Cofinancing for young innovative start-ups

Easy access to funding within a clear agreement framework

Innovative start-ups and very young companies with innovative or technological activities often have a hard time finding financing, even at PMV. With a Cofinancing for innovative start-ups, PMV wants to give them easier access to financing, in a smooth way, within a clear agreement framework.

Because they do not yet have positive realised cash flows and therefore have no immediate repayment capacity, innovative or technological start-ups often cannot resort to traditional bank financing. Nevertheless, for their financing, they usually prefer a loan to a capital contribution: not only do they lose part of their own business through a capital participation, but the procedure to obtain a loan is also much simpler.

Refusal or conditions

Cofinancing from PMV is an interesting option in these cases, in combination with the financial support of venture capital funds, business angels or other investors. But even when applying for Cofinancing, quite a few files were refused or had more conditions imposed on them: guarantees, the contribution of additional capital, disbursement subject to meeting targets…

Clear criteria, smooth granting

Nevertheless, PMV wants to help young, innovative and promising companies get financing in a smooth way, despite their high risk profile. We have therefore created a separate form of Cofinancing for start-up, innovative companies that do not yet have a positive cash flow today, but can demonstrate sufficient repayment capacity in the future based on a realistic and substantiated business plan. The features are:

  • a maximum loan amount of €150,000;
  • an own contribution in the form of (quasi-)capital by recognised investors, funds, business angels, etc. of at least the amount of the Cofinancing;
  • a maximum duration of 5 years;
  • an exemption period for capital repayment of maximum 3 years;
  • a fixed interest rate of 4% for a capital repayment exemption period of up to 1 year (for a capital repayment exemption period of 2 or 3 years, the fixed interest rate is increased to 4.25% and 4.50% respectively).

Easier financing

Young, innovative and promising companies without positive realised cash flow – we use the EIF’s criteria on digitisation and innovation to determine eligibility – are not only assured of funding through the new Cofinancing version but also of a smooth processing of their file without special conditions. With the Cofinancing for young innovative start-ups, PMV wants to make it easier for them to find funding when they have already been able to attract one or more investors or business angels at an early stage (and when they have been able to convince PMV of their team and the project’s chances of success).

Need more money?

Young innovative start-ups in need of larger amounts of funding? PMV is happy to analyse their case and potentially fund their development via a capital participation. Moreover, if turnover and positive cash flow are realised, the credit amount can be increased within the limits of the existing Cofinancing framework.

Frequently asked questions about the Cofinancing for young innovative start-ups

Must a company have realised positive cash flows to be eligible for Cofinancing?

No, Cofinancing or Cofinancing for young innovative starters can also be applied for when negative cash flows are realised. However, there must always be commercial traction and repayment capacity evident from the financial plan submitted. For companies that have positive cash flows or realise them shortly after the credit has been made available, Cofinancing is a suitable product. For companies that only realise positive cash flows in the longer term, Cofinancing for young innovative starters is suitable.

Can PMV link guarantees to a Cofinancing?

Generally, PMV operates without guarantees. PMV’s credit committee will decide in each case whether guarantees are deemed necessary. The guarantees for PMV are in principle limited to a joint and several guarantee (with or without wage waiver), a mortgage mandate or a pledge on the shares. In addition, PMV can also opt for signing commitments from directors or shareholders such as a ‘cash deficiency’ clause. In a Cofinancing for young innovative start-ups, none of the above guarantees are imposed.

Is research and development eligible for Cofinancing?

Research and development (R&D) funding for companies in the development phase is not eligible for Cofinancing, including Cofinancing for young innovative start-ups. Products or services must be commercialisable and market traction must be demonstrated. Adaptations that need to be made to a working basic product or software according to the concrete needs of a customer are not considered R&D. For already existing companies with a proven track record of favourable results, financing of working capital for R&D purposes may be considered in the context of expanding their activities. In concrete cases, PMV can be contacted to assess the situation.

Can PMV intervene if research and development is funded by other funding sources?

The modalities of a PMV product should be applied to the investments allowed by PMV. For example, if research and development is financed with own resources, this contribution will not be counted as part of the necessary minimum own contribution. Moreover, PMV will only guarantee a maximum of 50% of the permitted investments.

Can the funding resources of a business angel be considered as own contribution and resources coming from a co-financier at the same time?

If the business angel is affiliated to a network recognised by PMV, the funds provided are considered to be those of a co-financier. In addition, the same funds are considered as own contribution insofar as those funds are subordinated to the credit granted by PMV.

Which resources qualify as own contribution?

Own contribution can be met by the contribution of specie or contribution in kind, or a combination of both. The most common forms are contributions of equity, capital or subordinated loans from (future) shareholders. Convertible loans are eligible as long as they are converted or not repaid during the term of the PMV loan. Funds contributed to the company up to 6 months before the application date of the PMV loan can be considered as own contribution. The date of the deposit is taken into account for this purpose.

How long is the withdrawal period of a credit?

The standard withdrawal period is 12 months and starts on the day of the preparation of the credit proposal. The actual drawdown can take place after the conditions set for inclusion in the credit proposal have been met. As this is a subordinated loan, drawdown is only possible after own funds and funds from the co-financier have been spent.

Can PMV give conditional approval prior to the contribution of own or co-financier's funds?

PMV takes its decisions on the basis of an investment plan. PMV decides conditionally on planned financing; that is, it does not yet have to have been agreed. An investment plan should be as fixed as possible given that every change has to be reassessed. Before the loan is taken up, the planned financing must have been agreed, contributed and used.

How much is the interest rate?

For the Start Loan and Cofinancing, the interest rate – currently 3%. For the Cofinancing for young innovation companies, the interest rate is currently 4%. The interest rate applies as long as the grace period of capital repayments is less than 2 years. For 2 or 3 years of deferred capital repayments, the interest rate is increased by 0.25% or 0.50% respectively. The interest rate remains the same throughout the life of the loan.

In what way should the credit be repaid?

Credits are always repaid on the basis of monthly repayments. Quarterly repayments, semi-annual repayments or other formulas will not be allowed.