# EDF SME bonus: how the funding rate formula works

> How the European Defence Fund calculates development funding rates: baseline rates per activity, PESCO, SME and mid-cap bonuses, caps, and a worked example.

- URL: https://fadec.aero/blogs/eu-programmes/edf-sme-bonus-funding-rate-calculation
- Author: Eric Dauchy, Co-Founder and CEO, EuroGrowth
- Published: 2026-10-09
- Publisher: FADEC — Flanders Aerospace & Defence Cluster (https://fadec.aero/)

**TL;DR:** EDF research actions are funded at 100%. Development actions are funded per type of activity: a baseline rate (from 20% for prototyping to 90% for studies) plus bonuses: 10 points for PESCO, the non-cross-border SME share up to 5 points, twice the cross-border SME share, and 10 points for a mid-cap share of at least 15%, capped per activity.

In EDF development actions, the funding rate is not a single number. It is calculated per activity, and the SMEs in your consortium can move it by tens of points.

The European Defence Fund (EDF) SME bonus is calculated per type of activity in a development action. If at least 10% of the eligible costs of that activity are allocated to SMEs, the baseline funding rate rises by the percentage allocated to non-cross-border SMEs (up to 5 percentage points) plus twice the percentage allocated to cross-border SMEs. A PESCO project adds 10 points, and a mid-cap share of at least 15% adds another 10. The total is then capped at the maximum for that activity. Research actions do not need the formula: they are funded at 100%.

The rules below are taken from the European Commission's [2026 call document for development actions](https://ec.europa.eu/info/funding-tenders/opportunities/docs/2021-2027/edf/wp-call/2026/call-fiche_edf-2026-da_en.pdf) and the [2026 call for development actions dedicated to SMEs](https://ec.europa.eu/info/funding-tenders/opportunities/docs/2021-2027/edf/wp-call/2026/call-fiche_edf-2026-ls-da-sme_en.pdf), which publish the same tables. The 2026 calls closed on 29 September 2026; check the call document of the next work programme before you budget, because rates are set per call.

## Research actions or development actions?

The EDF funds two kinds of action, and the formula only matters for one of them.

| | Research actions | Development actions |
|---|---|---|
| Funding rate | 100%, according to the [2026 research call](https://ec.europa.eu/info/funding-tenders/opportunities/docs/2021-2027/edf/wp-call/2026/call-fiche_edf-2026-ra_en.pdf) | Baseline rate per type of activity, plus bonuses, up to a cap per activity |
| Form of grant in 2026 | Actual cost grants | Actual cost grants, or lump sum grants in the SME-dedicated call |
| Effect of SMEs on funding | None on the rate | Can raise the rate by tens of points |

For development actions, the call document warns about a practical trap: the Commission's IT systems "display a general funding rate of 100% for all automated calculations" for technical reasons. The rates actually due must be calculated in the detailed budget table in the submission system. If you take the 100% on screen at face value, your financial plan will be wrong.

## What are the baseline funding rates per activity?

The types of activity come from Article 10(3) of the EDF Regulation. In the 2026 development calls, they carry these baseline rates and caps:

| Activity (Article 10(3)) | Baseline rate | Maximum with bonuses |
|---|---|---|
| (a) Generating knowledge | Cannot be funded in a development action | n/a |
| (b) Integrating knowledge: interoperability, resilience, critical technologies, security of supply, exploiting results | 65% | up to 100% |
| (c) Studies, such as feasibility studies | 90% | up to 100% |
| (d) Design of a defence product, component or technology, including technical specifications and partial tests for risk reduction | 65% | up to 100% |
| (e) System prototyping | 20% | up to 55% |
| (f) Testing | 45% | up to 80% |
| (g) Qualification | 70% | up to 80% |
| (h) Certification | 70% | up to 80% |
| (i) Technologies or assets increasing efficiency across the life cycle | 65% | up to 100% |

Two rules complete the table. Work package 1, project management and coordination, must always use the rate for studies (90% baseline). Financial support to third parties, where a call allows it, is funded at 100%, but the costs of organising it are budgeted in the normal cost categories at the normal rates.

## Which bonuses can be added, and on what conditions?

| Bonus | Condition | Points added to the baseline |
|---|---|---|
| PESCO | The project is developed in the context of a PESCO project | +10 |
| SME, non-cross-border | At least 10% of the activity's eligible costs go to SMEs | + the percentage allocated to non-cross-border SMEs, up to 5 |
| SME, cross-border | Same 10% threshold | + twice the percentage allocated to cross-border SMEs |
| Mid-cap | At least 15% of the activity's eligible costs go to mid-caps | +10 |

The definitions matter, so here they are as the call documents give them:

- **SME:** an enterprise that meets the EU definition in Recommendation 2003/361/EC.
- **Non-cross-border SME:** an SME established in a Member State or EDF associated country *in which the consortium's non-SME beneficiaries are established*.
- **Cross-border SME:** an SME established in a Member State or associated country *other than* those in which the non-SME beneficiaries are established.
- **Mid-cap:** an enterprise that is not an SME and has up to 3,000 employees, with headcount calculated under the same recommendation.

Who counts: beneficiaries, affiliated entities and subcontractors involved in the action. Associated partners do not.

## The formula, written out

For each type of activity in your project:

1. **Share of SME costs** = eligible costs allocated to SMEs in that activity ÷ total eligible costs of that activity.
2. If that share is **at least 10%**, split it into the non-cross-border share (NCB) and the cross-border share (CB).
3. **SME bonus** = min(NCB, 5) + 2 × CB, in percentage points.
4. **Mid-cap bonus** = 10 points if mid-caps receive at least 15% of that activity's eligible costs, otherwise 0.
5. **PESCO bonus** = 10 points if the project is developed in a PESCO project, otherwise 0.
6. **Funding rate** = min(baseline + PESCO bonus + SME bonus + mid-cap bonus, maximum for that activity).

The calculation is repeated for every activity, because each has its own baseline, its own cap and its own cost split.

## A worked example

A consortium develops a new sensor. Its non-SME beneficiaries are established in France and Germany. Two SMEs take part: SME A in France and SME B in Belgium. Because no non-SME beneficiary is established in Belgium, SME B is a **cross-border** SME; SME A, in France, is **non-cross-border**. There is no PESCO link and no mid-cap.

**Activity (d), design**, eligible costs €2,000,000:

| Item | Value |
|---|---|
| Costs allocated to SME A (non-cross-border) | €160,000 = 8% |
| Costs allocated to SME B (cross-border) | €240,000 = 12% |
| Total SME share | 20%, so the 10% threshold is met |
| Non-cross-border bonus | 8 points, capped at 5 |
| Cross-border bonus | 2 × 12 = 24 points |
| Funding rate | 65 + 5 + 24 = 94% (below the 100% cap) |
| EU contribution for design | €1,880,000 instead of €1,300,000 at the baseline |

**Activity (e), system prototyping**, eligible costs €3,000,000, with the same SME shares:

| Item | Value |
|---|---|
| Baseline | 20% |
| SME bonus | 5 + 24 = 29 points |
| Funding rate | 49% (below the 55% cap) |
| If the project were also a PESCO project | 20 + 10 + 29 = 59%, capped at 55% |

**What if a mid-cap joins?** Suppose a company with 1,200 employees, not an SME, takes on work worth 15% of the eligible costs of each activity, with the SME shares unchanged. It adds 10 points to every activity. Design would reach 65 + 5 + 24 + 10 = 104%, capped at 100%; prototyping 20 + 5 + 24 + 10 = 59%, capped at 55%. Once an activity is near its cap, a further bonus adds nothing, so check the cap before redesigning a consortium around one.

Three lessons follow from the example:

- **Cross-border SMEs are worth twice as much.** A Belgian SME in a consortium led from other countries carries the larger bonus; in a Belgian-led consortium, a Belgian SME would count as non-cross-border and its bonus would stop at 5 points.
- **The non-cross-border bonus saturates fast.** Beyond 5% of costs, extra spending with non-cross-border SMEs adds nothing to the rate.
- **Caps bite on prototyping and testing.** Bonuses help most on activities with high caps, such as design and integrating knowledge.

## What do you need to claim the bonuses?

The call documents set three practical conditions:

- **Registration and self-assessment.** Only entities registered in the Participant Portal with a positive SME or mid-cap self-assessment result, for the current year and the two previous years, count for the bonuses. This applies to subcontractors claiming SME status too. The self-assessment is in the Funding and Tenders Portal under the organisation's SME tab.
- **PESCO confirmation.** If you claim the PESCO bonus and are selected, the national coordinator of the PESCO project must confirm it during grant preparation. Without that confirmation the 10-point bonus is cancelled and you must provide an adjusted co-financing declaration.
- **Detailed budget table.** The rates per activity are calculated in the detailed budget table, which is the basis of the grant. Get the cost allocation per activity and per participant right before you submit.

## Who pays the part the EDF does not cover?

Every point below 100% has to be financed by someone, and the call documents make that an eligibility condition, not an afterthought. Development actions must "demonstrate that the costs of the action that are not covered by the EDF funding are financed by other means", for example contributions from Member States or associated countries, or co-financing from the participants themselves. You prove it with co-financing declarations signed by the co-financers.

That is why the funding rate matters so much to an SME. In the worked example, the design activity needs €120,000 of co-financing at 94% instead of €700,000 at the 65% baseline. For prototyping, the gap is still €1,530,000 at 49%. Someone in the consortium, or a national ministry, must commit to that amount before submission.

The other development conditions are linked to the activity types as well:

| Activity | Extra condition in the 2026 development call |
|---|---|
| (d) Design | Based on harmonised defence capability requirements jointly agreed by at least two Member States or associated countries, shown by signed declarations |
| (e) to (h) Prototyping, testing, qualification, certification | Supported by at least two Member States or associated countries that intend to procure the final product or use the technology in a coordinated way, and based on common technical specifications, shown by signed declarations |
| All development actions | At least three independent applicants from three different eligible countries |

In practice, the activities with the lowest baseline rates are also those that need the strongest commitment from governments. A consortium planning a prototype therefore needs ministries on board early, both for the declarations and, often, for the co-financing.

## What does the SME-dedicated call add?

The 2026 call for development actions dedicated to SMEs used the same rates and bonuses, implemented as **lump sum grants**: the grant is fixed on the basis of an estimated budget per work package instead of reimbursing actual costs. The call had an estimated budget of €30 million, a maximum requested grant of €6 million per project, opened on 11 February 2026 and closed on 29 September 2026, with results expected in March 2027. The call document also notes that successful SME beneficiaries are offered business coaching. With a lump sum, the rate still decides how much of each work package the EU pays; what changes is that beneficiaries do not report actual costs but claim the lump sum once the work is done, and only part of it is paid if the action is not properly implemented.

## How should an SME use the bonus in negotiations?

For a small Flemish company, the bonus is a negotiating argument as well as a funding rule:

1. **Know your status.** Complete the SME self-assessment in the Participant Portal before talks begin.
2. **Know whether you are cross-border.** Ask where the non-SME beneficiaries are established. If none is in Belgium, every euro of your eligible costs raises the consortium's rate by twice its share.
3. **Ask for work in high-cap activities.** A share in design or integrating knowledge does more for the rate than one in prototyping.
4. **Get the allocation in writing.** The bonus depends on eligible costs actually allocated to you; agree your work package budget in the consortium agreement.

Our guides on [finding partners for an EDF consortium](/blogs/consortia-partnerships/how-to-find-partners-for-an-edf-consortium) and on [background and foreground IP under DESCA](/blogs/eu-programmes/desca-background-vs-foreground-ip) cover the next steps. The European Commission's [EDF overview](https://defence-industry-space.ec.europa.eu/eu-defence-industry/european-defence-fund-edf_en) gives the programme context.

## Where does FADEC fit?

FADEC brings together aerospace, space and defence companies in Flanders. Members use the network to find consortium partners and to be found by consortium leaders looking for SMEs. See [how FADEC helps with EDF consortium building](/blogs/eu-programmes/how-fadec-helps-with-edf-consortium-building), [membership](/membership), or [contact us](/contact).

## Quick answers

**What is the EDF funding rate for research actions?**
The 2026 EDF call document for research actions states that research actions are reimbursed at a funding rate of 100%.

**How is the EDF SME bonus calculated?**
Per type of activity, if at least 10% of its eligible costs go to SMEs. Costs allocated to non-cross-border SMEs add their percentage, up to 5 points; costs allocated to cross-border SMEs add twice their percentage.

**What is a cross-border SME in the EDF?**
An SME established in a Member State or EDF associated country other than those in which the consortium's non-SME beneficiaries are established.

**Is there a maximum EDF funding rate with bonuses?**
Yes, per activity. In the 2026 development calls, prototyping is capped at 55%, testing, qualification and certification at 80%, and design, studies and the other development activities at 100%.

**Who counts towards the SME and mid-cap bonuses?**
Beneficiaries, affiliated entities and subcontractors involved in the action, but not associated partners. They must be registered in the Participant Register with a positive SME or mid-cap self-assessment.

## Sources

1. [EDF-2026-DA call document: development actions through actual cost grants, V1.3, September 2026 (European Commission)](https://ec.europa.eu/info/funding-tenders/opportunities/docs/2021-2027/edf/wp-call/2026/call-fiche_edf-2026-da_en.pdf)
2. [EDF-2026-LS-DA-SME call document: development actions dedicated to SMEs through lump sum grants, V1.2, September 2026 (European Commission)](https://ec.europa.eu/info/funding-tenders/opportunities/docs/2021-2027/edf/wp-call/2026/call-fiche_edf-2026-ls-da-sme_en.pdf)
3. [EDF-2026-RA call document: research actions through actual cost grants (European Commission)](https://ec.europa.eu/info/funding-tenders/opportunities/docs/2021-2027/edf/wp-call/2026/call-fiche_edf-2026-ra_en.pdf)
4. [The European Defence Fund at a glance (European Commission)](https://defence-industry-space.ec.europa.eu/eu-defence-industry/european-defence-fund-edf_en)