Enisa participative loans

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The ENISA participative loan scheme is a financing program designed to support startups and small and medium-sized enterprises (SMEs). Unlike a traditional bank loan, this loan is not convertible into equity.
What are the main aims and objectives?

The primary objectives of the Enisa participative loan scheme in Spain are to provide funding support to newly formed startups and small and medium-sized enterprises (SMEs) in their early stages. This support is particularly directed at companies created by young entrepreneurs up to the age of 41. The scheme seeks to co-invest in the first rounds of private capital raised by the company, with the intent of stimulating company growth. The loan is designed to co-finance the company's strategic plan, with a focus on innovation. Furthermore, the scheme also aims to facilitate the ease of applying for new financing whenever there are changes and growth in the company. Overall, Enisa promotes the creation, growth and consolidation of Spanish SMEs, actively participating in the financing of viable and innovative business projects and stimulating the venture capital market through participative loans. 

How does the program work?

The Enisa participative loan scheme works by providing financial support to startups and SMEs. It operates like an equity loan, where the interest rate varies based on the company's profits. The loan amount can be up to €75,000. The scheme primarily targets newly formed startups and SMEs, especially those established by young entrepreneurs. It seeks to co-invest in the first rounds of private capital raised by the company to stimulate growth. The scheme also aims to make it easier for companies to apply for new financing as they grow and evolve. 

Enisa provides participative loans through three programs targeted at young entrepreneurs, entrepreneurs and companies at growth stage. The maturities of the participative loans range from 7 to 9 years, and the repayment of the principal is delayed from 5 to up to 7 years. The explicit interest rate applied is floating and collateral is not required. Enisa´s participative loans are subordinated to any loans and only senior to pure equity, and are counted as equity for financial analysis purposes. 

What is the overall cost?
Enisa handles a budget of roughly €100 million for these loans annually. 
How was it implemented?
Enisa (Empresa Nacional de Innovación, S.M.E., S.A.) is a state-owned company that falls under management of the General Directorate of Industry and SMEs, itself integrated into the Spanish Government’s Ministry of Industry, Commerce and Tourism. Enisa was established in 1982 to commit money to high-technology firms, typically in the form of minority equity stakes, with the aim of bridging the equity gap left by private VC firms. As the Spanish VC market matured, Enisa gradually switched from equity to other financial instruments since 1996, when the government approved regulation about participative loans. Since 2005 Enisa has sharply increased the number of participative loans granted to SMEs. 
What impact has been measured?

Since its creation and up until 2022, Enisa granted loans amounting to €1 billion to more than 6,000 Spanish SMEs.  

An academic study in 2019 of 512 entrepreneurial ventures that received a participative loan from Enisa between 2005 and 2011 found the following: 

  • Participative loans significantly boosted their recipients and sales 

  • In the two years following receipt of the loan, a 1-million-euro loan generated an increase in average employment of between 12.1 and 14.7 jobs and an increase in sales of between 1.09 and 1.97 million Euros 

  • The effect was larger for high-tech, young and small entrepreneurial ventures 

  • Participative loans increased their recipients annual growth by 10.6% for employment and by 18% for sales 

  • There was no evidence of industry or regional spillovers 

  • There was no impact on business survival rates 

What lessons can be learned?

While the Enisa participative loan scheme has been beneficial to many startups in Spain, it has not been without criticism. Some detractors argue that the loan amount of up to €75,000 is not sufficient for larger startups and SMEs, limiting their growth potential. Others point out that the interest rate, based on a company's profits, can be burdensome if a business has a particularly successful year. There are also concerns about the application process, with critics arguing it's complicated and time-consuming, deterring potential applicants. 

An empirical analysis based on a sample of 488 Spanish SMEs that received participative loans from Enisa between 2005 and 2010 found that recipients of participative loans had significantly higher financial debt (+31.5% than the control group), well beyond the value of the loan itself This is an indicator that other lenders are more willing to back programs that have participated in the scheme  

CURATED BY

Carolina Rodríguez

Former Promotion manager
Enisa
Spain