To promote growth and stability of the economy, the regions, states, the federal government and the European Union provide a wealth of aid. Due to the current financial and economic crisis and the related measures to combat it, a not insignificant increase in the amount of subsidies can be seen.
At the federal level, the commercial sector is still the most important area for subsidies. In an international comparison, Germany stands out within the European Union for its high level of aid.
Numerous support programs
Numerous subsidy programs have already been launched in the recent past, some of them specifically for small and medium-sized enterprises, but also some of them across all sectors and irrespective of the company size. Examples include:
As a result of the economic stimulus package I, u. a. Working capital loans with 60-percent liability exemption and investment loans with even 90-percent liability exemption granted. This means that your house bank takes only a very small risk in the context of such funds. This is a good additional argument for companies, the self-employed and freelancers vis-A-vis the bank to successfully grant a loan applied for.
Increase of the guarantee program
With the economic stimulus package II, u.a. the guarantee program increased. The guarantee banks were allowed to guarantee a higher loan volume proportionally. The federal guarantees to the guarantee banks have also increased. This also benefits all companies. In principle, public funding is available to structurally sound and viable companies. Reorganization cases are unfortunately mostly not supported.
Liquidity management is one of the most important tasks of a company. Liquidity bottlenecks should be tackled by all means possible. This is the only way for a company to be successful on the market in the long term.
Liquidity management in business
Investors, lenders and managers look at a company's financial statements using liquidity metrics to assess liquidity risk. This is typically done by comparing cash and short-term debt to determine whether the company can make excess investments, pay bonuses or meet its debt obligations. Companies that have excessive debt need to take steps to reduce the gap between their cash on hand and their liabilities. When companies have excessive debt, their liquidity risk is much higher because they have fewer assets to draw on.
All companies and governments that have debt face liquidity risk, but the liquidity of major banks is under particularly close scrutiny. These organizations are subject to strict regulations and stress tests to evaluate their liquidity management, as they are considered economically vital institutions.
Liquidity risk management uses accounting techniques to determine the need for cash or collateral to meet financial obligations. The enacted Dodd-Frank Wall Street Reform and Consumer Protection Act significantly increased these requirements compared to the pre-financial crisis period. Banks now have to hold a much higher amount of liquidity, which in turn lowers their liquidity risk.
Vital for companies: Liquidity for investments
If you don't advertise, you die – so goes the old adage in the field of marketing. But the same is also true: Who does not invest, dies! Investments ensure a company's competitiveness for the future; without them, it is almost certain that it will eventually fall by the wayside. Fortunately, many investments are also eligible for subsidies, as the following list shows:
Examples of eligible investments
- Cash subsidies
- Land acquisition
- Purchase of machinery, equipment, vehicles and facilities
- Takeover of an existing company
- Guarantees and federal guarantees
- Quality assurance
- Participation capital
- Export Financing
- Securing production
- Innovation Grants
- Exhibitions and fairs
- Company kindergartens
- Consulting subsidies
- National and international business cooperation
- Information events, training courses, workshops
- Research grants
- New media
GRW – Special subsidies for regional economic incentives
For some time now, there have been special funding programs that specialize in providing incentives for business at the regional level. The most well-known of these subsidy programs, the GRW subsidy, is presented in more detail below.
Example: The cost of setting up production facilities by investors can be significantly reduced by cash incentives in the form of grants. There is a nationwide program for the allocation of these subsidies, the "Joint Task for the Improvement of the Regional Economic Structure" – in short: GRW.
The program is issued by the Federal Ministry for Economic Affairs and Energy. It sets maximum possible subsidy rates for all eligible regions throughout Germany, which are published for each subsidy period in the form of the Ministry's so-called "subsidy map".
Calculation of the possible funding amount
The basis for calculating the possible amount of subsidies through the GRW program can be the actual investment costs (z. B. for buildings or machinery) or (assumed) wage costs for two subsequent years. The funds of the GRW program have to be applied for before starting the investment project. The application process is managed by the respective state governments.
Solid liquidity management and the willingness to invest are vital for almost every company, especially in times of crisis. But this is often easier said than done. Fortunately, there are corresponding subsidies, for example the so-called GRW subsidy especially for the regional economy. These make it easier for companies to implement the goals and plans they have set themselves.