7 Steps to Investment Funding Without the Burden of Bureaucracy

How to get up to 50 percent of your investment costs refunded by the European Union, federal or state governments? We show you how.

In addition to development loans and guarantees, the European Union, federal and state governments support companies and start-ups in financing of planned investments through non-repayable grants.

In more than 140 subsidy programs, companies can be reimbursed for (eligible) investment costs of up to 50 percent for the following measures.

• Establishment, acquisition or expansion of business premises

• Diversification of production

• Modification of the production process of an existing plant

• Measures to reduce CO₂-emissions

• Innovative, environmentally friendly, large-scale demonstration facilities.

It is considered an entrepreneurial duty to take advantage of these subsidies. Since investment subsidies are tax funds, the state protects itself from misuse through numerous rules and bureaucratic hurdles that must be taken into account.

How can you feel good about using the subsidies effectively?

7 steps to investment grants

 1. Definition of the measure & investment plan

The first step is to define the measure and draw up a holistic investment plan, which subsequently serves as the basis for calculating the possible subsidy amount. All relevant investment costs, starting with planning services up to the completion of the measure, have to be considered. The project duration is usually up to 2 years.

 2. Identification of subsidy programs & site selection

The amount of the investment subsidy often depends on the investment location, as some subsidy programs are only effective in structurally weak areas or special subsidy areas. Depending on the size of the project, the various local authorities must also be involved in the funding decision.

 3. Financing plan

The financing plan shows how the measure is to be financed. In addition to equity capital and funds from the current cash flow, the debt capital share can be minimized by investment grants. It is essential for the approval of investment grants that a project is completely financed.

 4. Application

Depending on the volume of the project, the application is preceded by various discussions with project sponsors and financiers, during which the package of measures is defined.

In general, it is important to ensure that the formal application for funding is always made before the implementation of the measure begins. However, during the formal application, it is often possible to obtain an early start to the project that is not harmful to the funding. It is not uncommon for several months to pass before the notification of funding is issued and sent to the company.

 5. Notice of grant

Once the notice of grant has been issued, the first calls for funds can usually be made.

The call-off management ensures that all costs attributed to the grant project are correctly reflected in the call-off, so that the project sponsor can pay out the requested funds in a timely way.

 6. Procurement management

The commissioning and ordering of subsidy services or products is subject to extensive and special rules; starting with the selection of suppliers and ending with the accounting treatment of the subsidized capital goods.

In this context, a subsidy-innocuous, early start of the measure is helpful, as you can then trigger purchase orders even before the measure is approved.

 7. Proof of use

After completion of an investment project, a substantive and numerical proof of use must be prepared and submitted. After a positive review of the proof of use, the project is considered completed.

It should be noted that subsidized investment projects may be audited during an earmarking period of several years. The public sector participates in investment projects with the aim of strengthening a business location and ensuring that jobs are maintained and expanded there. For example, evidence of jobs over a longer period must be reported.

Risks of subsidized investment projects

If funding guidelines are not fully complied with during implementation, there is a risk that the funding decision will be revoked, resulting in repayment of the grants. In the case of investment projects with a larger volume, reclaiming grants that have already been paid out can lead to dangerous liquidity situations, especially for small and medium-sized enterprises (SMEs).

Where to get support?

If you are interested in getting reimbursed for up to 50 percent of your investment costs and need help with the numerous rules and bureaucratic hurdles, write us now. For more information on our funding consulting services, click here.

We'll be happy to guide you right from the start.

Author: Thomas Schneider