Klaus-Dieter Licht: Brandenburg offers innovative financial instruments

Whether for business expansion or foundation, investment-related decisions stand and fall with the assurance of overall financing. Especially the availability of public funds and loans at the investment location, but possibly even the mobilisation of venture capital often constitutes a favourable and, thus, attractive source of funding for companies. That represents a considerable location advantage.

As a bank for business development, ILB, the investment bank of the state of Branden­­burg, supports public and private investment projects in the areas of business, infrastructure and housing. Business enter­prises, start-ups and freelancers as well as agricultural and media companies receive support through a targeted appro­priation of funds.
Funds from the state, the federal government, the EU and ILB’s own resources intervene in providing reduced-interest loans, grants, bonds as well as venture and equity capital. In the pursuit of that goal, ILB cooperates with savings banks as well as cooperative and private banks.


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Founded as the state development bank in 1992, ILB has accompanied the development and structural change of the state of Brandenburg significantly over the past two decades following the German reunification by supporting and financing future-oriented projects. In the field of economic promotion, for instance, over 37,000 business projects have been supported, investments exceeding 40 billion euros made available and 135,000 new jobs created since 1990.
In cooperation with the Brandenburg Eco­nomic Development Board (ZAB) on the state level as well as the chambers and regional institutions of economic development, ILB offers free individual advice on matters of business promotion and the appropriate financial instruments. Besides the subsidy programmes offered on behalf of the state of Brande­­­nburg, ILB’s promotion activities also include numerous in-house loan products.

New financial instruments as well as already established promotion programmes are geared towards structurally developing individual regions, reinforcing certain industries and providing optimal support in the various business stages.
The latest promotions offered by ILB include the early-stage fund “BFB Früh­phasenfonds Brandenburg”, the Branden­­burg­­-Kredit Mezzanine and Brandenburg-Kredit Mikro.

BFB Frühphasenfonds Brandenburg. In Brandenburg, the BFB early-stage fund enjoys a growing popularity as a venture-capital fund for young and innovative small enterprises. It was issued by ILB in the spring of 2010 on behalf of the Brandenburg Ministry for Economic and European Affairs. The volume of this fund aimed at young and innovative small enter­prises in the seed and start-up stage amounts to 20 million euros.


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The fund’s objective is to reinforce the equity base of companies in their early stages by means of open investments combined with subordinated loans.
Provisions are made for total participating interests in corporations of up to one million euros per company whose headquarters or production site is located in Branden­­burg. The inclusion of private investors such as business angels is possible and desirable. In order to set up the fund, ILB founded BFB Früh­phasen­fonds Branden­­burg GmbH as a wholly owned subsidiary. Seventy-five per cent of the fund’s means are provided by the Euro­pean Regional Development Fund (ERDF) and 25 per cent by budget resources of the state of Brandenburg. The fund may also promote start-ups, especially in the context of Brandenburg colleges and research institutes, by means of venture capital.

Brandenburg-Kredit Mezzanine. In Branden­­burg, established small and medium-sized enterprises (SMEs) in all commercial and freelance sectors may also resort to a sub­­or­­dinated-loan programme. Through the Brandenburg-Kredit Mezzanine and on behalf of the state, ILB offers subordinated loans to SMEs that have been in existence for at least three years; said loans involve 75 per cent of funds from the European Regional Development Fund (ERDF) and 25 per cent of state funds. The use of subordinated loans has a pos­­itive effect on equity and creditworthiness and improves the rating of the borrower. Due to a lack of equity, newly established SMEs often require subordinated capital. The volumes of such loans are typically small, upwards of 200,000 euros.,

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The Brandenburg-Kredit Mezzanine may serve to finance investments in land and buildings, commercial construction as well as manufacturing facilities and intangible assets.
Up to 100 per cent of the financial requirements may be financed with the minimum being 200,000 euros and a maximum of two million euros. In principle, the Brandenburg-Kredit Mezzanine may be combined with other public funds such as the federal economic promotion measure “GRW-Gewerbe” for the improvement of regional economic structures as well as the federal investment supplement.

Brandenburg-Kredit Mikro. Start-ups and young entrepreneurs who require the support of a financial institution for the realisation of their business idea are often faced with particular challenges when it comes to financing their projects. With Brandenburg-Kredit Mikro, introduced in 2011, ILB provides companies that have been in business for less than three years and whose house bank is unwilling to fi­­nance the project with a loan programme based on the KfW start-up loan “StartGeld”. In cooperation with the SME bank KfW as a refinancing partner, the Brandenburg cham­­­­­bers of commerce as well as the Branden­­­burg Ministry for Economic and European Affairs, ILB may, thus, provide start-ups, freelancers and small enterprises with a new financing opportunity through a loan of up to 100,000 euros.


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There are good reasons to invest in Branden­­­burg. Regional start-up companies and enterprises as well as investors from other federal states and countries have numerous options and offers at their disposal. Appropriate professional advice is offered by ILB and a number of other institutions.

 

100_31136_kleinThe author (born in 1947) has chaired the board of directors of ILB, the investment and development bank of the state of Branden­­burg, since 1993. Prior to coming to Brandenburg, he occupied various exe­cutive positions in a large German public bank. Most recently, he was CEO of the sub­­sidiary of a large German bank in Vienna.