Pre-financing

Pre-financing is an advance paid shortly after the grant agreement takes effect, so the consortium can start work before any costs have been reported. It is normally paid to the coordinator within about a month, and the coordinator distributes it to the partners under the consortium agreement.

It remains the EU's money until the work justifies it. Formally it belongs to the grantor until it is offset against accepted costs, which is why it must be returned if the project collapses early and why the coordinator holding it is a fiduciary rather than an owner.

A slice is retained for the MUTUAL INSURANCE MECHANISM: 5% of the maximum grant amount, deducted at the start. It insures the programme against beneficiaries that cannot repay what they owe, and it is returned at the end of the project provided nothing is due. Budget for receiving 95% of what the agreement's headline suggests.

The distribution schedule is the part consortia argue about afterwards and should settle before signature. A coordinator that passes on money only after each partner's first cost claim has effectively made the partners finance the early months themselves, which may be reasonable, but it should be a decision rather than a surprise.

For a small partner this is the difference between a project that is viable and one that is not. Between pre-financing and the first interim payment there can be eighteen months of spending before more money arrives, and that gap has to be financed by someone.