WHAT IS IT?

The Social Innovation Fund is a 55M€ public investment fund aimed at stimulating the social investment market and facilitating access to finance for social sector organizations and SMEs aiming to develop social innovation projects in Portugal.

The SIF is one of the four financing instruments implemented by public initiative Portugal Social Innovation as a way to boost social investment and to promote innovation and social entrepreneurship in Portugal. For more information about this initiative and other financing instruments, click here.

HOW DOES IT WORK?

Long-term loans, provided by financial institutions, at below market conditions adjusted to the specific needs of the social sector organizations or SMEs that aim to develop social innovation projects.

Loans will have a maturity of up to 10 years, while grace periods can be as long as 2 years. Lower interest rate caps will be offered, when compared to the average interest rates for this market.

The maximum amount financed can be up to 100% of the total investment.

Who can apply?
Social sector organizations and SMEs.

Co-investment alongside private investors in equity and quasi-equity in SMEs that aim to develop social innovation projects.

The co-investment ratio will be up to 70% SIF and 30% private investors and shall be made simultaneously, in a deal-by-deal approach. A Shareholders Agreement will be required between the Beneficiary SME, co-investors and the SIF.

The investment period shall be 10 years and a call option will be granted to co-investors, which can be exercised during the first 6 years from the date of the investment.

Who can apply?
Investors – Business Angels, Venture Capital Funds, SMEs, Foundations, among others*

Entities eligible for investment: SMEs

*Entities envisaged in article 1 of the Legal Framework for Venture Capital, Social Entrepreneurship and Specialized Investment, approved under Law No. 18/2015, of 4 March, as well as other entities or individuals that, whether or not they conduct ongoing business in Portugal, are able to invest in the share capital of companies in Portugal.

1. SIF DEBT

Long-term loans, provided by financial institutions, at below market conditions adjusted to the specific needs of the social sector organizations or SMEs that aim to develop social innovation projects.

Loans will have a maturity of up to 10 years, while grace periods can be as long as 2 years. Lower interest rate caps will be offered, when compared to the average interest rates for this market.

The maximum amount financed can be up to 100% of the total investment.

Who can apply?
Social sector organizations and SMEs.


2. SIF EQUITY

Co-investment alongside private investors in equity and quasi-equity in SMEs that aim to develop social innovation projects.

The co-investment ratio will be up to 70% SIF and 30% private investors and shall be made simultaneously, in a deal-by-deal approach. A Shareholders Agreement will be required between the Beneficiary SME, co-investors and the SIF.

The investment period shall be 10 years and a call option will be granted to co-investors, which can be exercised during the first 6 years from the date of the investment.

Who can apply?
Investors – Business Angels, Venture Capital Funds, SMEs, Foundations, among others*

Entities eligible for investment: SMEs

*Entities envisaged in article 1 of the Legal Framework for Venture Capital, Social Entrepreneurship and Specialized Investment, approved under Law No. 18/2015, of 4 March, as well as other entities or individuals that, whether or not they conduct ongoing business in Portugal, are able to invest in the share capital of companies in Portugal.

DEADLINES

The Social Innovation Fund will operate as an open continuous call.

SISEI ACCREDITATION

Both SIF Debt and SIF Equity will only accept applications if the investment ready projects submitted are accredited as SISEI – Social Innovation and Social Entrepreneurship Initiatives.

This recognition is granted by the Portugal Inovação Social Mission Unit, through the issuance of a favorable opinion, which should be included in the application process.

FAQ

1. What is the Social Innovation Fund (SIF)?

The Social Innovation Fund (SIF) is an independent investment fund created under Decree-Law No. 28/2018, of 3 May.

The SIF is a hybrid fund model given that is has two types of investment approaches: Wholesaler (SIF Debt) and Retailer (SIF Equity). With the SIF Debt line, the SIF will bolster the Counter-Guarantee Fund to ensure the issuance of counter-guarantees in favor of companies that provide guarantees to credit institutions that grant loans for the financing of eligible transactions of Final Beneficiaries in terms of maturity, interest rates and the provision of collateral that are tailored to their needs. With the SIF Equity line, the SIF will co-invest with a private investor in the Final Beneficiaries by subscribing and acquiring a stake in the share capital of companies that qualify as SMEs or by subscribing and purchasing bonds or other forms of equity or debt financing issued by the companies.

2. What are the SIF's goals?

Essentially, the SIF is for SISEIs in the consolidation or expansion stage that require more substantial investments and have the financial sustainability to repay the investment.

The SIF Debt line aims at facilitating access to financing, in the form of bank credit, to companies that qualify as Small and Medium-sized Enterprises (SMEs) and Social Sector Organizations, as envisaged under article 4 of Law No. 30/2013, of 8 May, that implement SISEIs, thus contributing to addressing market gaps and the corresponding financing gaps.

With the SIF Equity line, the goal is to encourage investment in the seed, growth and expansion stages of SMEs focused on developing SISEI using a capital facility for co-investment with private investors who are legally authorized to conduct these types of transactions.

3. What does the SIF consider co-investment?

With the SIF Equity line, investments by the Fund and the private co-investor are made simultaneously, under previously established terms and conditions. A shareholder agreement will be signed between the beneficiary company, co-investor and the SIF, which will establish the obligations of all parties involved.

4. In what regions can the SIF invest?

SISEI implementing entities whose intervention falls within, at least, one of the following NUTS II regions are eligible: Northern, Central or Alentejo Region.

5. In which sectors can the SIF facilitate access to a loan or investment?

Given that social innovation cuts across all issues and sectors, a wide range of sectors are covered. Priority sectors are: Social inclusion, digital inclusion, education, employability, healthcare, active aging and gender equality.

Observation: Due to specific restrictions in Europe when it comes to State aid, some sectors are excluded. For more information contact: fis@inovacaosocial.portugal2020.pt

6. How do I apply to the SIF?

Regardless of the financing facility, submission to the SIF starts with obtaining SISEI Accreditation, which you can already apply for now. See ‘5. SISEI Accreditation’.

As soon as the SIF opens, the steps that need to be taken for submitting an application to the SIF will be shared on the website, which will be run by the managing body (to be appointed).

The SIF is expected to start operating in December 2018.

The Portugal Inovação Social Mission Unit is currently accepting expressions of interest via the following email address: fis@inovacaosocial.portugal2020.pt

7. What is the cut-off date for submissions to the SIF?

Once open, the credit lines under SIF Debt have a life span of 12 months, which may be extended for additional periods of 6 months, if funds are not depleted within the previous allotted time period. The cut-off date is 31 March 2022.

Investments within the scope of SIF Equity must be made by 31 December 2023.

8. What is Portugal Inovação Social?

Created as part of Portugal2020, the Portugal Inovação Social initiative is the first program by a Member State to foster Social Innovation financed by European structural funds. It is a groundbreaking initiative aimed at mobilizing at least 150M€ in Portugal 2020 funds to boost the ecosystem that drives social innovation and social entrepreneurship initiatives (SISEI) in Portugal, and to create social investment practices that bring new players (companies and private investors) and greater scale to financing and support for innovation in the social economy.

9. What is impact investment?

Impact means significant and lasting improvement in a person, community or ecosystem’s well-being brought about by an action or set of actions.

Impact investment is the channeling of private equity for investment in projects that aim to have a quantifiable, positive social and/or environmental impact and which can or could generate financial return.

10. What is an SISEI?

Under Portugal Inovação Social, a Social Innovation and Social Entrepreneurship Initiative (SISEI) is a project aimed at implementing or developing an innovative solution for one or more social problems. In other words, it is a project that aims at intervening in one or several social problems in an innovative and effective manner to generate positive social impact.

11. What is a Social Sector Organization?

A Social Sector Organization is an independent entity that seeks to solve society’s problems, particularly those that affect populations that are excluded, unprotected, neglected or discriminated against. These organizations can be established as several legal forms, including as an association, foundation, cooperative, charitable institution, among others, as envisaged under article 4 of Law No. 30/2013, of 8 May.

12. What other financing instruments are being developed by Portugal Inovação Social?

Portugal Inovação Social manages four financial instruments that follow the life cycle of SISEIs and which complement one another:

Building Capacity for Social Investment: An instrument designed to support SISEIs in increasing their organizational and management skills to better prepare them to make a social impact and attract social investment;

Partnerships for Impact: Instrument designed to support SISEIs looking to implement a development plan to achieve greater scale and impact, together with private and public partners;

Social Impact Bonds: Instrument designed to support innovative projects that address urgent social problems that fall under the purview of public policy, under a payment by results approach; and

Social Innovation Fund: designed to promote both the access of SISEI initiatives to the best financing conditions to develop their projects and foster private social investment through the Social Innovation Fund, thus addressing market gaps identified by an independent assessment conducted under Portugal2020.

For more information, click here.

CONTACTS

For more information, contact: fis@inovacaosocial.portugal2020.pt or use the form below.