Dr. Herbert Hirschler: Supporting and financing companies – rapid loan subsidies

There can be no economic growth without loans. Quite apart from anything else, economic growth is based on com­­pa­nies’ keenness to invest. But companies often find that they cannot afford to hold their own in the market, implement new ideas or expand business activities out of their own pockets, which means that they sometimes need bank loans. This means that loans are also a parameter for economic growth in normal times, not only in times of crisis. At the company-formation stage in particular, those wish­­ing to start companies depend on a wide range of various different financing op­­tions; this applies equally to the medium-sized sector in implementing its ideas. At the end of the day, customised finan­­cing concepts are critical for companies’ commercial development.


The state of Hessen, the German federal government and the European Union support medium-sized companies with a wide range of different assistance pro­­grammes. These also include public guarantees, which can provide important assistance. Because of the wide range of support options, companies looking for a rapid solution can often lose their way, so it is im­­por­­tant that both existing companies and those people wishing to form companies find out quickly about the right assistance mea­­sures and thereby considerably improve their access to loans, sureties, subsidies and investment capital.

Subsidies can be obtained for almost every kind of investment as well as for consolidating capital equipment and equity capital. Advice on subsidies ob­­­tai­­ned from the Wirtschafts- und Infra­­strukturbank Hessen (Hessian bank of commerce and infrastructure) assists companies and those wishing to form companies in finding suitable subsidy programmes.

Subsidy programmes for the commercial sector are usually arranged by a com­­pany’s house bank. In this way it is pos­­si­­ble to determine in an interview rea­­son­­ably quickly why a company needs the loan, how much is required and whether the loan application will have any chance of success. Even more complex problems can be assessed quickly and, depending on how well the loan application has been prepared, a decision can be made fairly soon. Specific advice is very useful in helping companies to find the right programme for each financing need.


The most important programme in busi­­ness development in Hessen is the Kredit­­pro­gramm Gründungs- und Wachstums­­finan­zie­rung (company start-up and business development financing loan programme). This programme subsidises investments in company start-ups, the creation of new and permanent jobs and apprenticeships/traineeships and company expansion and consolidation.

Business development loans from this programme are granted to cover the capital requirements of existing and newly formed companies in Hessen and are available for up to two million euros. These loans are approved on condition that these investments have a reasonable prospect of long-term commercial success – even capital equipment can be financed. Since 1 January 2011, invest­­ments outside Hessen can also be fi­­­nan­­ced provided the applicant’s business has been based in Hessen for a minimum period two years and the loan pro­­tects long-term competitiveness and jobs in Hessen. Subsidies can also be obtained for the construction of property to be leased to third parties immediately following construction; this is for the purpose of creating or retaining a social infrastructure.

These business development loans are refinanced with funds from the KfW (bank for reconstruction) Banking Group. The loans from the Wirtschafts- und Infra­strukturbank Hessen, which are cheap in any case, are also reduced to an espe­­cially low interest rate of 0.2 per cent and to 0.4 per cent in structurally weak economic regions.


Manufacturing companies and freelanc­ers with up to 15 employees can obtain loans from a “Kapital für Kleinunter­neh­­men” (capital for small companies) programme. These loans are intended to improve com­­panies’ and freelancers’ financial structure and liquidity situations and enable them to take up additional outside capital.

There are also subsidy programmes for improving regional economic structure. These programmes are designed to assist commercial investments which are par­­ticularly worthy of assistance from an economic point of view, which require special effort on the part of the company and, among other things, which are in­­tend­­ed to subsidise the construction or extension of a plant, the takeover of a defunct plant or a plant threatened by closure. The project must be designed to create new, long-term jobs or protect existing ones. Projects of this nature enjoy priority in certain areas of Hessen – particularly in northern Hessen.


Support for trade fairs enables medium-sized companies in Hessen and freelanc­­ers to take part in trade fairs and exhi­­bi­­tions, mainly in difficult or geographically very distant overseas markets. These subsidies are used mainly to open up and consolidate new markets. Assistance for participation in trade fairs and exhibitions in Germany and elsewhere within the European Union is intended to primarily benefit the qualified trades and small companies with up to ten employees. Subsidies are approved for groups of at least three companies. Interested companies can apply to the responsible trades chambers and industry associations. The projects are approved throughout Hessen with all involved parties.

For companies undergoing temporary financial hardship, it is recommended that they contact their house bank as quickly as possible and explain fully the company’s commercial situation. Only if they are properly informed will banks be pre­­pared to assist companies in phases of decreasing revenues and tight liquidity. Experience has shown that many medium-sized businesses find it difficult to conduct strategic communication with their house banks without assistance. However, in order to maintain good busi­­ness relations with their house banks, companies must demonstrate both a stable operational business and reliable prospects for a long-term improvement in their business situation with a solid business plan. Businesspeople who can­­not provide such evidence out of their own resources should seek help as quick­­ly as possible.

An initial point of contact for such matters may be the local chamber of commerce or trades chamber with their networks of advisors. Subsidies are also available for improving a company’s performance, its competitiveness, for simplifying company start-ups and successions and for consult­­ing and training for small and medium-sized companies. In Hessen there are a large number of advisory centres, such as industry and trades chambers and associations etc. which can offer subsidised advisory services.



If a loan application is declined, business­­people should carefully analyse the rea­­sons for the refusal and discuss these with their company client advisor at their house bank. If the application failed due to insufficient collateral, indemnity bonds could help. With the “indemnity bond without a bank”, sure­­ties of up to 500,000 euros can be ap­­plied for with the Bürg­­schaftsbank Hessen (Hessian guarantee bank) directly. The granting of such a surety makes it easier for the house bank to ap­­prove a loan application and is an im­­por­­tant component for a financing concept.
For sureties from a liability guarantee of one million euros, interested companies should contact the Wirtschafts- und Infra­­strukturbank Hessen. This organisation prepares the documentation required for the decision at the application stage, advises companies, banks and savings banks for the sureties committee of the state of Hessen and reconciles the inter­­ests of the various parties involved.

There is a wide range of other subsidies available, of which some are also tied to certain regions, such as rural areas. This opens up a further, wide range of subsidy options. Every interested businessman and would-be start-up business­­man would there­­fore be well ad­­vised to use the subsidy con­­sulting services of the Wirtschafts- und Infrastrukturbank Hessen, which guides applicants through the range of subsidies available on behalf of the state of Hessen.

LTH_11_fertigFrom 1991 to 1999 the author was vice-president of the Darmstadt Re­­gion­al Council and permanent secretary of state in Hessen’s Ministry of Economics, Trans­­port, Urban and Regional Develop­­ment from 1999 to 2004. He is spokesman of the management of the Wirtschafts- und Infra­­struktur­bank Hessen, which emerged as a result of the merger of the Investi­­tions­bank Hessen and the LTH – Bank für Infra­­struktur, which he has managed since 2004.