EN | ES | IT | RO | PL | GR
Credit and EU funding opportunities for businesswomen
Feedback form    |    Play Audio    |    Download content: /


Access to Funding

IntroductionClick to read

Despite the rapid growth of women-owned businesses, they tend to start their businesses with less working capital.

Compared to their male counterparts, female entrepreneurs have less access to financing.

It is estimated that women-owned enterprises globally have unmet financial needs of between $260 billion and $320 billion annually.

MicrocreditsClick to read

Microcredit is a common type of microfinance in which a very small loan is offered to a person in order to assist them in starting their own small business or becoming self-employed.

These borrowers typically have modest incomes, especially those from less developed nations (LDCs).

Microloans seldom surpass €2,000 and might be as little as €10 to €100.

Microcredit agreements sometimes have different structures than regular banking; it is possible that there is not even a written agreement.

 

History of microcreditsClick to read

Most people credit the concept of “microcredit” to the Bengali economist Muhammad Yunus.

In order to fund their respective small companies, a group of women in Bangladesh launched this scheme in 1976 by borrowing $27. The women were able to maintain the company and repay the debt.

The Bangladeshi women who got microcredit lacked the funds to buy the supplies they needed to construct the bamboo stools they would later sell, and each individual borrower would be too risky to fund on their own.

They were able to start production thanks to collective borrowing, with the understanding that the loan would be repaid over time as they made some money

Private LoansClick to read

Loans provided to a person or business by a private institution or even a wealthy individual are referred to as private money loans, or simply private money. The group or person is referred to as a private money lender.

Borrowers are typically given access to private capital without having to meet the conventional eligibility requirements of a bank or other lending institution.

The main problem is that private money loans can occasionally carry a high level of risk for both the lender and the borrower.

The borrower has more leeway to use the loan for less-than-optimal objectives when there is less restriction.

For a private lender, risk reduction is crucial since making money is the main objective. Before making a loan offer to a borrower, a private lender considers a variety of different aspects. Some of the most crucial are:

  • The borrower’s credit: the credit score of a borrower reflects how timely and regularly the borrower has previously repaid his bills.
  • Pricing strategy: How can the lender make sure that the cost of the loan (to the borrower) is competitive with other lenders?
  • Exit strategy: The borrower’s plan for when and how they will pay off the debt.

However, it is always a good idea for the lender to exercise due diligence and confirm any information the borrower submitted in order to obtain the loan.

Structural funds and EU Next Generation Funds

EU Structural Funds Principles Click to read

  • More than half of EU financing was distributed through the five European structural and investment funds under the long-term EU budget (ESIF).
  • The European Commission and the member states of the EU work together to manage them.
  • These funds are set up to invest in the development of the labour market and a strong, sustainable European economy.
European Structural and Investment Funds (ESIF)Click to read

The ESIF focuse on five areas:

  • research and innovation
  • digital technologies
  • supporting the low-carbon economy
  • sustainable management of natural resources
  • small businesses

 

1. European regional development fund (ERDF)

The European Regional Development Fund (ERDF) aims to strengthen economic, social and territorial cohesion in the European Union by correcting imbalances between its regions.

It promotes balanced development in the different regions of the EU.

In 2021-2027 it will enable investments in a smarter, greener, more connected and more social Europe that is closer to its citizens.

2. European Social Funds (ESF)

The European Social Fund Plus (ESF+) is the European Union (EU)’s main instrument for investing in people.

It supports employment-related projects throughout Europe and invests in Europe’s human capital – its workers, its young people and all those seeking a job.

3. Cohesion Fund (CF)

The CF funds transport and environment projects in countries where the gross national income (GNI) per inhabitant is less than 90% of the EU average.

In 2014-20, these are Bulgaria, Croatia, Cyprus, the Czech Republic, Estonia, Greece, Hungary, Latvia, Lithuania, Malta, Poland, Portugal, Romania, Slovakia and Slovenia.

Furthermore, 37% of the overall financial allocation of the Cohesion Fund are expected to contribute to climate objectives.

4. European agricultural fund for rural development (EAFRD)

The EAFRD focuses on resolving the particular challenges facing EU's rural areas.

It is one of the two funds drawn from the long-term budget of the EU that support the CAP, which stands for the Common Agricultural Policy.

The total allocation amounts to €95.5 billion. This includes €8.1 billion from the next generation EU recovery instrument to help address the challenges posed by the COVID-19 pandemic.

5. European maritime and fisheries fund (EMFF)

The EMFF helps fishermen to adopt sustainable fishing practices and coastal communities to diversify their economies, improving quality of life along European coasts.

The fund finances projects that create new jobs and improve quality of life along European coasts, supports sustainable aquaculture developments, makes it easier for applicants to access financing and supports the implementation of the maritime policy.

EU Next Generation funds for COVID-19 recoveryClick to read

The EU’s €800 billion Next Generation EU program is a temporary recovery tool to aid in the economy's recovery from the coronavirus epidemic and to create a greener, more technologically advanced, and more resilient future.

The European Commission is taking out loans on the financial markets to pay for Next Generation EU (the EU has a strong credit rating, which enables the Commission to borrow money at favourable rates).

The advantage is subsequently transferred by the Commission to the EU Member States directly through loans or to the Union budget through reduced interest payments on borrowings used to fund spending for the economic recovery.

More than 50% of the long-term budget and Next Generation EU are supporting modernisation, for example through:

  • Research and innovation, via Horizon Europe
  • Fair climate and digital transitions, via the Just Transition Fund and the Digital Europe Programme
  • Preparedness, recovery and resilience, via the Recovery and Resilience Facility, rescEU and a new health programme, EU4Health

In addition, the package pays attention to:

  • Modernising traditional policies such as cohesion and the common agricultural policy, to maximise their contribution to the Union’s priorities
  • Fighting climate change, with 30% of the EU funds, the highest share ever of the European budget
  • Biodiversity protection and gender equality
Summing up

Summing upClick to read

Microcredit
Microcredit is a common type of microfinance in which a very small loan is offered to a person in order to assist them in starting their own small business or becoming self-employed.

Private Loans
Loans provided to a person or business by a private institution or even a wealthy individual are referred to as private money loans, or simply private money.

EU Structural Funds
More than half of EU financing was distributed through the five European structural and investment funds under the long-term EU budget (ESIF).

EU Next Generation Funds
Temporary recovery tool to aid in the economy's recovery from the coronavirus epidemic and to create a greener, more technologically advanced, and more resilient future.

Test Yourself
TestClick to start


Keywords:

Micro credits – private loans – EU structural funds – EU Next Generation – access to funding


Objectives:
  • Learn about funding opportunities for women businesses
  • Learn about micro credits opportunities and private loans
  • Learn EU structural funds principles
  • Learn about EU next generation funds for COVID-19 recovery

Description:

This module analyses access to funding for women’s businesses, including:

  • micro credits
  • private loans
  • EU structural funds principles
  • EU Next Generation funds for COVID-19 recovery

Bibliography


Consortium!

Partners