FACTS & FIGURES

Incentives inGermany
Supporting Your Investment Project

ISSUE 2022

INCENTIVES IN GERMANY

Public Funding of Investment
Projects: Objectives
Germany offers a number of project financing incentives to all investors – regardless of country of provenance. Funds are provided by the German government,
the individual federal states, and the European Union(EU). Incentives in Germany have a sustainable effectas they support companies in different project stages:
from setting up new production or service facilities to
R&D activities.
Supporting New Investments
Many incentives target new investments with a specific focus
on promoting economic growth. Funding to the tune ofapproximately EUR 21 billion has been freed up by the EU (cofinanced using means obtained from German federal and federal state budgets) for the period 2021 to 2027. In addition, Germany and its individual states also make their own incentives
funds available.

At a Glance• Amount of EU-funding (EU Cohesion and Structural
Policy) available 2021-2027: EUR 21 billion• Annual R&D spending (industry and public sector):
EUR 105 billion in 2020
• Efficient incentives support according to company’s
project needs

Incentives in Germany

Funding purposes

When it comes to investor production or service facility setup costs, investors can count on a number of different public
incentives programs. Cash incentives provided in the form of
non-repayable grants form an important instrument used.
Promoting Innovation
A major focus of financial support available in Germany is put
on assisting research and development (R&D) activities as they
are considered to be among the most important areas for thedevelopment of the German economy. Industry and the public
sector have made a commitment to spend around 3.5 percent
of national GDP per year on R&D activities until 2025. This
amounted to EUR 106 billion R&D spending in 2020. The campaign “High-Tech Strategy 2025” - as successor initiative of the“High-Tech Startegy” - has been launched by the German government to foster the advancement of new technologies.
Incentives Instruments
Incentives in Germany are available through different publicfunding instruments, different institutions and for different
funding purposes. The individual funding requirements may,for example, result from investment projects, research anddevelopment activities, personnel recruitment, working capitalneeds or other specific purposes. The different incentives
instruments including grants, loans and guarantees are generally available for all funding purposes and can normally be combined; thereby matching different business activity needs at
different development stages of the company.

FACTS & FIGURES 2022 | gtai.com

Investments

Working
CapitalResearch &Development

Specific
Purposes

Personnel

Financing supported by the following public funding
instruments (combinations of instruments usually possible)
Public funding instruments

GrantsLoans

Guarantees

EquityCapitalMezzanine
CapitalMeeting the Capital Needs of Investment Projects
Germany has organized its economic promotion policy according to the needs of enterprises. Incentives support is guided by
the financial needs of a company’s individual project, thereby
making the business activity assistance very efficient. During
the investment phase (when capital needs are high), cash
incentives programs reimburse direct investment costs by providing non-repayable cash grants. Public loan programs andguarantees round off investment project financing. Once operations have started, labor-related incentives programs support
companies during all stages of putting together a workforce.
Particular emphasis is placed on R&D projects which receive
financial assistance from a number of different programs.

INCENTIVES IN GERMANY

Public Funding of Investment
Projects: Instruments
Public funding in Germany is multifaceted and is essentially structured into four pillars: direct grants, public
loans, public guarantees, and equity capital. The various instruments are used in a wide range of incentive
programs.
Grants for Investments, R&D, and Hiring Personnel
Direct grants are of central significance within the Gemeinschaftsaufgabe “Verbesserung der regionalen Wirtschaftsstruktur” (GRW - Joint Task for the Improvement of Regional
Economic Structures) incentive program, which is used indesignated support areas. GRW grants are mainly designed
to reduce the investment costs for building new businesspremises. Other grant programs are used to stimulate activities related to research and development or the deploymentof new technologies and are offered by a wide range of specialist institutions. Grant programs for employment are also
noteworthy.
Project Financing by Public Loans
Public promotional loans are another attractive and important funding instrument. Such loans are available for investments, working capital, R&D projects, recruitment or otherspecific purposes relating to the investment project in Germany. These funds are awarded by the publicly owned KfWGroup at the national level, and by the business development banks at federal state level. Complementary publicguarantees are used to simplify investor access to financing
by strengthening their collateral (leverage).
Project Financing by Private Equity
Innovative start-ups in particular have to rely largely on
financing through equity such as venture capital (VC). In Germany, appropriate VC partners can be found through the
Bundesverband Deutscher Kapitalbeteiligungsgesellschaften
e.V. (BVK - German Private Equity and Venture Capital Association). Special conferences and events like the Deutsches
Eigenkapitalforum (German Equity Forum) provide anotheropportunity for young enterprises to come into direct contact with potential VC partners. Public institutions such as
the VC-entities of the different business business development banks and public VC companies may also offer partnership programs at this development stage.

At a Glance• International companies profit from incentives
support with same conditions as German companies• Combination of different incentives instruments
normally possible• SMEs often profit from preferential program terms

Criteria Determining Company Size
Company
category

Staffhead count

Annualturnover

Annual balance
sheet total

Smallenterprise< 50≤ EUR 10 million≤ EUR 10 million

Mediumsized enterprise< 250≤ EUR 50 million≤ EUR 43 million≥ 250> EUR 50 million> EUR 43 million

Largeenterprise

The criterion concerning the head count is compulsory. In addition, either of theannual turnover or the balance sheet criteria must also apply.
Source: European Commission

How to Determine Investment Project Incentives Levels
Each incentives program defines industries as well as forms
of investments (e.g. greenfield or expansion projects) eligible
for funding. International investors enjoy exactly the same
conditions available to German investors. Each program has a
set of criteria (such as company size, planned investment
project and investment location) which determine individual
investment project incentives levels. Company size is determined according to a European Union-wide classification system in which enterprises are categorized as being small,medium-sized or large according to their employee numbers,
and annual turnover or annual balance sheet total. Most
incentives programs offer the highest incentives rates tosmall and medium-sized enterprises (SMEs). Some programs
may even specifically target SMEs. Other criteria determining
project eligibility may be defined subject to individual incentives programs and federal state regulations.

FACTS & FIGURES 2022 | gtai.com

INVESTOR SUPPORT SERVICES

Incentives Calculation
ExampleGermany Trade & Invest provides a range of inward
investment services to international investors including
project-specific financing and incentives consultation.
We focus on a comprehensive incentives assessment
based on the investor’s project plan; followed by a calculation of available incentives support that simplifies
incentives negotiations with local authorities.
Here we provide an example of how investment project
financing can be complemented with financial support from
Germany’s different incentives instruments. The possibility to
combine different instruments makes it easier for investors to
structure project funding. Our example shows the opportunities that a combination of key public funding instruments
offers.
Investment Case Scenario
An enterprise has decided to set up a production facility near
the Polish border. Besides management, five new jobs will becreated in order to run the facility. The company has morethan 50 but less than 250 employees. With an annual turnover of EUR 30 million and a balance sheet total of EUR 35
million, the company meets the EU Commission's criteria forclassification as a medium-sized enterprise. An investment of
EUR 2 million in machinery and equipment is necessary for a
successful realization of the project. The company has EUR
500,000 equity for the investment in place. The financial
shortfall amounts to EUR 1.5 million.
Incentives Instrument I: Investment Grants
The calculation basis for determining the possible amount ofinvestment grants receivable through the GRW program might
be the actual investment costs (e.g. for buildings or machinery) or (assumed) wage costs for two subsequent years. The
costs for the new facility’s equipment and machinery are eligible for investment grants (the specific eligible costs for equipment are defined in the GRW regulations at the national andregional level). In this scenario, the calculation of the maximum possible grants amount is based on the number of newjobs to be created. The maximum eligible investment costs per
new job are EUR 750,000 (as defined by GRW regulations),
meaning that up to EUR 3.75 million investment costs would
be eligible when creating five new jobs. The company’splanned EUR 2 million investment lies within the scope of the
maximum amount of eligible investment costs. Based on the
incentive level in the Polish border region (35 percent for a
medium-sized enterprise), the company can calculate with
GRW investment grant funding of EUR 700,000.

FACTS & FIGURES 2022 | gtai.com

Incentives Instrument II: Public Loans
The outstanding funding amount of EUR 800,000 (Investment: EUR 2 million – Equity: EUR 500,000 – Grants: EUR
700,000) for the planned investment could be covered by apublic promotional loan. The “ERP – Promotional Loan SME” is
one of the prominent loan programs provided by the KfW, thenational business development bank of Germany. It offers
long-term fixed attractive interest rates and loan maturities aswell as no principal payments during the start-up years. A
very interesting feature of the “ERP – Promotional Loan SME”
is the available liability waiver of 50 percent of the pending
loan amount. The liability waiver reduces the default risk forthe intermediary commercial bank and creates an incentive tofinance the project. Another option in such cases is to secure
the loan using a public guarantee. The investor can apply for a
public guarantee to reduce the risk from the project financing
up to 80 percent of the remaining credit balance.

Final Investment Project Financing Structure
ME settling in C region bordering Poland
Investment Case Scenario
Investment costs

EUR 2,000,000

Jobs to be created

5 (permanent)

Equity capital

EUR 500,000

Financing gap-EUR 1,500,000

Incentives Instrument I: Investment Grants
Max. eligible
investment costs
Max. eligible investment
costs for actual project
Basic incentive level
Amount of cash
incentives
Remaining financing gap

EUR 750,000 per workplace
EUR 2,000,000(total investment sum)
35% of eligible
investment costs
EUR 700,000-EUR 800,000

Incentives Instrument II: Public Loans
Public promotional loan(“ERP - Promotional Loan SME”)

EUR 800,000

GRANTS FOR INVESTMENTS

Effectively Reducing
Investment Costs
Non-repayable grants are an effective means of significantly reducing production/manufacturing or service
facility set-up costs. Germany offers one major program
directing the allocation of investment grants throughout Germany: Gemeinschaftsaufgabe “Verbesserung derregionalen Wirtschaftsstruktur” (GRW – Joint Task for
the Improvement of Regional Economic Structures).

GRW Cash Grants: Available Incentives Rates
by Region until 2027

SchleswigHolsteinMecklenburgVorpommern

Hamburg

GRW Cash Grants

BremenThe GRW is a national incentive program that steers the
distribution of direct subsidies for different investment
projects across Germany in specified areas. Its main objective
is promoting regional economic development by job creation.
Eligible costs include capital expenditures or personnel costs
during the establishment phase.
GRW Regions in Germany
The European Commission defines the assisted regions andthe maximum funding rates across the entire EU, conducting audits at regular intervals. A new GRW regional aid
map came into effect in Germany in January 2022, and isvalid until December 2027. The region’s previous economic
performance, unemployment and population shrinkage areused to define so-called C and D areas with different funding
rates. The funding rates in C-regions depend on the degree
the criteria are met. C-regions are located mainly in eastern
Germany. A special set of circumstances applies to Germanmunicipalities and administrative regions along the Polishand Czech border. Here, companies are eligible to apply for
a compensatory differential to the Polish and Czech assisted
regions until the end of the present funding period. These
regions have the highest funding rates in Germany.
GRW Aid Intensity Levels
The maximum level of support that is permitted varies
across the country. At its simplest, it depends on two factors:
size of the requesting company (classification as a small,medium-sized, or large enterprise) as well as its investment
location within Germany. In the maximum-support areas inGermany, large companies can receive up to 25 percent of
their eligible investment costs reimbursed; medium-sizedcompanies up to 35 percent; and small companies up to
45 percent. These maximum-support areas are located inborder regions to Poland and Czech Republic. In C-regions(excluding the above mentioned border regions) large companies can receive up to 20 percent of their eligible investment costs reimbursed; medium-sized companies up to 30
percent; and small companies up to 40 percent.

FACTS & FIGURES 2022 | gtai.com

Brandenburg
Niedersachsen

BerlinSaxonyAnhalt

North RhineWestphalia

Thuringia

SaxonyHessenRheinlandPfalz

SaarlandBavaria
BadenWürttemberg

Available Incentives Rates in Incentives Regions
Defined by the GRW Program
Small

MediumLarge

Border areas

max. 45 %max. 35 %max. 25 %C region(unemployment +population) 1

max. 40 %max. 30 %max. 20 %C region(population) 1

max. 35 %max. 25 %max. 15 %C regionmax. 30 %max. 20 %max. 10 %D regionmax. 20 %max. 10 %max. EUR
200,000

Region/Enterprise size

Note: 1 In predefined areas in C Regions an increased incentive level is confirmed by
the EU Commission.
Source: Federal Ministry for Economic Affairs and Climate Action 2022

GRANTS FOR INVESTMENTSGRW Grant Conditions
The GRW program defines industries as well as forms ofinvestment (e.g. greenfield projects or expansions) eligible
for funding. International investors are subject to exactly
the same conditions available to German investors. A set ofcriteria (including company size, planned investment project
location et al.) determines individual investment project
incentive levels. Who and what can be funded with GRW
grants is determined at the federal level by the GRW coordination framework.
Project Eligibility
Investment projects are primarily eligible for GRW grants
for setting up new or expanding existing facilities, for diversification of production, for fundamental changes to production processes, and for investment projects of companies
to go beyond the national and EU rules on environmental
protection or to improve environmental protection wheresuch regulations do not exist. Even the acquisition of businesses threatened with closure can be eligible under certain
conditions. Special terms and conditions may apply to large
companies. The GRW program is focused on manufacturing
and service industries. Pure sales or marketing activities are
not covered by the program.
Calculating Possible Cash Incentives
Project costs and the grant level depending on the eligible
investment costs form the calculation basis for determining
the possible amount of cash incentives receivable through the
GRW program. Eligible costs are either project-related capital
expenditures (e.g. for new buildings, equipment, machinery)occurring in the first three years after project start or the personnel costs of the newly created jobs in the first two years.
In the case of the wage cost option, lower and upper wage
limits apply subject to federal state GRW regulations.
GRW Regulations at Federal State Level
The individual federal states are free to determine individual
ceilings for cash grant support but are bound to the maximum incentives level determined by the GRW coordination
framework for their respective location. The GRW regulations
adopted by each federal state specify in more detail what
investments they are intended for as well as any other conditions that must be met. The opportunity that GRW grants
can be combined with other funding instruments such as
public loans or guarantees is a very interesting feature of the
program. Applicable subsidy ceilings have to be taken into
account. However, at least 25 percent of investment project
financing must be derived from own resources or externalfinancing free of any subsidy.

FACTS & FIGURES 2022 | gtai.com

At a Glance• Non-repayable grants in specified regions
throughout Germany• Eligible costs: purchase/production costs of newbuildings, machinery, and equipment; purchasecosts of new intangible assets OR salary costs for
two years• Eligible projects: setting up of new or expanding
existing facilities, diversification of production,
fundamental changes to production processes• Eligible industries: most manufacturing andservice industries

GRW Cash Grants Application Process
GRW cash grants must be applied for at the federal state inwhich the investment project will be located. Each federal
state operates a state owned business development bankwhich is responsible for administering as well as approvingof cash incentives applications. Please note that applications
must be submitted before the actual start of the investment
project. It is advisable to discuss possible GRW funding withthe relevant business development bank during the elaboration of the investment strategy.
The application process is swift and efficient. Investors
should prepare the following documents:· Official application form
· Bank financing statement on secured project financing· Business plan
· SME status verification (if applicable)
Investor Support Services
GTAI’s Financing & Incentives team develops project-specificrecommendations for investment financing based on available public incentives. The team also provides comprehensive information on the different funding programs available
and how to apply for them.
→ invest@gtai.com

GRANTS FOR RESEARCH AND DEVELOPMENT

Research and Development
Project Incentives
Research and development (R&D) is considered to beamong the most important areas for the developmentof the German economy. Industry and the public sector
have made a commitment to spend around 3.5 percent
of national GDP per year on R&D activities until 2025.
This amounted to EUR 106 billion R&D spending in 2020.

Choosing the Right R&D Program
R&D projects can count on numerous forms of financial public support. There are many programs allocating R&D grants,
interest-reduced loans and special partnership programs.
Financing is provided by the European Union (EU), the German government, and the individual German federal states.
R&D incentives programs in the form of grants generally
provide money for R&D project personnel expenditure. Other
costs for instruments and equipment may also be eligible
if they can be clearly assigned to the relevant R&D project.
R&D program guidelines specify in detail the eligible costs.

In addition, a number of national programs without aspecific technological focus also exist. Of these, the Central
Innovation Program for SMEs (ZIM) is the most prominent.
Application for incentives available under this program ispossible at any time and without any prior calls for proposals. It makes provision for individual as well as for cooperation projects. It is possible to check the R&D project viability
by a feasibility study.
German Federal State Funding
In addition to programs run by the federal government, each
German federal state has its own R&D funding programs inplace. Regional conditions and structures influence the R&D
funding programs available. Some states place particularfocus on specific industry clusters. However, there are also
a number of programs where a specific technological focus
is not required. Cooperation between project partners is notalways necessary.

R&D Grant Programs
EU R&D Incentives
The EU’s Horizon Europe program offers financial support
to research and innovation projects at the European level
and will run until the end of 2027. Support is allocated in theform of grants covering up to 100 percent of eligible project
expenditures. With a total budget of nearly EUR 100 billion,
Horizon Europe is the world’s largest research funding program. Support is provided to R&D projects working at thetransnational level with different project partners. The EU
usually issues a call for proposals announcing the researcharea, eligibility guidelines and the available budget.
German Federal Government R&D Grants
All research programs financed by the German federal government have been concentrated within the High-Tech Strategy 2025. The High-Tech Strategy 2025 defines “future fieldsof activity” with a high dependency on ongoing high-techresearch and development: health & health care; sustainability, climate protection & energy; mobility; urban & rural
areas; security; economy & workplace 4.0. Each area consistsof a number of different R&D programs. R&D project support
is offered in the form of non-repayable grants. Enterprises
usually can reach grant rates of up to 50 percent of eligible
project costs. Higher rates may be available for SMEs andprojects carried out in cooperation. Partnership between
project partners, especially between enterprises and research
institutions, is usually required. The federal government
periodically calls for R&D project proposals followed by acompetition of best project ideas.

FACTS & FIGURES 2022 | gtai.com

European Commission"Horizon Europe"
Funding for R&D programswith technology focus
Transnational R&D project
cooperation required

Lump sum funding forspecific R&D topics
Access restricted to SMEs
and newcomers

FundingFundingfor development
and scalewith
up ofgame changing
for R&D programs
technology
focus
innovations
by EIC-Acceleator
Cooperativeand non-cooperative projects will be supported
Access (Cooperation
restricted to start-ups
SMEs
between andscienceand business is desirable)

German Government"High-Tech Strategy 2025"
Funding for R&D programs with technology focus
Cooperative and non-cooperative projects will be supported(cooperation between science and business is desirable)

GRANTS FOR RESEARCH AND DEVELOPMENT

Further R&D Project Subsidy Options
R&D loans can be an alternative to R&D grants and entail
several advantages: They are usually not attached to a specific technology field, application is possible at all times, andthey can cover higher project costs. R&D loans are provided
by different publicly owned development banks at thenational and federal level. Equity is offered by both the KfWGroup and federal state-owned or public-private venture
capital companies to technically oriented companies. Conditions are negotiated on a case-by-case basis.
Research Allowance Act
The German government supports R&D activities of companies flexible by tax relief. Companies with tax status in
Germany and performing R&D activities are eligible for a tax
credit of up to EUR 1 million annually. The eligible expenditure is the cost to company of salaries paid to employees
working on the project, with the tax credit set at 25 percent
of eligible costs to a maximum of EUR 4 million. Contract
research is also eligible by the research allowance act. Projects qualify for the credit as long as they fall under one of
the three broadly-defined research categories (see below).
Companies wishing to benefit from the research tax credit
act must get a certificate from a statutory body determining
whether a project is eligible.

How to Benefit from Public
R&D Spending
To participate in R&D grant programs, companies must
define an R&D project with clear objectives and a fixed
timeline. Projects should be intended to develop a new
product, process or service that substantially surpasses existing products, processes or technical services in terms of theirfunctions, parameters or features. An application for R&D
funding also has to set out a commercialization plan, detailing how research results will be transformed into marketableproducts, processes or services that generate additional
turnover and/or employment in the region where the R&D
project is located.
The aid intensity level for a project depends on the size ofthe enterprise (small, medium-sized or large); whether the
project is conducted in cooperation with other companies
or research institutes; and the research category of the
project. The research category expresses the scope of theintended project. There are three research categories: (1)fundamental research; (2) industrial research; (3) experimental development.

→

For individual R&D incentives support please contact
GTAI's incentives experts: invest@gtai.com

FACTS & FIGURES 2022 | gtai.com

At a Glance• Support focuses on R&D grants• Aid intensity level depends on: company size,
research category, degree of partnership cooperation• National High-Tech Strategy 2025 with planned
funding volumes of 3.5 percent of GDP annually(public and private sector together) provided for
projects focusing on R&D in “future fields of activity”• Technology-open programs – with focus on SMEs –also available

Three Research Categories:· Fundamental ResearchExperimental or theoretical work aimed
at gaining new knowledge· Industrial Research
Research with a specific practical objective aimed
at developing new products, processes, or services,or at improving existing ones
· Experimental Development
Research aimed at producing drafts, plans,
and prototypes

The High-Tech-Strategy 2025

Plastic in theenvironment is tobe reduced.

Industry is to begreenhouse gas
neutral.

Mobility is to be clean
and networked.

Biodiversity to
be conserved.

Source: The Federal Government 2022

EQUITY CAPITAL

Public Equity Capital Sourcesin Germany
Certain business situations call for, or even require, an
injection of equity capital instead of debt capital. Equity
is the owner’s capital and therefore represents capital atrisk. A solid equity capital foundation increases the company’s flexibility in executing its objectives and opens
up access to other sources of financing on better terms.
Start-ups and technology companies are often financed bya high degree of equity. However, equity capital also represents an efficient method of business activity financing forcompanies from the classical industry sectors. In Germany,equity capital from public sources is available from a numberof different investor channels.

National Level Activity
The KfW Group provides equity capital as part of its economic development programs. Equity capital is provided
indirectly through different channels, for example, throughthe "High-Tech Start-up Fund” (HTGF - High-Tech Gründerfonds) specialized on financing the seed phase of a company
or through the coparion GmbH & Co. KG, focusing on thestart-up and early growth phase of a company or throughthe “DeepTech Future Fund” whose investment focus are hidden champions/deep-tech companies with the potential to
become a global market leaders.

phase. Besides the KfW Capital and the Federal Ministry for
Economic Affairs and Climate Action, more than 32 renowned
German corporations have provided capital to the fund.
coparion GmbH & Co. KG
KfW’s coparion GmbH & Co. KG offers young and innovative
companies in the start-up and early growth phases directaccess to funds of up to EUR 15 million in several rounds.
Coparion adheres to a principle of investing in companies
who have their headquarters in Germany, and together withother investors subject to the same conditions and amounts.
With a fund volume of EUR 275 million, coparion has therequired flexibility to invest in promising businesses.
KfW Capital
The KfW Group has concentrated its venture capital (VC)
activities within the KfW subsidiary. Its main focus lies in
optimizing the accessibility of VC for young, innovativetechnology enterprises. VC is channeled via investments inventure capital funds and venture debt funds. The investment volume was EUR 200 million annually at the end of
2020. Investments of up to EUR 50 million by KfW Capitalper fund are possible. Through this subsidiary the KfW coordinates all its VC activities, such as in the HTGF and coparion GmbH & Co. KG.

Public Private Equity Capital Provider Conditions

In 2021, a total of EUR 4 billion of venture capital was invested in Germany.
BVK – German Private Equity and Venture Capital
Association e.V.

High-Tech Gründerfonds (HTGF)
The HTGF is the largest and most active seed stage fund inGermany focusing on technology driven start-ups. Investments of up to EUR 1 million are possible in the seed phase.
The maximum possible investment level available is EUR
3 million per enterprise. The HTGF has financed more than
670 high-tech start-ups in the last 17 years. More than 150
portfolio companies have successfully exited in that time –proof positive of the HTGF's importance in providing capital
to Germany's thriving start-up scene. High-Tech Gründerfonds support goes beyond providing money for realizing
new business ideas. It also offers a high level of technology
expertise, a broad network of scouts and capital providers
to secure further growth of the new company after the seed

FACTS & FIGURES 2022 | gtai.com

coparionGmbH & Co. KG

High-Tech
Gründerfonds (HTGF)

Foundation

2016

2005

Available investment volume perstart-up

max. EUR 15 million

max. EUR 3 million

Investment
amount

EUR 0.5-8 million

EUR 1 million in theseed phase

Focus

Start-up and early
growth phase

Seed financing

Type ofinvestment

Co-investment(pari passu)

Autonomous
investment

EQUITY CAPITAL

Federal State Level Activity
Public Venture Capital Companies
Venture capital companies (VCCs) in the federal states offer
equity financing to young and innovative enterprises. These
VCCs act as subsidiaries of the business development banksof the federal states and support companies actively byproviding risk capital as well as management and industry
knowledge for their further development. The investment
focus is on innovation and is mainly in industry sectors
including ICT, life sciences, and new materials. Subject tothe regulations of the individual venture capital company,
financing volumes of up to EUR 10 million in several financing rounds are achievable.
Public-Private Equity Companies
For established companies seeking to finance further growth,
but for start-ups as well, Mittelständische Beteiligungsgesellschaften (MBGs - “Public-Private Equity Companies for Smalland Medium-Sized Enterprises") are available as financing
partners in the federal states. As independent institutes,
they are supported by the federal states. MBGs operate primarily through silent participation through the provision ofsubordinated capital. They have no investment focus on special industry sectors. A capital searching company can expecta financing volume of up to EUR 1 million. It is characteristicthat the individual MBGs are only active in their respective
federal state. An advantage of financing by capital from thefederal state MBGs for companies is that they have easieraccess to the financing network of the respective businessdevelopment bank. That is why they are an important
instrument for the economic development policy of thefederal states.

At a Glance• Public equity companies at federal state leveland national level• Up to EUR 10 million investment• Capital available for companies in different
life cycle stages

Role of Private Equity in Germany> 400 private
equity companies
in Germany> 1,000
companies
financedeach year> 5,500 portfolio
companies

EUR 274 bn
revenue of
portfolio
companies

EUR 12.6 bn
investedin 2021

EUR 68 bn
invested in
2017-2021

Choosing Appropriate Equity Providers
There are different channels available for enterprises seeking
equity to acquire capital, depending on the company’s
growth phase status as well as industry sector. A start-up isnormally looking for seed financing to develop the business
and/or for market entry. In this case, the selection of aventure capital provider is a suitable solution. KfW Capital
invests in venture capital and venture debt funds. The listof the invested funds is published online. So called “pitch
events” are one way of getting in touch with venture capitalcompanies.
A growing enterprise with a sound track record usually needs
capital in order to further expansion. Regional active MBGs
are in place to offer capital for expansion financing. Enterprises in a later stage of development are often contacted
directly by providers of equity capital looking for investment
opportunities. They may also contact equity capital providers directly.

FACTS & FIGURES 2022 | gtai.com

Source: BVK 2022→

GTAI’s financing experts support investors in identifying potential equity partners. For further information
please contact our financing experts: invest@gtai.com

LOANS FOR FINANCING PURPOSES

Financing Investment Projects
with Public Loans
Investors can access publicly subsidized loan programs.
These programs offer loans at below current market
interest rates in combination with grace periods. They
are provided by business development banks. Public
loans offer investors the opportunity to aquire capital
to finance investments or expansions cost-effectively.

At a Glance• Public loans offer reduced, fixed interest-rates,
long loan terms, repayment-free periods• Up to EUR 50 million loan amount at national level

Public Loan Modalities
Each financial tool or program offered by business development banks is accessible to foreign investors to finance a
respective project in Germany subject to the same financing
conditions available to investors from Germany. Loans are
secured with the usual collateral. Applications are madethrough the investor’s commercial bank to the respective
business development bank. Interest-reduced loans can usually be combined with other public funding instruments.
National Public Loan Programs
The KfW Group is the nationally operating developmentbank of the Federal Republic of Germany. It makes a numberof financing tools available to different target groups. The
wide range of financing instruments encompasses promotional loan programs as well as mezzanine financing andprivate equity. Thanks to its high level of flexibility, the KfWFörderkredit großer Mittelstand (“KfW - Promotional Loan
Large Mittelstand”) is an important KfW loan program. It is
possible to finance up to 100 percent of eligible costs using
this loan program. A liability waiver of 50 percent of thepending loan amount in favor of the investor’s commercialbank is possible. This program is available for larger, mainly
privately owned enterprises with an annual group turnoverof up to EUR 500 million.
Business Development Bank Loan Programs
In addition to the KfW Group, each German federal state has
its own development bank that finances projects within therespective federal state. State development bank loans are
generally tailored to mainly meet the requirements of small
and medium-sized enterprises.
Application Procedure
The respective business development bank is contacted via
the applicant’s commercial bank which complements thefinancial package. A sound business plan and sufficient collateral are the basis for the integration of public promotionalloan programs. Investors should have a bank in Germany toease the application process.

FACTS & FIGURES 2022 | gtai.com

KfW’s new business reached EUR 107 billion in
2021. The largest share of new commitments
was attributable to business in Germany witha volume totalling EUR 82.9 billion. There wasstrong demand for the promotion of energyefficient residential buildings, commercial energy efficiency and renewable energies.
KfW Group

Alternative Incentive Tool
One advantage is that public promotional loans offer theopportunity to finance investments not supported by the
GRW program. A classic example is investment made in
vehicles usable in public traffic not supported by the GRW
cash grants program. Investments and/or costs that can befinanced by public promotional loans depend on the single
loan program terms and conditions. Also of note is the factthat some public promotional loan programs feature liability
waivers. A liability waiver reduces the loan default risk forthe intermediary bank and creates an incentive to financethe project. One other option to partially release the intermediary bank from risk of default is the combination of apublic guarantee with the public promotional loan. The basis
for using this option is the regulation of the respective publicloan program and successful public guarantee application.
→ Investor Support Services

The experts from GTAI’s Financing & Incentives team are inplace to assist investors in identifying appropriate public
promotional loan programs to finance projects using further
public financing instruments. invest@gtai.com

PUBLIC GUARANTEES

Securing Bank Loans with
Public Guarantees
Occasionally, loans required for investment projects canonly be collaterized partially. Where this is the case, forcompanies it could be a challenge to attract financing.
Public guarantees serve as a loan security or supplementin the case of any shortfall in loan collateral. Publicguarantees, in this function, encourage financial institutions (i.e. commercial banks) to offer loans to companies. It should however be noted that public guarantees
do not provide cash support or any kind of credit.

How Public Guarantees Work
The guarantee functions as a promise by the guarantor to
the lender that, in the event of the borrower defaulting on
payment, the guarantor will repay the lender a specified proportion of the foregone principal. In other words, guarantees
will be provided by a guarantor to pay all or part of the loanin the case of borrower payment default.

In 2018, more than EUR 1.1 billion in publicguarantees was used to secure 5,800 financing projects in Germany.
VDB – Association of German Guarantee Banks

General Terms and Conditions
The guarantee maturity is generally connected to the financing the guarantee is used for. Commitments vouched forwithin public guarantees are normally subject to intensive
individual examination. The applicant has to submit relevant
documents (i.e. business plan, company economic documentsetc.) to the respective guarantee bank or the mandatory
in order to initiate the necessary evaluation procedure.
The guarantee costs are divided into one-off costs (e.g.
document fee) and an annual fee. The annual fee paid is apercentage of the pending guaranteed amount of the year inquestion.
Different Public Guarantee Programs
As a financial instrument, the public guarantee is very flexible. Different types of public guarantee programs exist to
support different types of investment projects within Germany. The most suitable guarantee program depends on therequired amount, the size of the enterprise, and the investment region.

FACTS & FIGURES 2022 | gtai.com

At a Glance• Ease loans in case of insufficient collateral• Cover up to 80 percent of respective loan amount• Available through different programs and institutions depending upon the loan amount to be secured

Loan Guarantee Procedure
Guarantee banks, which have a presence in each federal
state as privately organised economic developers, support
short-term, mid-term, and long-term loan financing for small
and medium-sized enterprises with guarantees generally of
up to EUR 1.25 million. The specific maximum possible guarantee amount depends on the regulation of the respective
guarantee bank. Public guarantees of up to EUR 3 million are
generally offered by the business development banks of therespective federal state. A public guarantee offerings checkof the business development bank of the individual federal
state would be necessary. A guarantee amount of more than
EUR 3 million can be guaranteed directly by the federal
states. In individual federal states, a mandatary is in chargeof assessing applications for a federal state guarantee.
Application Process
Before starting the investment, the guarantee application
has to be submitted to the respective guarantee bank orstate mandatory in order to initiate the necessary evaluation process via the investor‘s commercial bank. In the caseof federal state guarantees, a committee deliberates on theapplication and submits a recommendation. Finally, the state
Minister of Finance decides on the allocation. Concurrent EU
notification is necessary for guarantees above EUR 15 million.
Germany Trade & Invest's financing experts assist investors
in identifying appropriate public guarantee programs andinform about the application procedure.
→ invest@gtai.com

LABOR-RELATED INCENTIVESSupporting Human
Resources
Labor-related incentives play a significant role in reducing the operational costs incurred by new businesses.
Germany’s Bundesagentur für Arbeit (Federal Employment Agency) and the German states offer a range oflabor-related incentives programs designed to fit thedifferent company needs when building a workforce.

Four Main Labor-related
Incentives Groups
The range of programs offered can be classified into fourmain groups: programs focusing on recruitment support,
training support, wage subsidies, and on-the-job training.
Labor-related incentives are available throughout Germany– independent of factors such as company size, industry
sector or investment project location. Programs can be carried out and adjusted by the local job center according toinvestor needs.
Matching Personnel: Recruitment Support
With over 400 local job centers located throughout Germany,
the Federal Employment Agency assists companies in finding
new employees. Regardless of the qualification or experiencelevel required, job centers offer a competent and professional service as well as market expertise to help identify
prospective employees in all sectors. Assistance provided
covers everything from job vacancy advertising and preselection of candidates (i.e. assessment centers) to the provision of facilities for conducting job interviews. Because job
centers are governmental institutions, all services are provided entirely free of charge.
Enhancing Qualification: Pre-Hiring Training
Prospective employees often need to participate in appropriate training measures before operating machinery andtechnical equipment. Such measures can be organized andadministered by external specialist institutions. In general,training program costs of up to 100 percent can be subsidized.
Supporting Integration: Wage Subsidies
Employers can be granted a direct cash payment paid asa proportion of the employee’s wage. Grants can accountfor up to 50 percent of wage costs including social security
contributions. They may be provided for a period of up to 12
months. Wage subsidies can be granted when hiring unemployed people. When hiring unemployed people who havedisabilities or who are older, wage subsidies can be raised

FACTS & FIGURES 2022 | gtai.com

to a maximum 70 percent of wage costs paid for a period of
up to eight years. Wage subsidies are generally allocated if
investors provide long-term employment contracts. Please
note that wage subsidy applications should be made inadvance of the contract being signed.
Professional Development: On-the-Job Training
The German federal states offer a variety of on-the-job
training programs. Companies can be supported with subsidies covering up to 50 percent of all training costs. European
Union (EU) authorization is required if the amount awarded
to a single company exceeds EUR 2 million.

Visa for Highly Qualified Employees
The so-called “EU Blue Card” allows highly qualified nonEU citizens to be fast tracked to employment in Germany.
Foreigners may apply for this kind of residence permit if theyhold a German university degree (or a proven comparable
qualification) and demonstrate a job contract with an annual
gross salary of at least EUR 56,400 for 2022. The annual
gross salary level is lower but at least EUR 43,992 for 2022
in professions with a particular skill shortage. The EU Blue
Card contains the permit to stay and the permit to work inGermany.

→

For detailed information on German visa and residence
permit procedures, please see our "Investment Guide
to Germany" online: www.gtai.com/coming-to-germany

Labor-related Incentives at Different Stages of theHiring Process

Stages of Building
a Workforce

Available
Incentives

Finding Suitable Staff

Recruitment Support

Testing Candidates

Pre-Hiring Training

Hiring Employees

Wage Subsidies

Further Education

On-the-Job Training

LABOR-RELATED INCENTIVESSpecial Programs: Grants for Hiring
Personnel
Besides general labor-related incentives programs thatprovide support during the hiring process and beyond, there
are also special programs that offer support in the form of
non-repayable grants throughout Germany. Such programs
are usually intended to support companies with a certain
need for specialized or highly qualified employees, e.g.
when launching research and development (R&D) projects
or setting up new company sites. In case of setting up new
production sites, personnel costs can also form the basis forcash incentives calculation within the GRW program.
Grants for Hiring Highly Qualified Staff
The hiring of university graduates can also be supported
through grants in the form of “Innovation Assistant” programs available in individual federal states. The respective
candidate must not have graduated more than two years
ago. The Innovation Assistant must also be employed withthe purpose of carrying out an innovation project within
the company. Small and medium-sized enterprises (SMEs)
are eligible for support. Up to 50 percent of the respective
labor costs can typically be financed for a period of one to
two years subject to the individual program.
GRW Program Options
Another way to reduce personnel costs in the set-up phaseis to use the GRW program (Joint Task for the Improvementof Regional Economic Structures). This mainly supports
the setting up of new production and service facilities in
specific regions in Germany with non-repayable grants.
Within the GRW, there is the possibility to calculate funding
based on the assumed wage costs instead of project-related
capital expenditures.
The availability of this option depends on the GRW funding
guideline of the respective federal state. Wage costs canbe co-financed for a period of two years per job and also
include the employer’s contribution to the social security
system. Minimum and maximum eligible wage requirements do apply, usually starting at EUR 30,000 per year
(employer’s gross).
Grants for R&D Project Personnel Costs
A large amount of non-repayable grants is provided to
R&D projects each year. These grants are provided throughprograms operating at regional, national and European
level. The grant amount a project is eligible for is normallycalculated based on the employee labor costs of the respective project. R&D projects may profit considerably fromthis type of funding as personnel costs are typically themost significant expense. It is also possible to make multiple applications during any R&D funding program, withseveral R&D projects active at the same time.

FACTS & FIGURES 2022 | gtai.com

At a Glance• Available throughout Germany independent ofindustry and location• Programs administered by the Federal Employment
Agency and the federal states• Program focus on supporting employee training
measures• Wage subsidies are available

Federal Employment Agency
Germany's Federal Employment Agency offers abroad range of services in the labor and training
market for private individuals as well as companies
and institutions. To perform these service tasks, it
has a nationwide network of employment agencies
and branch offices at its command. It also conducts
labor market and occupational research, labor market
observation and reporting as well as recording labormarket statistics.
Services include:• Placement in training places and workplaces• Vocational guidance• Employer counselling• Promotion of different kinds of training• Promotion of professional integration of people
with disabilities• Benefits to retain and create workplaces• Compensation for reduced income, e.g. unemployment benefit or insolvency payments

Investor Support Services
The experts from GTAI’s Financing & Incentives team support
investors in identifying appropriate programs to financepersonnel costs using further public financing instruments.
They can also carry out a check to identify what programs
can be combined and will put you in contact with the right
institution to apply for funding.
→ invest@gtai.com

OUR SERVICES

Germany Trade & Invest Helps You
Germany Trade & Invest’s teams of industry experts willassist you in setting up your operations in Germany. We
support your project management activities from theearliest stages of your expansion strategy.
We provide you with all of the industry information you
need – covering everything from key markets and related
supply and application sectors to the R&D landscape.
Foreign companies profit from our rich experience in identifying the business locations which best meet their specificinvestment criteria. We help turn your requirements into
concrete investment site proposals; providing consulting
services to ensure you make the right location decision.
We coordinate site visits, meetings with potential partners,
universities, and other institutes active in the industry.

Our team of consultants is at hand to provide you with therelevant background information on Germany’s tax and legal
system, industry regulations, and the domestic labor market.
Germany Trade & Invest’s experts help you create the appropriate financial package for your investment and informyou about suitable financial partners. Incentives specialists
provide you with detailed information about available incentives, the application process, and arrange contacts withlocal economic development corporations.
All of our investor-related services are treated with theutmost confidentiality and provided free of charge.

Our support services for your investment project

Strategy

Evaluation

Decision & Investment

Project management assistanceBusiness opportunity
analysis and market
research

Project partner
identification andcontact

Joint project management with regional
development agency

Coordination and support of negotiations
with local authorities

Cost factor
analysis

Sitepreselection

Site visit
organization

Final site
decision support

Market intelligenceand statistics

Financing & incentives
consultancy

Information on visa
options and labor law

Contact to financial
partners

Market entry
strategy support

Location consulting/Site evaluation
Identification ofproject-specificlocation factors

Support services
Facts on incorporationand taxation

FACTS & FIGURES 2022 | gtai.com

CONTACT

Investor Support Services
Investors can count on Germany Trade & Invest’s financing
and incentives consultancy services from project beginning
to project completion. The team has more than a decade ofexperience and a proven track record in helping international
companies set up their business operations in Germany.
Investors receive first-hand information on available public
assistance for their individual project. A team of experts
focuses on a comprehensive incentives assessment based on
the investor’s project plan, followed by a detailed calculationof available support for smoother incentives negotiations
with local authorities.
The financing and incentives team is part of Germany Trade &Invest’s Investor Support Services division. This division also
provides a range of other services including tax and legal
information services addressing the questions most often
posed by international companies regarding incorporation;
corporate taxation; entry and residence regulation; andemployee and social security obligations.

For questions on financing investment projects in Germany
please contact us at invest@gtai.com
For more information about the incentives framework as
well as all relevant information on how to set up yourbusiness in Germany please visit our website:www.gtai.com/investment-guideContact us at our headquarters in Berlin:
Germany Trade & Invest
Friedrichstraße 60
10117 Berlin
Germany
T +49 (0)30 200 099-555

Imprint
Publisher
Germany Trade and Invest –Gesellschaft für Außenwirtschaft
und Standortmarketing mbH
Friedrichstraße 60
10117 Berlin
Germany

AuthorFinancing & Incentives Team:
Michael Schnabel
michael.schnabel@gtai.com

T +49 (0)30 200 099-555
F +49 (0)30 200 099-999
invest@gtai.com
www.gtai.com

Print
Kern GmbH, 66450 Bexbach
www.kerndruck.de

Executive Board
Dr. Jürgen Friedrich, Chairman/CEO
Dr. Robert Hermann, CEO
EditorWilliam MacDougall, GTAI

LayoutDanielle Röbbenack, GTAI

Picture Credits
Cover: GettyImages/Westend61
Order Number
20861/2

Notes
All rights reserved ©Germany Trade &Invest, August 2022
Reproduction, in whole or in part, only
permissible with express prior authorization. All market data provided isbased on the most current market
information available at the time of
publication. ­Germany Trade & Invest
accepts no liability for the actuality,
accuracy, or completeness of the information provided.

About Us
Germany Trade & Invest (GTAI) is the economic development agencyof the Federal Republic of Germany. The company helps create andsecure extra employment opportunities, strengthening Germany as
a business location. With more than 50 offices in Germany and abroad
and its network of partners throughout the world, GTAI supports ­German companies setting up in foreign markets, promotes Germany asa ­business location and assists foreign companies setting up in G
­ ermany.
All investment services and related publications are free of charge.

Germany Trade & Invest
Bonn Office
Villemombler Straße 76
53123 Bonn
Germany
T +49 (0)228 249 93-0
F +49 (0)228 249 93-212
info@gtai.de
www.gtai.de

Mr. Michael Schnabel
Senior Manager
Financing & Incentives
michael.schnabel@gtai.com
T. +49 (0)30 200 099-504
F. +49 (0)30 200 099-999
For more information on incentives and financing investment projects,
please contact Germany Trade & Invest’s Financing & Incentives team.

Germany Trade & Invest
Headquarters
Friedrichstraße 60
10117 Berlin
Germany
T +49 (0)30 200 099-0
F +49 (0)30 200 099-111
invest@gtai.com
www.gtai.com