The First Spanish Financial Entity Specializing in the Audiovisual Sector

On December 23, 2005 the first Reciprocal Guarantee Society (S.G.R.) for the audiovisual sector was legally established in Madrid and its first Governing Council meeting took place on January 23, 2006. The product of a broad consensus and of the support of the whole of the Spanish audiovisual sector, this society has been set up and is a pioneering initiative in the sector.

The creation of an audiovisual Reciprocal Guarantee Society is considered to be an enterprise promotion instrument fundamental in providing the support required to fund the audiovisual sector, since it means that the whole of that sector is able to negotiate preferential conditions with banks, which will reduce costs and allow greater access to credit.

The initial share capital stands at €6,045,000 and a technical provision fund has also been set up at a value of €1,000,000. With this information, the society has drawn up a development plan which intends to generate €70,000,000 in the next five years.

The S.G.R. has been created with the participation of the Body for the Management of Audiovisual Producers Rights (EGEDA), the Institute of Cinematography and Audiovisual Arts (ICAA) of the Ministry of Culture and SMEs from the sector as a whole, in addition to federations and associations from throughout Spain: Spanish Federation of Audiovisual Producers (FAPAE), Spanish Cinema Federation (FECE), Spanish Association of Audiovisual Technical Industries (AITE), Association of Independent Cinematography Distributors (ADICINE), Associated Independent Cinematography Distributors (DICA), Spanish Society of Cinema Producers (SECIES), etc.

The Spanish Council of Ministers authorized the ICAA to participate as a “patron member” with three million euros, and EGEDA contributed the same amount of capital.

For the authorization of its operations, the Society has the approval of the Ministry of Economy and Treasury, the support of the Bank of Spain and the Community of Madrid, and is subject to constant supervision in its activities. In addition to providing financial guarantees for its members, the Society will advise companies on accounting and tax services, grants and subsidies.

Following the General Assembly to be held in March 2006, the formal processes may begin for the guarantee operations relating to the projects that have already been analyzed and have received the approval of the supervisory bodies established for that purpose.

Aval Audiovisual S.G.R. already has more than 200 participating members from all the audiovisual subsectors, and the priority aims of the society are production, distribution, exhibition and technical industries. Any company or entrepreneur belonging to these sectors, who faces any kind of financial need or considers it interesting to be able to compare various investment alternatives, knows that it has available this financial tool created and designed especially for it.

The classes of guarantees cover the broadest possible range and, in sum, there exist financial guarantees in relation to financial entities, financial guarantees before other entities, non-financial guarantees before the authorities, non-financial guarantees before third parties, and finally, any class of guarantee that Spanish audiovisual SMEs may need in their daily activity.

The S.G.R. will analyze the different contracts underpinning a particular audiovisual operation and will pay special attention to the clauses relating to the ownership of the intellectual property rights, which may be independently valued so as to be considered part of the counterguarantees for guarantee operations.

The main problems facing SMEs in the sector and which Aval Audiovisual S.G.R. aims to solve are:

  • Shortage of own resources;
  • High level of short-term indebtedness;
  • High-level of financial dependency on other parties;
  • High financial costs;
  • Limited negotiating capacity before financial entities;
  • Lack of knowledge of financial entities of the audiovisual sector;
  • Difficulty of financial entities in recognizing the value of the assets of companies in the sector;
  • Limited access to new technologies and potential markets.

The main benefits which SMEs in this sector find with a financial entity such as Aval Audiovisual, S.G.R. are:

  • The S.G.R. covers the shortage of capital assets, by providing the guarantee;
  • It substantially improves its negotiating capacity, since it negotiates global agreements with banks. The S.G.R. helps to obtain conditions similar to those obtained by large companies;
  • It reduces financial costs: the S.G.R. negotiates overall preferential conditions;
  • The S.G.R. coordinates its agreements with the existing lines of assistance; and
  • It broadens the capacity for risk of an SME, by supporting financial operations with its guarantee.