WASHINGTON, Jan. 10 (UPI) -- The European Commission announced Monday that it would offer $47 million (36 million euros) in financial programs to help aid small businesses throughout the 10-new member states of the European Union.
The program -- one of many designed to help small to mid-size businesses increase thier financial standing -- is offering financial incentive programs to local banks and credit institutions to increase the number of loans provided to small businesses.
"From my experience of EU enlargement I know that particularly small businesses in new member states are often struggling to obtain financing," said Gunter Verheugen, EU commissioner for enterprise and industry. "Our initiative will help entrepreneurs to create and develop businesses and jobs."
The commission has already handed off $7.8 million (6 million euros) to credit institutions and local banks in order to help fund technical assistance programs and capacity building in countries with low levels of bank lending.
For the last several years, the commission has worked steadily with individual governments and through national directives to help assist one of Europe's strongest business contingencies: SMEs.
SMEs, otherwise known as small and medium sized enterprises, make up the majority of businesses in Europe. The majority of small enterprises -- 90 percent -- are categorized as micro businesses, which have less than 10 employees. Small businesses, according to European Commission's Enterprise and Trade Web site, make up 53 percent of Europe's workforce, which includes 95 million people, who are employed in the small business sector.
"Small businesses are the main driver for innovation and employment as well as social and local integration in Europe," the European Commission Enterprise and Industry Web site stated.
Although several analysts made note of the strong necessity of SMEs to the European economy, these smaller businesses have had to struggle against many challenges in the past, which is why the commission has taken progressive steps to better integrate SMEs into the European economy.
For the most part, SMEs have difficulty obtaining information to bid for contracts. When they can, they usually end up not having the capacity to take on large-size contracts. Additionally, the cost of preparing proposals usually comes as a disadvantage because often times costs are already fixed, which SMEs can rarely afford. They also are bound to have financial guarantees to ensure that projects can be completed without any risk of debt or insufficient funds.
"The deficiency in credit provision to small enterprises is explained by its high transaction cost and the financial providers' perception of a high risk and low return activity," the commission's Enterprise and Industry Web site explained.
Since the summer of 2000, European heads of states have adopted numerous strategies to help integrate small businesses into the new financial environment of the EU. Something that is crucial, since public procurement contracts make up 14 percent of the EU's gross domestic product annually, and SMEs account for more than half of the EU's production and employment.
"The European Union's SMEs must be seen as key stakeholders in the development of policy," said Ben Butters, director of Small Business Europe. "So it is essential that policymakers are kept aware of their concerns at all times and across a wide range of areas."
However, often time the hardship for SMEs is the lack of representation among policymakers.
In June 2000, the European Charter for Small Business was adopted in order to create a more positive environment for small businesses that would allow them greater access to public procurement contracts.
Even more recently, the United Kingdom's small business service, an agency of the Department of Trade and Industry, launched a national Web site on Monday to help small business owners track and find public procurement contracts through the sub-Office Journal of the European Union. The launch followed one of the recommendations of the 2003 Better Regulation Task Force/ Small Business Council Report.
"I want to make sure that small firms of all types have access to a slice of the public sector procurement cake," said Nigel Griffiths, Small Business and Enterprise Minister.
"By developing a national portal to bring together buyers and sellers we can cut the time and effort that small firms spend hunting for contracts while increasing the options available to public sector buyers, helping to ensure better value for money for the taxpayer," he added.
In the U.K., there are 4 million SMEs, making up 99 percent of all companies.
Aside from the U.K. proposal, ECOFIN, an independent corporate finance advisory group, is lobbying that SMEs be allowed to apply tax rules in their home state, instead of the ones designated by the commission.
"Different tax systems in the EU are extremely costly for business," Gerhard Huemer of UEAMPE told the EU Reporter.
"In fact a European Commission review calculated that around 3 percent of a companies turnover is wasted in so called 'compliance costs' as they have to deal with cross border tax differences. For small businesses, the cost in relative terms is over 130 times bigger than for large business -- which is clearly an internal market barrier," he added.
