+-When shall the BA submit the individual accreditation application?
The BA individual accreditation application must be submitted to IAPMEI before presenting the SPV application to IFD.
Does the SPV have to be formally established on the application date, or only when the contract is signed?
However, it is not mandatory that the accreditation process performed by IAPMEI is finished before the submission of the SPV application. During the process of evaluation and selection of SPV, IFD will assess with IAPMEI if the BA integrating the SPV are dully accredited.
The entity that applies to this call (SPV) must be legally established on the application date (that is, it must have a fiscal identification number), and this same entity, if selected, must sign the financing agreement.
Can Business Angels own more than 50% of the SPV’s Equity Capital? Can their participations be indirect (through Companies they control)?
The Business Angels must own, directly and individually, more than 50% of the SPV’s Equity Capital.
The maximum amount per SPV of €750.000,00 represents FC&QC co-financing or the global SPV amount?
The maximum amount per SPV of € 750 000.00 represents FC&QC’s co-financing amount.
The aggregate amount of eligible management costs is understood as 3% of the total amount invested by the SPV, or as 3%/year of the total amount invested by the SPV?
The aggregate amount of eligible management costs, during the eligibility period, cannot exceed, annually, 3% of the total amount invested by the SPV, always ensuring they fall below the thresholds defined in Regulation (EU) No. 480/2014, of March 3, for the base remuneration (Section 2.a., paragraph i. of Article 13.º).
Can an SPV that has applied to Phase 1 apply to Phase 2 as well?
Yes, it can. There is no constraint for SPV that have applied to Phase 1 in the application to Phase 2, whether they received financing or not.
Are the Financial Intermediary and the Special Purpose Vehicle (SPV) two different entities?
Financial Intermediary is the generic expression used within the European Structural and Investment Funds (ESIF) for entities acting between the financing programmes and final beneficiaries (SME). Therefore, in the case of Business Angels (BA), the Special Purpose Vehicle (SPV) is the Financial Intermediary.
Do the SPV need a specific CAE/NACE Code?
There are no demands in terms of CAE/NACE Code, but the object of the SPV must include the participation in the equity capital of other companies.
Do the SPV have to be specifically created for this call, or can existing SPV apply?
Existing SPV can apply, provided they receive new capital in case they are selected and there are no conflicts of interest between the investments already in the SPV’s portfolio and those which will be made in the future within this call.
Is there a maximum debt-to-equity ratio for the SPV in order for it to be eligible within this line?
No, but the SPV must have positive equity on the application.
If the co-financing is 65%, the financing brought by BA to the SPV must be at least 35% of the SPV’s equity or of the total amount financed by the SPV?
For every 100 € of total SPV financing (equity + debt), at least 35 € will have to be private. Of these, the BA will have to put up the majority.
Will a model Financing Agreement be made available during the application period?
Example: 100 € = 65 € FC&QC + 51%*35 € from BA + 49%*35 € from other private investors (individuals or companies).
No, the draft of the Financing Agreement will be given to selected applicants upon decision of attribution of funds within this call.
Are operations financed by BA after the call’s application date eligible for this financing line?
No, only investments made after the signature of the financing agreement with FC&QC are eligible.
Can the earnings obtained by the SPV from investments in FB be reinvested?
Yes, upon decision of the SPV, while within the investment period and if they meet the initially defined investment priorities. After the end of the investment period, reinvestment can only occur pending authorisation by FC&QC.
If income from intermediate sales or dividends allow the full repayment to investors of the initial SPV financing (FC&QC, BA and remaining private investors), can the SPV begin the distribution of preferential remuneration?
No, the distribution of preferential remuneration can only happen after the eligibility period of Portugal 2020, that is, 31 December, 2023.
Do the Final Beneficiaries need an SME certificate issued by IAPMEI?
Yes, they must have it prior to the investment by the SPV.
Is an investment in a foreign FB, with a affiliate company in Portugal eligible?
Yes, provided the investment is made in the focus region(s) of the financing OP and in the Portuguese company (affiliate). Note that the company that is financed must have an SME certificate issued by IAPMEI.
What is the criterion to consider a FB within one of the Regions (North, Centre, Alentejo, Lisbon or Algarve): headquarters or branch location?
In this financing line, the determining location is that of the prospective investment. For example, the location of the industrial unit, or of the project/development team. Therefore, a company may have its headquarters in one region (for example, North), but if the investment is implemented in Alentejo, the project is considered to be located in the Alentejo, under this line of financing.
If an SPV obtains financing from COMPETE, is there an obligation to divide the investment between North, Centre and Alentejo?
Within COMPETE, these three regions are considered as one. That is, investments may be implemented in any or all of those regions.
When you mention private investment in a FB, what is considered private investment?
In this context, non-private financing is that coming from European Structural and Investment Funds (ESIF). FC&QC is financed 100% by ESIF.
In each round of risk financing into a FB, the SPV should seek a global private participation rate of 10%, 40% or 60%, depending on the specific case. This means that the total private investment in that round to the SME, whether at the level of the SPV or of individual investors, should reach at least those rates.
The SPV may not fulfill these minimum private financing rates in some investments provided that, in the whole portfolio, the weighted average private financing rate corresponds to the minimum demanded.
+-Will the resources of the Equity and Quasi-Equity Fund (FC&QC), managed by IFD, within the Line of Financing for Venture Capital Funds, have a market-oriented management?
FC&QC, as a fund of funds managing ESIF resources, has the mission to address market failures identified in Ex-Ante Assessment, implemented through financial instruments such as the Line of Financing for Venture Capital Funds (IFD-FC&QC-FCR-01/16). This Line of Financing has a set of rules derived from European Regulations for ESIF supported Financial Instruments, and restrictions defined by the Operational Programmes of Portugal 2020, all of which are detailed in the Call documentation. Its object is to co-finance Venture Capital Funds which operate in market conditions and whose management is market-oriented and performed by financial intermediaries licensed to operate in the Portuguese market.
Is the Financial Intermediary different from the Venture Capital Managing Company?
Financial Intermediary is the generic expression used within the European Structural and Investment Funds (ESIF) for entities acting between the financing programmes and final beneficiaries (SME). Therefore, in the Call for Tenders for co-financing of Venture Capital Funds, the Managing Company is the Financial Intermediary.
How can we expect FC&QC to be involved in the operation and management of Managing Companies of co-financed Venture Capital Funds (VCF)?
FC&QC will verify the VCF’s investments in order to ensure the eligibility within the programme, but will not analyse individual projects’ business plans. FC&QC should be represented in the VCF’s assembly of participants, like any other investor, and is not required to be represented in any other managing body of the VCF or the Managing Company.
What is understood by “The VCF must ensure private funds pari-passu with FC&QC funds, amounting to 50% of the closing objective defined in the application”?What is understood by “The VCF must ensure private funds pari-passu with FC&QC funds, amounting to 50% of the closing objective defined in the application”?
The VCF’s first closing, to occur simultaneously with the signature of the financing agreement, should be, at least, 50% of the VCF’s global objective, defined within the application.
What is a serious breach that may lead to the eventual resolution, by FC&QC, of the financing agreement?
Apart from other criminal situations within Law No. 16/2015, if the Financial Intermediary cannot ensure the VCF’s private capital defined in the Financing Agreement when there is a capital call to the VCF, within the amounts of the first closing, FC&QC considers there may be a serious breach.
After subscription by FC&QC and up to the value defined for the first closing, must the investor or MC-VCF follow the payment methodology defined in section 9 of the Call for Tenders even if it goes against the VCF’s policy?
FC&QC will pay when solicited by the MC-VCF, as long as the payment falls within the rules defined in section 9 mentioned above.
What are the maximum amounts of payment in the capital calls?
The payment methodology defined in this call implies that all payment requests, not just the first, are limited to an amount corresponding to 25% of the global FC&QC participation.
What is the deadline for the capital payment by FC&QC after a capital call by the Managing Company?
Capital call payments by FC&QC will occur within 30 days after IFD, as Managing Company of FC&QC, receives the call from the financial intermediary, provided the expense execution thresholds are met.
Is there any guarantee or put option on the VCF’s units at the end of the duration of FI?
No guarantee or put option is defined at this point regarding the VCF’s units.
How is the Execution rate of the VCF verified on the various intermediate evaluation dates (milestones)?
On Milestone 1 (M1) the VCF must have an execution rate corresponding to 30% of the global amount linearly distributed through time. That is, considering that M1 is at 25% of the investment period, a linear distribution would imply an execution of 25% of the global amount. Instead, the required rate is 30% of that, meaning 7.5% of the global VCF amount (30%*25%). The same reasoning applies to the remaining Milestones.
Do management costs, past and future, count for the execution rate?
All eligible expenses effectively paid count toward the execution rate.
Will FC&QC pay, every year, its share in the fund’s expenses along with other participants?
Yes, provided they fall within the rules defined in the Call’s documentation.
How are management fees treated after the programme’s eligibility period?
The MC should reserve management fees corresponding to the whole life of the financial instrument, as the capital is paid. The fees relative to expenses after the eligibility period (31/12/2023) should be kept in an escrow account to that effect.
What treatment is given to the interest resulting from the capitalisation of the amount managed by the fund? Is it incorporated into the fund and can it be reinvested?
Until the end of the eligibility period, the interest from the capitalization of the amount managed by the fund should be treated the same as the remaining invested capital.
Is the performance-based remuneration calculated for each investment or for the VCF as a whole? When can it be paid?
FI’s remuneration should be calculated for the VCF as a whole (not per each individual investment) and can only begin to be paid after 31/12/2023 (the end of the eligibility period).
Are the operations performed by the VCF after the application to the Call eligible for this line of financing?
No. Only the investments performed after the signature of the financing agreement with FC&QC are eligible.
What are equity and quasi-equity instruments (minimum of 70% per each investment performed by the VCF)?
Investment in equity and quasi-equity instruments are defined as such by the Regulation (EU) No. 651/2014, of June (GBER):
The investments per Region and Investment Priority (IP) are fixed as defined in the application, or is it possible to alter those amounts between Regions and/or IP throughout the execution of the FI?
«Equity investment» means the provision of capital to an undertaking, invested directly or indirectly in return for the ownership of a corresponding share of that undertaking;
«Quasi-equity investment» means a type of financing that ranks between equity and debt, having a higher risk than senior debt and a lower risk than common equity and whose return for the holder is predominantly based on the profits or losses of the underlying target undertaking and which are unsecured in the event of default. Quasi-equity investments can be structured as debt, unsecured and subordinated, including mezzanine debt, and in some cases convertible into equity, or as preferred equity;
The remainder may be financed, for example, through shareholder loans.
There may be a reallocation, provided there is availability within the global endowments. The MC-VCF should request authorisation from IFD to perform that reallocation when necessary and the availability is verified at that time.
If a VCF obtains financing from COMPETE, is there any obligation to divide the investments between North, Centre and Alentejo?
Within COMPETE, these three regions are considered as one, that is, the investments may be performed in any or all of the regions.
What is the criterion to consider that a Final Beneficiary is in the North, Centre, Alentejo, Lisbon or Algarve? Headquarters or branch location?
In this line of financing, the determining factor is the location of the investment. For example, of the industrial unit or the development/project team. Therefore, a company may have headquarters in one Region (for example, North), but the investment is in the Alentejo and, therefore, the project is considered in this Region for risk financing purposes.
Is the investment in a foreign Final Beneficiary with a branch in Portugal eligible?
Yes, as long as the investment occurs in the region(s) focused on by the relevant financing OP and in the Portuguese company (branch). Note that the financed company needs to be certified SME by IAPMEI.
If the Final Beneficiary needs to change its headquarters, namely in case of an internationalisation process, and there is a need for investment, is it possible to use only the private capital of the VCF?
The private component and respective public participation (FC&QC) into the VCF must always be invested together into Final Beneficiaries.
What is private financing for calculating the minimum private financing into a Final Beneficiary?
To this effect, what is not considered private financing is the amount from European Structural and Investment Funds (ESIF). FC&QC is financed 100% from ESIF.
What are consolidation or financial restructuring operations?
In each risk financing round into a Final Beneficiary, the VCF should seek a global participation of private investors amounting to 10%, 40% or 60%, depending on the applicable framework. This means that the total private investment in that round into the SME, whether at the VCF level or at the individual level, should reach, at minimum, the above mentioned rates.
The VCF may not comply, in some investments, with the minimum private financing rates provided, in its global portfolio, the weighted average of the minimum private financing corresponds to the required levels.
Consolidation is understood in the sense of using financing to purchase other companies, or promote the merger of companies with the main goal of rationalising. Financial restructuring means debt restructuring in Final Beneficiaries.
The Final Beneficiaries must have SME certification from IAPMEI?
Yes, prior to the VCF’s investment.
Will a template of Financing Agreement be made available within the application period?
No, the draft of the Financing Agreement will be made available to selected applicants after the decision to attribute funds from the Call.
+-Is IFD a Development Bank?
Though under supervision from the Banco de Portugal, IFD is not a bank. It will not receive deposits from or grant loans directly to companies, whether for investment or working capital. IFD is a wholesale institution, which will act using the commercial network of banks and other institutions, such as the mutual guarantee societies, with whom it will coordinate the establishment of credit lines and other equivalent instruments, guaranteed or counter-guaranteed by instruments financed by IFD, to provide resources for companies.
Why was IFD created? What is its purpose?
IFD intends to contribute to the economic development and the creation of wealth and employment, with growing national added value, and its main goals are to design, structure, and operationalise financing solutions that allow the mitigation of market failures in the access to finance by Portuguese companies (especially SME), in particular Financial Instruments in Equity / Quasi-Equity / Mid- to Long-Term Debt, to help Portuguese SME to strengthen their balance sheets and better finance their investments.
Can IFD grant loans directly to companies?
No. IFD will be a wholesale entity, which will act in partnership with commercial banks, Mutual Guarantee Societies, investors and other private financial entities, such as Private Equity and Venture Capital Companies and Business Angels, and with existing State-owned institutions that deal with Guarantees, especially mutual counter-guarantees, and with Venture Capital. Therefore, it is not expected that IFD will grant loans directly to companies.
Which activities will IFD be involved in? What, specifically, is its role in channeling financing to companies?
Is IFD expected to develop other activities?
During the first phase of its activity, IFD has performed only those initially authorised by the European Commission, i.e., “to manage the financial instrument programmes under the European Structural and Investment Funds (“ESIF”) allocated to Portugal and their reimbursements, and thereby contribute to mitigating market failures in the access of small and medium-sized enterprises (“SMEs”) to finance in Portugal”
. As a wholesale institution, IFD acts in partnership with commercial banks, MGS (Mutual Guarantee Societies), investors and other private financial entities, such as Private Equity or Venture Capital companies and Business Angels, as well as existing public institutions that deal with guarantees, especially mutual counter-guarantees.
In November/2016, the European Commission approved the extension of the remit of IFD to the so called Phase 2, including the management of multilateral financing obtained from international financial institutions and/or other national promotional institutions, such as EIB (European Investment Bank) or KfW (Kreditanstalt für Wiederaufbau), working complementarily with commercial banks in access to the market and taking on a wholesale role, whether in On Lending operations (lending to national retail banks funds borrowed from other institutions), or acting as Arranger (organising operations between international institutions and national banks).
Yes. IFD’s role is expected to be further broadened, pending authorisation for Phase 3, relative to the coordination/integration of State-owned financial companies connected to providing financing to companies, as well as the design of solutions Powered by IFD, distributed through the existing State-owned networks and private partners (namely, MGS, Venture Capital companies, Business Angels, banks, stock market, etc.).
What type of financing instruments for companies will IFD be involved in?
IFD will not directly lend money to companies, even in phases 2 and 3, remaining as a wholesale operator providing financing to private financial intermediaries, following a strict non-competition policy.
Already operational and available to companies are Financial Instruments co-financed by European Structural and Investment Funds (ESIF). IFD intends to manage these funds equally distributed between Debt/Guarantees/Securitisation Instruments and Equity/Quasi-Equity Instruments.
Which Debt financing instruments will IFD make available to companies?
Which Equity and Quasi-Equity financing instruments will IFD make available to companies?
Among others, the following Debt Financial Instruments/financing solutions will be designed:
- Support to the Counter-Guarantee Fund, for partial counter-guarantee of the guarantees issued by specialized entities (MGS) on bank loans to SME;
- Interest or guarantee fee subsidies for loans to SME on guarantees issued by specialized entities to Commercial Banks in financing to SME;
- Support to the development of securitisation instruments for portfolios of loans to SME;
- Eventually, support to instruments which act or present new products within Juncker Plan, as well as loan or bond funds, destined to specific purposes and areas where the markets offers no solutions.
What other lines of business will IFD approach?
Among others, the following Equity and Quasi-Equity Financial Instruments/financing solutions will be designed:
- Underwriting of Venture Capital Funds, to be developed together with private investors, targeting solutions to the various business development stages of the target SME, through the promotion of different vehicles such as Seed Capital, Start-Up and Development Capital Funds and, if possible, transfer of ownership.
- Underwriting of funds specialised in Quasi-Equity (atypical and innovative): In order to strengthen SME’s equity and long-term debt financing, resources may be directed into investment in new instruments that offer quasi-equity financing products, such as Mezzanine and Subordinated Debt, Preferential Shares, Participating Bonds, Convertible Bonds and Reversible Equity, among others.
- Underwriting of Co-investment Funds with Business Angels, to be developed together with private investors. In order to increase the investment by Business Angels in SME, new co-investment programs will be developed, namely through funds or collective investment vehicles, with industry specialisation, if necessary, to support projects and companies (especially innovative companies) in the early stages of their activity.
Will IFD contribute to the rationalisation of the public offer of financing to companies in terms of existing Financial Instruments?
IFD will manage loans from international financial institutions, among which:
- On Lending, instruments to be developed together with international entities (multilateral institutions, promotional banks from other countries) and the national retail banks. IFD may obtain financing from entities such as KfW or EIB, under advantageous price and maturity conditions, which IFD contracts on its balance sheet and then relends to national financial institutions so that they can then provide financing to companies (under certain conditions). Individual loans will be contracted in partnership with financial intermediaries, namely through the commercial banks’ networks.
- Organisation of large-scale loans (Arrangement), instruments to be developed together with international entities (multilateral institutions, promotional banks from other countries) and the national retail banks. IFD can act as arranger, negotiating financing with international institutions (such as KfW or EIB) which will be contracted directly with national financial institutions so that they can then provide financing to companies. These operations are off IFD’s balance sheet.
One of IFD’s goals, since its creation, has been to coordinate the Financial Entities/Financial Instruments existing within the State, as well as contribute to the design of solutions to be distributed by the existing network of market operators, which (pending authorisation from the European Commission) will entail developing solutions and instruments Powered by IFD with existing entities (or using existing financial instruments) within the State-owned universe, such as SPGM, PME Investimentos, Portugal Ventures and SOFID, or with private financial operators, such as the banks, MGS, venture capitalists or Business Angels.
Where should I go to request financing, guarantee or equity investment supported by IFD?
In order to obtain IFD-supported financing, companies and entrepreneurs should contact existing market operators, with whom IFD will sign agreements and protocols, and which will have an operational link to IFD, whether as a guarantee provider, or as co-investor. The list and the links to partner entities will be in IFD’s site, as the agreements and protocols are signed.
If I want an incentive within the new EU Support Framework, Portugal 2020, can I contact IFD?
No. According to its by-laws, IFD “performs the role of management of financial instruments to support the economy and the stimulus and orientation to corporate investment and the creation of jobs, functioning as a wholesale operator”. Therefore, its duties do not include direct funding to SME which, if it occurs, is to be decided by the managing entities of the Operational Programmes. Depending on the type of project, the best entity to be applied to may be found on the webtise of Portugal 2020: www.portugal2020.pt/Portal2020.
P.S. Portugal 2020 is the PARTNERSHIP AGREEMENT adopted between Portugal and the European Commission, which includes the 5 European Structural and Investment Funds – ERDF, Cohesion Fund, ESF, EARDF and EMFF – which holds the programing principles that define the economic development, territorial and social policies to be developed, in Portugal, between 2014 and 2020.