Access to Finance for Independent Professionals and The Self-Employed

Access to Finance for Independent Professionals and The Self-Employed - EFIP Common Position Paper -

General Considerations The life of self-employed people in the EU is characterised by financial difficulties but also by many positives, such as freedom and flexibility, including the ability to determine when and where they work and what type of work they do. These factors are leading more people to choose independence, most of the times without the need of any financial support that is often needed for larger start-ups.

Many of the existing EU financial instruments are designed to target businesses or SMEs in general rather than self-employed people or independent professionals (who are directly/explicitly addressed even more rarely). Self-employed are a unique subset of micro enterprises and differ from them in key ways, notably in their self-reliance. Their business model rests on supplying their expertise to clients without necessarily seeking to grow and take on permanent staff, which is typical of start-ups and SMEs. In addition, most of the private capital schemes offered by the EU program COSME focus on credit lending to address the financial needs of small businesses. However, loans and repayments may only exacerbate the challenges in the context of financial volatility and periodic income fluctuation that selfemployed people and micro-businesses experience. EU financial assistance programs should instead focus on “financial resilience” and to improve small business’ access to non-lending financing routes.

Finally, private financial institutions incur into fixed costs for deciding and processing loan applications, which makes lending small amounts (up to 25.000 Euro) unattractive to them. The EU should develop incentive structures to make small loans more appealing to lenders (like enabling lenders to bundle them) while at the same time reduce costs and bureaucratic obligations for private financial institutions lending to small companies and independent professionals. In addition, small loans are sometimes not repaid and they can default up to 20% of the initial value, a cost which is taken on by private financial institutions. Hence, some may need to be backed up by public guarantee schemes which in the long run is still more cost effective than handing out non-repayable grants.

Policy Recommendations Against this backdrop, the EU should: 

Make independent professionals and the self-employed eligible to apply for EU and national funding programs for SMEs and allow the European Fund for Strategic Investments to provide long-term financing for investments and cash flow needs for the smallest businesses.

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Ensure that in publicly funded schemes there is an emphasis on metrics to track “work” taking place outside formal employment, instead of merely measuring “jobs” and “employment” to gauge the strength of the economy, so that independent professionals and self-employed are not excluded or disadvantaged and the value they create quantified.

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Especially in the professions where there is no need for large sums of capital to buy equipment to deliver a profitable service, the EU should develop small grants up to 5.000 Euro making the EU Progress Microfinance Facility accessible to all people (even outside vulnerable categories and low skilled workers) who want to develop their micro-enterprise or establish themselves as self-employed.

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Link pre-start financial support with post-start financial support by developing some financial instruments to offer consultancy services or business coaching such as those typically provided by incubators, for example by helping to develop and implement a business plan.

This not only improves the self-employed skills, but greatly increases their chance of getting mainstream funding in the future.

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Make sure financial instruments are followed by low-interest bank loans, backed up with a public guarantee, which will better suit the self-employed and independent professionals’ need for capital and can help efforts to promote the transition from unemployment into selfemployment.

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Remove onerous bidding requirements (e.g. asking for large liability insurance and large capitalisation requirements) to enable consortia of self-employed professionals to come together or form subcontracting arrangements (as recommended by a recent EUROFUND report) and access EU funding from which they are often excluded because they are not legal entities.

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Introduce a refundable tax credit for new micro-businesses in their first years of operation, similar to the tax credits that municipalities often use to attract and retain large businesses.

Ensure the correct implementation in the Member States of the Late Payment Directive, with specific attention to the situation of self-employed workers. Consider the creation of a Prompt Payment Code where all signatories must commit to paying interest on late payment at a level above the Government’s legal minimum and support the introduction of a small business conciliation service.

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Promptly implement the provision included in the EU Commission Crowdfunding Communication to mainstream crowdfunding and other alternative financial matchmaking platforms that can connect small businesses to a wide community of lenders, including specialized investors such as peer-to-peer lending, micro-lending and SME angels.

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About the European Forum of Independent Professionals (EFIP) EFIP is a European not-for-profit collaboration of national associations which represents over 11 million of independent professionals at EU level through targeted research and advocacy.

Independent professionals (often referred to as freelancers or contractors) are highly-skilled selfemployed workers without employers nor employees. They offer specialised services of an intellectual and knowledge-based nature and work on a flexible basis in a range of creative, managerial, scientific and technical occupations. With a 45% increase since 2004, they are the fastest growing segment of the EU labour market.

EFIP mission is to strive for European policy, business and social environment to become more conducive to the independent and self-employed way of working, in both the private and public sectors.

More information about EFIP is available on our Website, our Manifesto and our Campaign.

Contact Marco Torregrossa Secretary General European Forum of Independent Professionals Avenue de l’Opale 124 box 6 B-1030 Brussels (Belgium) +32.486.71.30.26 marco.torregrossa@efip.org www.efip.org EU Transparency Register N.: 823591710024-95

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