from the E.U. The scheme aims to support roughly 10,000 SMEs, if loans guaranteed by the initiative averaged out at about $60,000 per credit facility, said Roger Havenith, EIF deputy chief executive.
SMEs benefiting from the program would come from not just the movie, TV, animation and video game sectors but music, cultural heritage, design, performing arts and publishing. “In some countries, you could imagine more of a focus on cultural heritage, in others on film,” Havenith said.
The Guarantee Facility addresses one of the major challenges faced by many movie and TV companies in many parts of Europe. France already operates an Ifcic bank guarantee scheme which co-guarantees credit lines extended to its film and TV industries by its two main lenders, Natixis Coficine and Cofiloisirs. Spain benefits from an Audiovisual SGR company which underwrites bank film finance. Without such guarantee schemes, many banks are reluctant to lend to film and TV companies, even when they are called upon merely to discount reliable contracts such as a pre-sale to a broadcaster.
Two reasons are banks’ lack of expertise in film and TV and the relatively low volume of business of many movie and TV companies.
The EIF now proposes to extend guarantees to more lending institutions across the whole of the 28-nation E.U.
“Undoubtedly, the new facility is very, very useful for companies in Italy and Spain, for instance, which have very few banks dealing with the film and TV sectors,” said Jean-Baptiste Babin, co-founder of Paris-based Backup Media, a film producer, financier and consultancy company.
As another part of the new $134-million initiative, formally called the Cultural and Creative Sectors Guarantee Facility, the EC and EIF, a Luxembourg-based and E.U.-backed risk financier, will also seek to train banks and other financial institutions to understand culture industry business models and risk exposure.
This seems essential. “In tough economic conditions, banks are more reluctant to step into the creative industry lending,” Babin said.
Havenith commented that the EIF and European Commission had received “a very high level of response” from lenders expressing an informal interest in the Guarantee Facility.
The EIF and Commission have been developing the Guarantee Facility for at least five years, having launched a pilot scheme in 2011, said Lucia Recalde, head of the Creative Europe Media Program. “There has been a lot of dialogue with financial institutions. The uptake is likely to be quite significant,” she said.
Backed by €6 million ($8.5 million) of funding, the test program operated via France’s Ifcic, Spain’s Audiovisual SGR and German regional banks.
The EIF will publish a call for expression of interest from eligible financial institutions “in the next few days,” said Havenith.
Financial institutions involved in the EIF facility initiative can include not only banks but guarantee schemes. EIF guarantees’ risk exposure will be up to 70% of risk involved in individual loans, he added.
The EIF Guarantee Facility will be promoted at events such as the Venice Film Festival and via Media Program desks in individual countries, Recalde anticipated.
“We are helping them to get the bank loans they would normally not get,” Günther H. Oettinger (pictured), the E.U. digital economy commissioner, said in a statement.