Business financing and incentives

The German lawyers at WILDE BEUGER SOLMECKE have over 20 years of experience in helping small, medium-sized and larger businesses obtain funding for their projects when entering the German market. WBS has particular expertise in obtain funding for media projects. Our lawyers can help your company obtain business financing for its next project.

Writing a business plan

The first step to securing funding is to ensure you have a solid and credible business concept. Businesses should ensure that their concept is given impetus by a strong and well-structured business plan.

Our team can help you to draft and finalise a business plan and ensure your business meets with success when applying for financing incentives.

Financing and incentives

Germany has a range of financial incentive programmes to support businesses. Each financial support programme targets specific industry sectors and forms of investment. The programmes cover the whole range of activities, from initial investment, to operational costs, to research.

Projects are eligible for support depending on the planned investment amount, the location of investment and the size of the company making the investment.

Both the German federal government and German states offer financial incentive programmes, with some programmes offering combined assistance.

International investors are subject to the same eligibility criteria as national investors.

A. Investment support

 Germany’s investment support programme is divided into three streams: cash investment grants, low-interest loans and public guarantees.

1. Cash grants

a. GRW

The GRW (Gemeinschaftsaufgabe – Verbesserung der regionalen Wirtschaftsstruktur) is a national funding programme which supports business investment and investment in business-relevant public infrastructure in municipalities.

Limited financial support is also available for clearly defined non-investment measures such as employee training or for expert reports. These limited measures are only available to small and medium-sized enterprises.

The level of support offered differs depending on the geographic location of investment.

Funding is given to investment projects aimed at creating long-term employment and which are capable of increasing the GDP of the relevant geographic area in a more than insignificant manner.

Businesses investing in so-called maximum support areas, which are mainly located in eastern Germany, can receive a greater percentage of funding. The maximum level of funding available is as follows:

Geographic area

Company size

Investment support level (%)

A

Small

50

Medium

40

Large

30

A (other)

Small

40

Medium

30

Large

20

C

Small

35

Medium

25

Large

15

D

Small

20

Medium

10

Large

max. 200,000

b. Investment grant (Investitionszulage)

Germany’s investment grant programme (Investitionszulage) was specifically designed to stimulate investment in eastern Germany.

The programme came to a close at the end of 2013. Investment projects seeking funding should apply under the GRW mentioned above.

2. Low-interest loans

A range of financial products are available through Germany’s development bank, the KfW.

The SME lending arm of the KfW (the Mittelstandsbank) provides financial support to start-ups, entrepreneurs and SMEs. The bank provides loans, equity and mezzanine financing. Applications for assistance are made via a business’ bank.

Each state also has its own development bank available to fund investment projects with low-interest loans.

3. Public loan guarantees

Businesses can often experience difficulties in obtaining loans when they are unable to offer sufficient security.

Public loan guarantees are offered by Germany’s federal government and by each federal state.

Eligibility for a public guarantee is subject to the planned loan amount, business size and the investment location. Public guarantees typically cover up to 80% of the total loan value.

The individual federal states offer guarantees throughout Germany of up to a maximum of 10 million euros. Projects in eastern German and parts of Berlin can receive combined federal and state guarantees starting at 10 million euros.

B. Operational financing

1. Employment support

Employment forms a large part of a business’ operational costs. Germany’s Federal Employment Agency (Bundesagentur für Arbeit) and state authorities offer a range of financial measures to assist businesses with employment costs.

Financial support is targeted at key areas including:

Target area

Level of funding (max.)

Activities

Recruitment

100%

Advertising, pre-selection and assessment centres

Training

100%

3 month training courses for unemployed

Salary subsidies following recruitment of unemployed

50%

(max. 12 months)

Employer must guarantee long-term employment

On-the-job training

50%

Continued training within a business

Eligibility for support is also subject to the size of the business, industry sector and project location.

2. Research and development funding

Foreign companies invest around 11 billion euros annually in research and development in Germany. A range of public funding is available to complement investment in R&D projects. The federal government provides around one third of research funding, with the private sector providing the rest.

The federal government and individual states mainly provide independent support. In some areas they collaborate through joint bodies.

The German government steers its research and development funding through a number of strategies. The most important of them are the High-Tech Strategy 2020 and the Internationalisation Strategy.

a. High-Tech Strategy 2020

The High-Tech Strategy 2020 defines lead markets and priorities for R&D funding. The aim of the strategy is to improve the innovation climate and to strengthen cooperation between science and industry.

The strategy targets projects in the areas of:

  • Climate and energy
  • Health and nutrition
  • Mobility
  • Safety and Security
  • Communication

b. Internationalisation Strategy for Science and Research

One of the high-priority areas under Germany’s Internationalisation Strategy for Science and Research is to foster businesses’ access to international innovation potential, as well as improving cooperation with developing countries.

c. European Union funding

The European Union provides funding for research and innovation through its Horizon 2020 Framework Programme. A total of €80 billion of funding is available over 7 years (2014 to 2020). The focus of the programme is to promote the transformation of research results into innovative products.

The Horizon 2020 Framework Programme is complemented by the European Union’s research area initiative. The European Research Area creates a common research area within the member states of the European Union and aims to strengthen the scientific and technological atmosphere through the free movement of researchers, scientific knowledge and technology.

3. SME innovation funding

 Germany’s Innovation Programme for small and medium-sized enterprises is a federal funding programme that supports SMEs in innovative projects.

The programme began in 2008 and will run until 2014.

The aim of the programme is to promote innovation and strengthen the competitiveness of business, industry and the freelance professions, thus contributing to growth and securing employment.

 

Contact our expert team of German lawyers on +49 (0) 221 / 951 563 0 or use our contact form for more information on obtaining business financing in Germany..


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Christian Solmecke is a partner at the law firm WILDE BEUGER SOLMECKE. He is the author of numerous legal publications in the area of internet and IT law. He is also an associate lecturer for social media law at the Cologne University of Applied Sciences.

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