The Business Startup and Growth Financing Program is the key support instrument for medium- to long-term investment financing in Baden-Württemberg. Its three focal areas are: Business Startup and Consolidation, Small Business Loan and Business Loan that may be applied for depending on the age and size of the company to be supported. Investments in rural areas that are considered important from the perspective of structural policy may receive particularly intensive support in the shape of subsidies or low-interest loans through the Rural Development Program. In addition, special support for investments that fulfill certain regional or technological criteria is available through the regional and technology support programs.

Rural Development Program (ELR)

This program offers the highest investment grants of all programs for investments in rural areas of Baden-Württemberg that help create or protect local jobs. Aside from new business establishments, company takeovers, expansions and relocations of existing businesses may also be eligible for support. The key precondition: The company in question must be a small or medium-sized enterprise in the sense of the program guideline (not identical to the European Union’s definition of a small or medium-sized enterprise):

• The small enterprise has fewer than 50 employees and the medium-sized company has fewer than 250 employees.
• The small company’s annual sales do not exceed $ 7 million, and the mediumsized enterprise's do not exceed $ 40 million. Total assets of the small enterprise do not exceed $ 5 million, and they do not exceed $ 27 million for the medium-sized company.

Investors who have been granted the program's support may choose between a grant and a long-term low-interest loan. The total subsidy – a maximum of $ 250,000 – is independent of the chosen support instrument, but varies depending on the company's size and the type of investment plan:

• Small companies: maximum 15% of the total investment,
• Medium-sized companies: maximum 7.5% of the total investment.

In the case of low-interest loan financing, the financing share can amount to a maximum of 75%. Before a loan or subsidy is applied for, the respective investment plan must be integrated into the Rural Development Program. An initial point of contact here is the mayor's office of the municipality where the planned investment will be located. A municipal structural development concept will be developed here. The municipality will apply for a dispatching of operations on this basis. The decision about the dispatching of operations for individual investment plans lies with the Ministry for Nutrition and Rural Areas. Once a positive dispatching of operations notification has been obtained, applications for loans may be handed to the L-Bank through the “colending bank procedure". Applications for grants may be made both through the colending bank and directly through the L-Bank. If the dispatching of operations of an investment plan does not succeed or is not agreed on in a timely manner, an alternative development program offered under GuW or the regional support program should be examined.

The ELR Combined Loan allows for an increase in the grant or low-interest loan to 100% of the total investment, that is full financing of the investment plan. The conditions that apply to combined loans correspond to those for undiscounted GuW Business Loan (see Business Startup and Growth Financing).

Risk relief: To reinforce the co-lending banks' willingness to offer investment financing, the L-Bank or the Bürgschaftsbank Baden-Württemberg may issue additional state guarantees (volume of more than $ 1 million to $ 5 million for the L-Bank and volumes up to $ 1 million for Bürgschaftsbank Baden-Württemberg).

Business Startup and Growth Financing Program (GuW)

Program focus business foundation and consolidation:This program offers financing for all common forms of business startups – business establishments, takeovers and active stakeholdings – as well as investment plans aimed at the solidification of a business. Both natural persons such as company founders and ownership successors as well as companies – unincorporated and incorporated companies – may apply for this type of support. Eligibility criteria include:

• The company is a small or medium-sized enterprise in the sense of the EU definition.
• The company was established, acquired or active stakeholding was made no longer than eight years ago.
• The investment location is in Baden-Württemberg.

If required, the investment plan may be fully financed through the Business Startup and Growth Financing Program. Generally, the maximum loan amount is $ 2 million. The investment support is provided in the form of long-term, low interest loans with amortization-free years at the beginning. An additional interest discount is available for innovative and technology-oriented investment plans. In addition, all investment plans in EU Objective 2 regions are eligible for additional subsidies. Aside from low-interest loans, investors may draw on a working capital loan that is made available without an additional interest discount. In some cases, working capital requirements may be financed through the liquidity support program (see Short- to medium-term debt financing).

Program focus of GuW Small Business Loan: These loans are geared toward companies that are more than eight years old. Eligible investment plans include the acquisition of a business or an active stakeholding in a business. The interest discount on GuW loans for small and medium-sized enterprises is smaller than that of the business foundation and consolidation programs. Other eligibility criteria are:

• The company is a small and medium-sized enterprise in the sense of the EU definition.
• The investment location is in Baden-Württemberg.

If required, the investment plan may be financed completely with GuW loans for small and medium-sized enterprises up to $ 5 million.

Program focus GuW Business Loan: The GuW Business Loan represents an alternative option for the long-term financing of company acquisitions and stakeholdings for established companies that are older than eight years and do not fall under the EU's critera for small and medium-sized enterprises. The GuW Business Loan does not offer an additional interest discount. But it does offer attractive interest conditions and an advantageous loan structure with long terms and amortization-free initial years. The eligibility criteria are:

• The company has less than $ 500 million in annual group sales.
• The investment location is in Baden-Württemberg.

The financing share and maximum amount correspond to those of the GuW Small Business Loan.

Risk relief: In the case of insufficient collateral, all variants of the GuW program allow for a combination of the loan with a guarantee issued by the L-Bank in the context of its guarantee program (volumes of more than $ 1 million to $ 5 million). Guarantees of the Bürgschaftsbank up to 40% are applied for in conjunction with the GuW loan and are characterized by unusually attractive provisions.

Regional and technology support

Regional support: The regional support program is geared toward companies that invest in defined, structurally weak regions of the state. Aside from business start-ups, business expansions and takeovers may also be eligible for support on the condition that they help protect or create local jobs. In the case of business transfers, the existing business must be facing closure. Other eligibility criteria are:

• The company is a small and medium-sized enterprise in the sense of the EU definition.
• The investment location is in a declared regional development area of Baden-Württemberg (see list of areas under www.l-bank.de<//font><//font>) or an EU Objective 2 region.

Only capital investments are eligible for investment grants. The loan volume should not exceed 75% of the total financing requirement. As with the GuW program, longterm, low-interest loans with an initial, amortization-free period are offered here. The additional eligibility criteria “regional limitation” and “positive labor market effect” are honored by a higher interest discount compared with GuW Small Business Loan. This applies, in particular, to the state’s Objective 2 regions.

Risk relief: Loans may be combined with guarantees in the case of insufficient collateral (see Rural Development Program ELR)).

Technology support: Investments in new, high-potential technologies are honored by an interest discount that is comparatively higher than the discount on GuW Small Business Loan. Eligibility criteria are:

• The company operates a manufacturing business with up to 300 employees.
• The company introduces new, technologically advanced products or production processes.
• The investment location is in Baden-Württemberg.

Financial support also requires that the investment plan harbors technical risks for the company and promises medium-term business success. The support loan is generally limited to 75% of the eligible costs. As in the GuW program, long-term lowinterest loans with initial redemption-free periods are offered here. The size of the interest discount is the same as for the Regional Support Program. Investments in EU Objective 2 regions benefit from additional interest discounts.

Liquidity support: The liquidity support program is especially interesting for investors who need short- to medium-term financing for the acquisition of an existing company. The investment grant is available only for companies that could not remain in business without the planned takeover. In addition, the program allows for the financing of additional, growth-related working capital requirements, consolidations as well as investments with an amortization period of up to eight years. Other eligibility criteria are:

• The enterprise is a commercial company or a self-employed business with generally up to 500 employees.
• A sustainable overall business concept for the company is available.
• The investment location is in Baden-Württemberg.

Under the liquidity support program, the investor obtains a low-interest investment loan that can finance up to 100% of the planned investment. A special characteristic of liquidity support is its high level of flexibility. Loan terms can be adjusted to individual financing requirements.

Risk relief: In the case of insufficient collateral, the loan may be combined with a guarantee (see Rural Development Program (ELR) under Middle- to long-term debt financing.

Silent participation by the Mittelständische Beteiligungsgesellschaft Baden-Württemberg (MBG)

The MGB provides equity capital, typically in the form of silent participation, to investors for the foundation or takeover of a company or an active stakeholding in a company. In this way, the company’s equity can be increased while avoiding influence of the capital provider on the company’s business. Eligibility criteria for a silent participation are:

• The company is a small and medium-sized enterprise in the sense of the EU definition.
• The investment location is in Baden-Württemberg.

The participation is made on equal terms, i.e. in the amount of the existing equity. The minimum and maximum limits for business foundation are $ 50,000 and $ 250,000, and for company successions $ 50,000 and $ 750,000. The silent participation is repaid at the nominal value after 10 years. Interest payments consist of a fixed and an income-related rate. The silent participation does not participate in value increases beyond the income-related interest payments. Loss sharing is limited to the case of insolvency.

ERP capital for business startups (KfW)

With its ERP capital for business establishments, KfW offers investors a subordinated loan for the financing of business startups (new business starts, takeovers, active stakeholdings) and investments within two years after the start of self-employment. The loan does not require any collateral on the part of the co-lending bank and creates financing leeway. Preconditions for this investment grant are a minimum equity investment of 15% and the fulfillment of the EU's definition of a small and medium-sized enterprise. Mezzanine financing benefits from an interest discount during the first few years as well as seven amortization-free initial years. The maximum amount per applicant is $ 500,000.

Reference
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Agency for International Economic and Scientific Cooperation
www.bw-invest.de