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Investing in a Tourism project is not as simple as it may seem at first glance. In most cases, investments in the tourism sector require an initial investment and a higher risk compared to investing in a traditional business. From the capital needed to the day that marks the start of the activity, regardless of the investor's nature, the thought is the same, "What financial mechanisms can I use to reduce the risk of my project?".
It is precisely because we understand the needs and are close to the investors in the tourism sector that we have prepared this article. Here, you will not only find the answers you need to reduce the risk of your project, but you will also learn how the combination of the Productive Innovation Incentive System and the 2024 Support Line for Tourism Offer Qualification works in practice.
Table of Contents
You have probably heard of the Productive Innovation Incentive System. It is probably one of the most well-known supports among Portuguese entrepreneurs. This is a Business Competitiveness Incentive System (SICE) promoted by Portugal 2030 and managed by IAPMEI, aimed at SMEs developing activities in sectors such as Industry, Tourism, and Services.
With a non-repayable grant rate that, at the date of this article (2024), can reach up to 60%, this is an excellent financial mechanism for companies proposing to develop innovation projects aimed at increasing productive capacity.
Based on this objective, eligible projects include:
However, access to the budget allocation of this Incentive System is not available for all types of projects. This means that although the project's base may fall within one of the types mentioned above, there is a determining factor for the success of the application: the INNOVATION factor.
To assess whether your project has the potential to submit an application, schedule your free diagnosis here.
The LAQO - Support Line for Tourism Offer 2024 is a financing line agreed between Turismo de Portugal and banking institutions, aimed at supporting and stimulating the creation, requalification, and repositioning of developments, establishments, and activities in areas of low population density.
Unlike the Productive Innovation Incentive System, this line follows its own financing structure capable of covering more areas of activity. However, there are factors to be considered and safeguarded by companies to ensure access to the Fund.
With a maximum limit of €3,000,000 to be granted by Turismo, the financing is structured as shown in Table 1 below.
Table 1: LAQO Financing Structure
In the case of support granted by Turismo de Portugal, this is repayable over up to 15 years with a grace period of up to 4 years for SMEs. For Non-SMEs, the repayment period is 10 years with a grace period of up to 3 years.
Additionally, companies that achieve their goals may benefit from a performance bonus of 25% for SMEs and 5% for non-SMEs, which can be further increased by 10% if the company is awarded the Sustainability Leader Seal.
Finally, this line can be used cumulatively with the Productive Innovation Incentive System, an opportunity we will detail in practice, showing how this combination of financing mechanisms can help reduce risk and the need for working capital in the first phase.
To better understand how the cumulativeness of the Productive Innovation Incentive System and LAQO works in practice, we have prepared this practical case to illustrate its benefits. ⚠️ Note that this is a purely hypothetical case and should be adapted to the reality of your project.
This practical case is divided into three phases:
About the Project Under Analysis:
Consider Company X, an SME located in a low-density area that proposes to develop an innovative tourism concept with a significant impact on the enhancement of the region where it intends to establish itself. For this project, the estimated investment is €1,000,000.
For this case, we considered the following applicable rates for each of these variables:
Note: For the following calculations, the innovation aid limits are not considered.
Table 2: Investment with Application of SI Productive Innovation
In this scenario, we can observe that this project would benefit from a non-repayable grant of €400,000 and that the promoter would need to ensure €200,000 initially and also request a loan of €400,000. Thus, at the end of the project, the promoter would have invested €200,000 (own capital) and paid interest on the €400,000 bank loan.
Table 2: Investment with Application of LAQO
By applying solely to LAQO, Company X would need to ensure €200,000 of Own Capital, would benefit from a repayable financing from Turismo de Portugal of €600,000 with a grace period of up to 4 years, and at the end of the project, would still manage to benefit from a performance bonus of €210,000.
After calculating, at the end of the project, the project promoter will have invested €200,000 of own capital, benefited from a loan of €800,000 (€600,000 without interest and €200,000 from a bank loan with interest), and a success bonus of €210,000.
Table 2: Investment with Application of SI Productive Innovation + LAQO
In this scenario, the investor would have invested €200,000 (Own Capital), benefited from a non-repayable grant of €400,000, and transformed the need for a bank loan of €400,000 (Bank Loan – Point 1) into interest-free financing of €300,000 and a loan with interest of €100,000.
At the end of the project, the investor can also benefit from a performance bonus of €105,000.
The practical analysis of the cumulativeness between the Productive Innovation Incentive System (SICE Productive Innovation) and the Support Line for Offer Qualification (LAQO) clearly demonstrates the significant benefits that can be achieved by combining these sources of funding.
In the first scenario, with the isolated application to SICE Productive Innovation, the promoter receives a non-repayable grant of €400,000 but needs to take out a bank loan of €400,000, bearing the corresponding interest, in addition to investing €200,000 of own capital.
In the second scenario, with the isolated application to LAQO, the project benefits from €600,000 interest-free repayable financing from Turismo de Portugal and a €210,000 performance bonus. However, a €200,000 bank loan with interest is still required, along with an initial investment of €200,000 in own capital.
In the third scenario, by combining SICE Productive Innovation with LAQO, the company maximises the benefits: it receives €400,000 as a non-repayable grant, reduces the need for a bank loan to just €100,000 with interest, supplemented by €300,000 interest-free financing from Turismo de Portugal. Additionally, it may benefit from a €105,000 performance bonus if all the objectives defined in the application are met.
This practical study highlights that the combined approach allows the investor to minimise financial costs and maximise support benefits, resulting in a more favourable and less onerous financing structure. For investors, this strategy represents an opportunity to leverage investment with less financial risk exposure and greater potential return, optimising the positive impact of the project on regional value enhancement.
At Yunit, you will find support tailored to the specificities of your project to ensure the success of your application!
1. Analysis of investments and framing;
2. Preparation of strategic analysis and feasibility study:
4. Application;
5. Support for the implementation of the investment project.
At Yunit, our role is to demystify and simplify the entire application process for our clients, optimising the eligibility potential of investment projects: from conducting a coherent economic-financial analysis to aligning the project with relevant indicators in the context of decarbonisation, to submitting the application on the specific platform, whose forms require a range of knowledge and skills.
The fact that we are an SME and have similar logic and challenges to those of our clients places us in a privileged and close position to be able to identify and diagnose market changes and opportunities, translate them into the context of each of our clients, and support their change and adaptation to provide the best response and continue to create value.
Only by working in this way can we achieve success rates in the order of 76% (SI R&D, INT, QUAL, and INOV), when the market average is 41%.
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Yunit Consulting: Together, let's take the leap
Last update: 31 July 2024
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