Common use of Access to Finance Clause in Contracts

Access to Finance. The key factor hindering SME growth and development in Slovenia is access to finance, as SMEs find it more and more difficult to obtain loans, while the latter, to make matters worse, are more expensive than those provided to large business entities by banks.49 Moreover, a large number of enterprises are over-indebted, and business assets are severely deteriorating. The volume of loans to the non-bank sector decreased considerably in 2012. The same trends are indicated for 2013.50, 51 Facilitating access to finance with existing instruments, and alternative and innovative forms has thus become essential to promoting SME growth and development; therefore, special attention will be placed on the development of financial instruments. Financial instruments in Slovenia are implemented by a number of institutions: funds, the Slovenian Development Bank, venture capital funds and other financial intermediaries. The consequence is the dispersal and duplication of financing, and non-transparency of measures for beneficiaries. A transparent ESIF implementation system will bring together the relevant financial intermediaries and ensure an integrated approach to financing projects/measures. Apart from the use of the instruments in support of investments in SMEs, in particular innovative SMEs, financial instruments will be used for other purposes (e.g. RDI, training, business processes, energy and material efficiency, etc.) and, in addition to traditional forms of enterprise (companies and sole traders), for other forms of conducting a business activity, whereby a combination of both reimbursable and non-reimbursable funds will be used to finance the measures. At the financial instrument level, funds under different European funds will be combined. A number of financial instruments will be identified in accordance with the gap analysis for Slovenia. Therefore, synergy effects and linkages to measures supported under other thematic objectives (1, 4, 6, 8, 9 and 10) will be ensured in order for TO 3 objectives to contribute to the objectives of those thematic objectives. 48▇▇▇▇://▇▇▇.▇▇▇▇.▇▇/novica_prikazi.aspx?id=5420 49 ▇▇▇▇://▇▇.▇▇▇▇▇▇.▇▇/enterprise/policies/sme/facts-figures-analysis/performance-review/files/countries-sheets/2012/slovenia_sl.pdf 50 ▇▇▇▇://▇▇.▇▇▇▇▇▇.▇▇/enterprise/policies/industrial-competitiveness/monitoring-member-states/files/ms-compet-report-2013_en.pdf 51 Bulletin of the Bank of Slovenia, May 2013; ▇▇▇▇://▇▇▇.▇▇▇.▇▇/iskalniki/bilteni.asp?MapaId=229 A holding fund was established within the Slovene Enterprise Fund in the current financial perspective for the purpose of financing SMEs. The funds were allocated to a financial instrument, a guarantee fund for bank loans with interest rate subsidies, and to the design and implementation of the following pilot instruments: the development of venture capital funds, microcredits, seed and start-up credit lines, which helped us gain invaluable experience in this field. The evaluation of the implementation of entrepreneurship and competitiveness policy in the 2004–2009 period showed that the recipients of incentives were carefully selected in all areas and that their performance was above-average before and after the receipt of the incentive. Nevertheless, the analysis underlined that the results were limited and mostly short term. The best results were noted in terms of the increase in employment, salaries and sales. Modest results occurred mainly in the field of increasing productivity and export capacity, which is the result of the objectives, which were set in such a manner in the preparation of the operational programmes and individual measures. A reduced efficiency of incentives was in some ways also the result of certain shortcomings in the Slovenian business environment and the functioning of institutions where Slovenia is at a disadvantage as compared with other countries.52 A culture of entrepreneurship should be advocated; social attitudes to entrepreneurship should be changed, and creativity, ambition and innovativeness should be stimulated in order to achieve more positive effects in embracing entrepreneurship. An adequate supportive environment is especially important in this process. According to different entrepreneurship indicators, Slovenia is close to the bottom of the monitored countries. Slovenia has a wide range of entities to form a supportive environment for entrepreneurship and innovation, the joint mission of which is to provide comprehensive support services for enterprises and entrepreneurs with the aim of facilitating access to information, counselling, training, and in some cases also the necessary infrastructure and mentoring. The services of individual entities differ, since each type of entity provides specialised services tailored to the target groups. In practice, we face insufficient cooperation of the entities involved and inconsistent support for enterprises and entrepreneurs. Consequently, emphasis will be given to eliminating these shortcomings and raising the quality of the services offered, and their regular adjustment to enterprises’ new trends and needs. In 2012, entrepreneurial activity regained some strength after a three-year decline; however, Slovenia remains in the lower half of EU Member States in terms of the creation of new enterprises. Early-stage entrepreneurial activity and the share of entrepreneurs with business continuance both grew slightly. The shift in new and emerging enterprises in 2012 could be attributed to enhanced self-employment subsidies disbursed during the crisis, as the number of recipients grew considerably in the 2009–2011 period. It should also be noted that 1.4% of the adult population stopped pursuing entrepreneurial activity, which is 14.4% of all entrepreneurial activity. As much as 11% discontinued operations due to retirement (the EU average is approx. 7%). The main development challenge in both cohesion regions is to complete and adjust the existing supportive environment which, considering the special needs of each cohesion region, will contribute to enhancing entrepreneurial activity, boosting the productivity and competitiveness of existing innovative enterprises and encouraging the emergence of new ones, with an emphasis on high-tech enterprises which will develop technologies, products and services in fields defined for Slovenia in the SSS. In the 52 ▇▇▇▇://▇▇▇.▇▇▇▇.▇▇▇.▇▇/fileadmin/▇▇▇▇.▇▇▇.▇▇/pageuploads/DPK/CRPi_2010/Koncno_porocilo_CRP_konkurencnost.pdf cohesion region of Eastern Slovenia, more attention will have to be paid to linking support institutions for knowledge and qualification transfer, and centralised service provision. In both cohesion regions, the activation of the existing business infrastructure will also be important, and where suitable and required, the construction of new infrastructure to develop economic activities in individual regions at the NUTS 3 level, and a contribution to the networking of various economic development operators, also by promoting public-private partnerships. In order to create higher added value and enhance international competitiveness, it is important to promote integration into global value chains, provide counselling for enterprises, and advocate creativity, and innovative approaches and design. Integration between different areas is particularly important with a view to encouraging innovative cooperation, integration and operation models. In this context, it is paramount to create an efficient supportive environment for Slovenian companies wishing to expand to international markets or seeking to diversify their presence in new foreign markets. Most Slovenian enterprises from industrial sectors still find themselves positioned in the lower half of the global added value chains of foreign enterprises. Since 2007, Slovenian market shares have fallen both worldwide and within the EU.53 Considering the EU average, Slovenian SMEs do seem to be more internationalised; however, data suggest that most of the revenue from foreign markets is generated by large enterprises, whereas micro enterprises, which account for as many as 90% of the Slovenian economy, generate a mere 10% in foreign markets. An important part of the geographical markets on which Slovenian exports focus does not fall within emerging markets. In 2012, most of Slovenia’s exports in goods went to EU markets (69.1 % of all exports), whereas exports to other countries remain more or less at the same level.54 The share of exports in GDP in 2012 accounted for 73%, while the share of revenue in foreign markets accounted for 31.8% of total revenue (2011 data). The share of exports by SMEs amounted to 33.1% in 2012. In terms of exporting services, Slovenia targets EU markets (72% of all service exports in 2011). The market share of Slovenian service exports remained modest in these markets and declined during the crisis (by 3.5%), with the exception of travel service providers, who managed to increase their share in the EU market in the 2008–2011 period, even though the demand in the EU shrank in that period.55 The entire tourism activity attributes to 40% service exports. The analysis of competitiveness and international orientation of early-stage entrepreneurs shows that as many as 32% of emerging and new entrepreneurs in Slovenia plan to shift their activity to international markets (more than 25% of customers abroad).56 This segment of the Slovenian economy is particularly important and the coming financial period should give more attention to stimulating Slovenian enterprises to seek opportunities in foreign markets, diversify their operations and integration with the aim of achieving positive multiplier effects. Important levers facilitating the internationalisation of enterprises are embodied by the support for priority areas in smart specialisation areas. In the context of horizontal measures in support of the internationalisation of enterprises, projects will receive support if they contribute to greater added value in the export of goods and services as well as improving the business environment for more successful international operations. 53 ▇▇▇▇://▇▇▇.▇▇▇▇.▇▇▇.▇▇/fileadmin/user_upload/publikacije/pr/2013/POR_2013s.pdf 54 Statistical Office of the Republic of Slovenia 55 ▇▇▇▇://▇▇▇.▇▇▇▇.▇▇▇.▇▇/fileadmin/user_upload/publikacije/pr/2013/POR_2013s.pdf 56 Nezaznane priložnosti: GEM Slovenija 2012, 19 April 2013 At the NUTS 3 level, the highest share of goods exchange between Slovenia and other countries in 2012 was contributed by enterprises with their head offices in the Central Slovenia statistical region, i.e. 27.5% of the total value of exports and 47.9% of the total value of imports. Enterprises from the Central Slovenia statistical region contributed most to the value of Slovenia’s trading with other EU Member States and countries which are not Member States. In 2012, these enterprises exported EUR 3.1 billion in goods to EU Member States and EUR 2.1 billion in goods to other countries; they also imported EUR

Access to Finance. The key factor hindering SME growth and development in Slovenia is access to finance, as SMEs find it more and more difficult to obtain loans, while the latter, to make matters worse, are more expensive than those provided to large business entities by banks.49 banks.52 Moreover, a large number of enterprises are over-indebted, and business assets are severely deteriorating. The volume of loans to the non-bank sector decreased considerably in 2012. The same trends are indicated for 2013.502013.53, 51 54 Facilitating access to finance with existing instruments, and alternative and innovative forms has thus become essential to promoting SME growth and development; therefore, special attention will be placed on the development of financial instruments. Financial instruments in Slovenia are implemented by a number of institutions: funds, the Slovenian Development Bank, venture capital funds and other financial intermediaries. The consequence is the dispersal and duplication of financing, and non-transparency of measures for beneficiaries. A transparent ESIF implementation system will bring together the relevant financial intermediaries and ensure an integrated approach to financing projects/measures. Apart from the use of the instruments in support of investments in SMEs, in particular innovative SMEs, financial instruments will be used for other purposes (e.g. RDI, training, business processes, energy and material efficiency, etc.) and, in addition to traditional forms of enterprise (companies and sole traders), for other forms of conducting a business activity, whereby a combination of both reimbursable and non-reimbursable funds will be used to finance the measures. At the financial instrument level, funds under different European funds will be combinedcombined (ERDF, ESF, EAFRD). A number of financial instruments will be identified in accordance with the gap analysis for Slovenia. Therefore, synergy effects and linkages to measures supported under other thematic objectives (1, 4, 6, 8, 9 and 10) will be ensured in order for TO 3 objectives to contribute to the objectives of those thematic objectives. 48▇▇▇▇://▇▇▇.▇▇▇▇.▇▇/novica_prikazi.aspx?id=5420 49 ▇▇▇▇://▇▇.▇▇▇▇▇▇.▇▇/enterprise/policies/sme/facts-figures-analysis/performance-review/files/countries-sheets/2012/slovenia_sl.pdf 50 ▇▇▇▇://▇▇.▇▇▇▇▇▇.▇▇/enterprise/policies/industrial-competitiveness/monitoring-member-states/files/ms-compet-report-2013_en.pdf 51 Bulletin of the Bank of Slovenia, May 2013; ▇▇▇▇://▇▇▇.▇▇▇.▇▇/iskalniki/bilteni.asp?MapaId=229 A holding fund was established within the Slovene Enterprise Fund in the current financial perspective for the purpose of financing SMEs. The funds were allocated to a financial instrument, a guarantee fund for bank loans with interest rate subsidies, and to the design and implementation of the following pilot instruments: the development of venture capital funds, microcredits, seed and start-up credit lines, which helped us gain invaluable experience in this field. 52 ▇▇▇▇://▇▇.▇▇▇▇▇▇.▇▇/enterprise/policies/sme/facts-figures-analysis/performance-review/files/countries-sheets/2012/slovenia_sl.pdf 54 Bulletin of the Bank of Slovenia, May 2013; ▇▇▇▇://▇▇▇.▇▇▇.▇▇/iskalniki/bilteni.asp?MapaId=229 The evaluation of the implementation of entrepreneurship and competitiveness policy in the 2004–2009 period showed that the recipients of incentives were carefully selected in all areas and that their performance was above-average before and after the receipt of the incentive. Nevertheless, the analysis underlined that the results were limited and mostly short term. The best results were noted in terms of the increase in employment, salaries and sales. Modest results occurred mainly in the field of increasing productivity and export capacity, which is the result of the objectives, which were set in such a manner in the preparation of the operational programmes and individual measures. A reduced efficiency of incentives was in some ways also the result of certain shortcomings in the Slovenian business environment and the functioning of institutions where Slovenia is at a disadvantage as compared with other countries.52 countries.55 A culture of entrepreneurship should be advocated; social attitudes to entrepreneurship should be changed, and creativity, ambition and innovativeness should be stimulated in order to achieve more positive effects in embracing entrepreneurship. An adequate supportive environment is especially important in this process. According to different entrepreneurship indicators, Slovenia is close to the bottom of the monitored countries. Slovenia has a wide range of entities to form a supportive environment for entrepreneurship and innovation, the joint mission of which is to provide comprehensive support services for enterprises and entrepreneurs with the aim of facilitating access to information, counselling, training, and in some cases also the necessary infrastructure and mentoring. The services of individual entities differ, since each type of entity provides specialised services tailored to the target groups. In practice, we face insufficient cooperation of the entities involved and inconsistent support for enterprises and entrepreneurs. Consequently, emphasis will be given to eliminating these shortcomings and raising the quality of the services offered, and their regular adjustment to enterprises’ new trends and needs. In 2012, entrepreneurial activity regained some strength after a three-year decline; however, Slovenia remains in the lower half of EU Member States in terms of the creation of new enterprises. Early-stage entrepreneurial activity and the share of entrepreneurs with business continuance both grew slightly. The shift in new and emerging enterprises in 2012 could be attributed to enhanced self-employment subsidies disbursed during the crisis, as the number of recipients grew considerably in the 2009–2011 period. It should also be noted that 1.4% of the adult population stopped pursuing entrepreneurial activity, which is 14.4% of all entrepreneurial activity. As much as 11% discontinued operations due to retirement (the EU average is approx. 7%). The main development challenge in both cohesion regions is to complete and adjust the existing supportive environment which, considering the special needs of each cohesion region, will contribute to enhancing entrepreneurial activity, boosting the productivity and competitiveness of existing innovative enterprises and encouraging the emergence of new ones, with an emphasis on high-tech enterprises which will develop technologies, products and services in fields defined for Slovenia in the SSS. In the 52 ▇▇▇▇://▇▇▇.▇▇▇▇.▇▇▇.▇▇/fileadmin/▇▇▇▇.▇▇▇.▇▇/pageuploads/DPK/CRPi_2010/Koncno_porocilo_CRP_konkurencnost.pdf cohesion region of Eastern Slovenia, more attention will have to be paid to linking support institutions for knowledge and qualification transfer, and centralised service provision. In both cohesion regions, the activation of the existing business infrastructure will also be important, and where suitable and required, the construction of new infrastructure to develop economic activities in individual regions at the NUTS 3 level, and a contribution to the networking of various economic development operators, also by promoting public-public- private partnerships. 55 ▇▇▇▇://▇▇▇.▇▇▇▇.▇▇▇.▇▇/fileadmin/▇▇▇▇.▇▇▇.▇▇/pageuploads/DPK/CRPi_2010/Koncno_porocilo_CRP_konkurencnost.pdf In order to create higher added value and enhance international competitiveness, it is important to promote integration into global value chains, provide counselling for enterprises, and advocate creativity, and innovative approaches and design. Integration between different areas is particularly important with a view to encouraging innovative cooperation, integration and operation models. In this context, it is paramount to create an efficient supportive environment for Slovenian companies wishing to expand to international markets or seeking to diversify their presence in new foreign markets. Most Slovenian enterprises from industrial sectors still find themselves positioned in the lower half of the global added value chains of foreign enterprises. Since 2007, Slovenian market shares have fallen both worldwide and within the EU.53 EU.56 Considering the EU average, Slovenian SMEs do seem to be more internationalised; however, data suggest that most of the revenue from foreign markets is generated by large enterprises, whereas micro enterprises, which account for as many as 90% of the Slovenian economy, generate a mere 10% in foreign markets. An important part of the geographical markets on which Slovenian exports focus does not fall within emerging markets. In 2012, most of Slovenia’s exports in goods went to EU markets (69.1 % of all exports), whereas exports to other countries remain more or less at the same level.54 level.57 The share of exports in GDP in 2012 accounted for 73%, while the share of revenue in foreign markets accounted for 31.8% of total revenue (2011 data). The share of exports by SMEs amounted to 33.1% in 2012. In terms of exporting services, Slovenia targets EU markets (72% of all service exports in 2011). The market share of Slovenian service exports remained modest in these markets and declined during the crisis (by 3.5%), with the exception of travel service providers, who managed to increase their share in the EU market in the 2008–2011 period, even though the demand in the EU shrank in that period.55 period.58 The entire tourism activity attributes to 40% service exports. The analysis of competitiveness and international orientation of early-stage entrepreneurs shows that as many as 32% of emerging and new entrepreneurs in Slovenia plan to shift their activity to international markets (more than 25% of customers abroad).56 abroad).59 This segment of the Slovenian economy is particularly important and the coming financial period should give more attention to stimulating Slovenian enterprises to seek opportunities in foreign markets, diversify their operations and integration with the aim of achieving positive multiplier effects. Important levers facilitating the internationalisation of enterprises are embodied by the support for priority areas in smart specialisation areas. In the context of horizontal measures in support of the internationalisation of enterprises, projects will receive support if they contribute to greater added value in the export of goods and services as well as improving the business environment for more successful international operations. 53 ▇▇▇▇://▇▇▇.▇▇▇▇.▇▇▇.▇▇/fileadmin/user_upload/publikacije/pr/2013/POR_2013s.pdf 54 Statistical Office of the Republic of Slovenia 55 ▇▇▇▇://▇▇▇.▇▇▇▇.▇▇▇.▇▇/fileadmin/user_upload/publikacije/pr/2013/POR_2013s.pdf 56 Nezaznane priložnosti: GEM Slovenija 2012, 19 April 2013 At the NUTS 3 level, the highest share of goods exchange between Slovenia and other countries in 2012 was contributed by enterprises with their head offices in the Central Slovenia statistical region, i.e. 27.5% of the total value of exports and 47.9% of the total value of imports. Enterprises from the Central Slovenia statistical region contributed most to the value of Slovenia’s trading with other EU Member States and countries which are not Member States. In 2012, these enterprises exported EUR 3.1 billion in goods to EU Member States and EUR 2.1 billion in goods to other countries; they also imported EUREUR 7.2 billion in goods from EU Member States and EUR 2.4 billion from other countries.60 56 ▇▇▇▇://▇▇▇.▇▇▇▇.▇▇▇.▇▇/fileadmin/user_upload/publikacije/pr/2013/POR_2013s.pdf 57 Statistical Office of the Republic of Slovenia 58 ▇▇▇▇://▇▇▇.▇▇▇▇.▇▇▇.▇▇/fileadmin/user_upload/publikacije/pr/2013/POR_2013s.pdf 59 Nezaznane priložnosti: GEM Slovenija 2012, 19 April 2013 60 ▇▇▇▇://▇▇▇.▇▇▇▇.▇▇/doc/pub/REGIJE-2014.pdf In relation to the Smart Specialisation Strategy, demonstration and pilot projects, and approaches to internationalisation will be supported through joint investments in knowledge, technologies and capital, thereby utilising the potential of emerging markets on the one hand and avoiding the potential risks caused by a relatively high share of Slovenian exports to EU markets, where the economic recovery is slow. The measures will be linked to support provided under thematic objective 1, thus helping to bridge the gap between research and the market, and knowledge institutions and business, and facilitating the inclusion of enterprises in international value chains. Furthermore, access to finance for SMEs will be made easier, and funds will be provided by EU programmes such as Horizon 2020, ▇▇▇▇▇ and other relevant programmes targeting SMEs at the EU level. SMEs will be encouraged to take part in calls for proposals under the LIFE programme, especially concerning the environment, resource efficiency and the top levels of waste management hierarchy. In addition to enhancing the competitiveness of SMEs and promoting the establishment of new enterprises, as well as strengthening the growth and development of the existing ones, it is important to strengthen the healthy core represented by the industry as the generator of innovation, growth and employment to preserve and increase the competitiveness of the economy. Industry, in the narrow sense of processing activities, accounts for 20% of total added value. Since the crisis, productivity measured by value added per employee in the processing sector, has stood at around 60% of the EU average. Low productivity is also a result of the inadequate integration of science, research and development with entrepreneurship (lack of an effective knowledge triangle), and inadequate targeting of products for services that combine integrated solutions with technological and non-technological innovations. In comparison with other EU Member States, the material productivity of the Slovenian economy is lower than the EU average, while energy consumption is high, although this is encouraged by the fact that the latter has been reduced in the most export-oriented sector of the economy (processing activities), where energy costs significantly affect competitiveness. Taking into account the expected upward trend in prices of raw materials and energy, and pressures on the environment, Slovenia must, in addition to labour productivity and efficiency, significantly improve material and energy productivity, and achieve synergy effects of such investments to enhance the competitiveness of enterprises, reduce the environmental burden and create (green) jobs. Therefore, in terms of promoting the growth and development of enterprises, special attention will be given to measures that contribute to increasing the material and energy efficiency of enterprises combined with measures targeting eco-innovations under thematic objective 1, and to promoting a systematic approach to designing green products, services and developing new business models (thus contributing to the delivery of thematic objectives 4, 6, and 7).