Does your company qualify as SME?
Many funding agencies and subsidy providers aim to boost the position of ‘micro, small and medium-sized enterprises’, or SMEs, and therefore require your business to qualify as an SME to be eligible for funding.
Exactly what criteria determine whether you are an SME?
There are three main criteria that determine whether your enterprise qualifies as an SME:
- Staff headcount (< 250 annual work units)
- Annual turnover (≤ €50 million)
- Annual balance sheet total (≤ €43 million)
To qualify as an SME, your enterprise must fulfill the staff headcount norm, and either the turnover OR the balance sheet total criterion.
Staff headcount for SMEs
The staff headcount is expressed in annual work units (AWU). To determine the staff headcount, include all full-time, part-time and seasonal staff members. So, staff includes: employees, persons working for the enterprise being subordinated to it, owner-managers, and partners engaged in a regular activity in the enterprise and benefiting from financial advantages from the enterprise. The staff headcount criteria for the different sizes of SMEs are as follows:
- Micro-sized: <10 AWU
- Small-sized: <50 AWU
- Medium-sized: <250 AWU
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Annual turnover and balance sheet total
The annual turnover should not include value added tax (VAT) or other indirect taxes. The annual balance sheet total refers to the value of your company’s main assets. To qualify as an SME, your company should meet either the annual turnover criterion OR the balance sheet criterion. The thresholds for the different sizes of SMEs are as follows:
- Micro-sized: annual turnover ≤ €2 million OR annual balance sheet total ≤ €2 million
- Small-sized: annual turnover ≤ €10 million OR annual balance sheet total ≤ €10 million
- Medium-sized: annual turnover ≤ €50 million OR annual balance sheet total ≤ €43 million
How to calculate the headcount, turnover and balance sheet total
How the three criteria should be calculated depends on the capital structure of your enterprise. Three types of SMEs are recognized:
Autonomous SME enterprise:
If you are 1) totally independent, or 2) if your company has <25% capital or voting rights (whichever is higher) in one or more other enterprises and other enterprises do not have a stake of >25% (capital or voting rights) in your enterprise. Exceptions exist for public investment companies, venture capital companies, business angels, universities, non-profit research centres, institutional investors (including regional development funds) and autonomous local authorities with an annual budget of <€10 million and fewer than 5000 inhabitants may have a maximum stake in your enterprise of 50% instead of 25%, provided they are not linked to one another.
Calculation: use only the number of employees and financial data in your own annual accounts.
Partner SME enterprise:
If 1) your enterprise has 25-50% of the capital or voting rights in another enterprise, or 2) another enterprise has a holding of 25-50% of the capital or voting rights in your enterprise.
Calculation: you add a proportion (equal to the percentage of shares or voting rights – whichever is higher) of the other’s enterprise’s staff headcount and financial details to your own data.
If your enterprise is linked to another enterprise and one of the enterprises has the ability to exercise a dominant influence over the other. For example, by owning >50% of shares or being entitled to change a majority of the management body. Also, having a contract that allows a dominant influence, or holding sole control over majority of shareholders’ voting rights).
Calculation: all employment and financial data (100%) of the linked enterprise should be added to the data of your enterprise to check if your company meets the criteria of an SME.
More information and calculation examples
Funding for SMEs
There are many non-dilutive funding opportunities that specifically address SMEs, such as EIC Accelerator and Eurostars. Our experts have extensive experience in composing grant applications in the fields of life sciences, biotech and medical technology, which can support a swift development of your company or technology. Furthermore, with our extensive network we can find innovative partners to join your competitive projects. Contact us and find out what we can do for you.