Investment financing for businesses – combining grants, subsidized loans and EU funding

Companies invest in new machinery, digital processes, energy efficiency or the expansion of their production. At the same time demands for liquidity, planning certainty and cost-effectiveness are increasing. Well-thought-out investment financing for companies is therefore becoming increasingly important: It is not only the amount of financing that determines a project’s success, but also the right combination of various financing components.

This article outlines the options available to companies for investment financing, explains when combining different funding instruments is worthwhile and highlights what you should consider before starting a project.

What does investment financing mean for businesses?

Investment financing is the foundation for the long-term funding of measures that enable a company to strengthen its competitiveness. These include, for example:

• Machinery and production facilities
• Digitalization and automation
• Buildings and infrastructure
• Energy efficiency measures
• Research and development projects
• New technologies and innovative business models

In addition to traditional bank loans, grants play a particularly important role. Depending on the project, companies can take advantage of grants, subsidized loans or European financing options.

Why a funding strategy is more important than a single funding program

When making investments companies often seek a quick answer:

• Is there a grant available for my project?
• Which KfW subsidy loan is right for my investment?
• Can we take advantage of ERDF or GRW funding?
• Is financing available through InvestEU or the European Investment Bank (EIB)?

What matters is not a single funding program but rather a combination of various financing components. Successful investment financing reduces financing costs and expands financial flexibility.

What subsidy loans and options are available for investments?

Investment grants: direct support for businesses

Non-repayable investment grants are among the most attractive funding instruments. They immediately reduce financing needs and strengthen the equity base.

Examples:

• Joint Task "Improvement of the Regional Economic Structure" (GRW)
• European Regional Development Fund (ERDF)
• Federal and state funding programs
• Innovation and digitalization programs

Whether a grant is available depends for example on the region, the size of the company, the industry and the purpose of the investment.

Important: Applications for many grant programs must be submitted before the investment begins. Those who wait until after signing a contract to check whether funding is available may miss out on important opportunities.

Subsidized Loans: More Attractive Financing for Investments

In addition to grants, subsidized loans are a key component of investment financing for businesses. They often provide long-term financing on attractive terms.

Typical benefits include:

• low interest rates
• long terms
• repayment-free start-up years
• large financing amounts
• partial liability exemptions

Major providers include:

• Kreditanstalt für Wiederaufbau (KfW)
• State development banks
• Regional development institutions

European funding for larger projects

The European Union also supports companies with their investments.

These include:

• InvestEU
• European Investment Bank (EIB)
• European Investment Fund (EIF)

Support is provided through loans, guarantees or equity financing among other means. These instruments can be an important complement to national funding, particularly for innovative, sustainable or large-scale investment projects.

Traditional bank financing

For many companies their primary bank also remains an indispensable financing partner.

A professional funding strategy effectively complements traditional bank financing. The goal is to create a financing structure that optimally combines funding programs and bank financing.

Which investments benefit most from grants?

Both small and large investments can benefit from a combination of grants and financing solutions.

Typical eligible projects include:

• Machinery and production facilities
• Automation and robotics
• Digitalization and industry 4.0 projects
• Production facilities and operational buildings
• Energy efficiency measures
• Research and development
• Medical technology
• Logistics and warehouse technology
• Expansion and growth investments

Which funding instruments are suitable for which investment?

There is no one-size-fits-all solution. The optimal financing structure depends, among other factors, on company size, investment volume, location, industry, degree of innovation and financing needs.

Smaller investments can often be supported through grants and subsidized loans. For larger projects additional European financing instruments or complex financing solutions may be appropriate.

Can multiple funding programs be combined?

In many cases companies can combine various funding and financing instruments. Which combinations are possible depends on the funding conditions and state aid regulations.

One possible combination for example consists of:

• Investment grant
• Subsidized loan
• Financing from a primary bank
• Equity
• European financing instruments

Early assessment is crucial. Many funding programs require that the application be submitted before a project contract is awarded or an investment is initiated.

When is a professional grant and financing strategy worthwhile?

As the investment amount increases, the opportunities to combine various financing components generally grow as well.

Typical classification (an individual assessment is crucial):

The sooner companies analyze funding opportunities, the greater their financial flexibility will be.

Why companies miss out on funding opportunities

Eligibility is often not assessed until important decisions have already been made or the project has already begun.

Common mistakes include:

• Funding programs are considered too late
• Companies look exclusively for grants
• Subsidized loans are not considered
• European funding opportunities remain untapped
• Investment costs are not structured optimally
• Programs are not combined with one another

How EurA supports companies with investment financing

EurA supports companies in planning and implementing customized investment financing.

Services include:

• Analysis of your project’s eligibility for funding
• Identification of suitable grant programs
• Selection of suitable subsidized loans
• Review of european financing options
• Development of a customized funding and financing strategy
• Assistance with the application process
• Support during project implementation and payment of funds

Drawing on our experience with grant programs at the federal, state, and EU levels, we guide companies through the entire grant process.

Our goal is to systematically evaluate all relevant funding and financing options and combine them in a way that makes economic sense.

Example: Investment financing for a new production line

For example, a medium-sized manufacturing company is planning an investment of 3 million euros in a new production line and additional automation technology.

Instead of financing the investment exclusively through a bank loan, the funding and financing options are first evaluated.

Depending on the location and project an exemplary financing strategy might look like this:

• Investment grants
• Subsidized loans from KfW or a state development bank
• European programs (such as InvestEU-backed financing through suitable financing partners)
• Loans from the company’s primary bank
• Equity

The result is not a one-size-fits-all solution, but a customized financing structure. It can help secure liquidity, reduce financing costs and strengthen the project’s economic viability.

FAQ: frequently asked questions about investment financing for businesses

What types of grants can companies use for investments?

Depending on the project, companies can access grants, subsidized loans, state programs, federal programs or European funding opportunities. Which funding option is appropriate depends on the investment objective, location, and company size.

Can grants and bank loans be combined?

Yes. Subsidies are often used in conjunction with traditional bank financing. Combining different instruments can make the financing of an investment project more cost-effective.

When should businesses explore funding opportunities?

The assessment of funding opportunities should ideally take place before the investment begins. Many programs require an application to be submitted before a contract is awarded or the project begins.

Why is professional grant consulting worthwhile?

The grant landscape is complex and changes regularly. A structured analysis helps companies identify suitable programs, comply with grant requirements and structure their financing optimally.

Conclusion: strategically plan investment financing

Today,successful investment financing for companies often consists of several components. Grants, subsidized loans, European financing instruments and traditional bank financing can complement each other effectively.

Whether it’s GRW, ERDF, KfW promotional loans, state development banks, InvestEU, EIF or - for larger investment projects - EIB financing: what matters most is a strategy that aligns with the investment and the company’s development.

Those who explore funding opportunities early on and combine financing options create better conditions for economically successful investments.

Are you planning an investment?

Whether you want to invest in machinery, digitalization, buildings, energy efficiency, research or the expansion of your business: We’ll review all relevant grant and financing options for you.

Together, we’ll develop a customized funding and financing strategy that’s perfectly tailored to your business and your investment goals - from the initial funding analysis to the successful implementation of your investment project.

Text: Jan Bernlöhr

Image: Shaibal - stock.adobe.com