Start-ups: Growth Phase: Financing Business Growth

 

 In the growth or growth phase, although the sales increase, but at least at the beginning of the phase the company is usually not yet in the profit zone.

In this phase, the company structure is continuously being continued. The internal business organization may need to be reorganized. The expansion of sales and production comes first. It may be necessary to diversify the product portfolio in order to acquire additional customers. In addition to equity capital, promotional loans, if necessary combined with non-payment guarantees, can also gain in importance.

venture capital

In addition to private investors and medium-sized investment companies, publicly funded venture capital funds also invest in young companies. In addition, they offer helpful know-how and access to a wide network.

Co-investment fund coparion

Co-investment fund coparion

The co-investment fund coparion invests in small innovative tech companies that are not older than ten years. They should have above-average growth potential and already have their first sales, key customers or a successful product launch. Up to ten million euros can be invested per company. Prerequisite for the coparion commitment is that private investors with at least the same volume and on the same economic terms (“pari passu”) participate in the financing round. Coparion was initiated by the ERP Special Fund and KfW Bankengruppe.

loan

Typical of public development loans include favorable interest rates and long maturities. There are loans that are aimed specifically at innovative growth companies. However, “classic” development loans may also be considered.

ERP Innovation Program

With the ERP Innovation Program, the costs of research and development can be financed over a period of ten years over the long term in order to help products or processes to become market-ready and develop.

The funding is granted as an integrated financing package consisting of a classic loan (debt capital tranche) and a subordinated loan (subordinated tranche). It finances up to 100 percent of the eligible costs, a maximum of 5 million euros per project.

Motivate investors

The Federal Ministry of Economics, the ERP Special Fund and the European Investment Fund (EIF) support venture capital or venture capital funds, which use their capital in so-called gazelles – fast-growing young companies to provide young companies with sufficient capital in the growth phase – participate. In addition, the BMWi also creates financial incentives for business angels who invest in young companies.

Mezzanine Fund of Funds for Germany (MDD)

The Mezzanine Fund of Funds for Germany (MDD) invests in private professional funds that provide mezzanine finance, an intermediate form of equity and debt capital. These include subordinated loans, silent, typical and atypical investments. In the event of insolvency, they are only subordinated (after the other loans) and thus strengthen the economic capital base of a company. The MDD also participates in so-called venture debt financing. These are loans where the entire loan amount is due only at the end of the term. Customary collateral is not required.

ERP / EIF Growth Facility

ERP Funds and EIF partner with private venture capital funds and set up co-investment funds to participate in innovative growth companies. The amount of the participation is based on the amount of the investment by the venture capital fund (“pari passu”). His investment should be between 20 and 60 million euros.

INVEST – grant for venture capital

Business angels and other private investors can use the “INVEST” to increase their stake. If a business angel participates for at least € 10,000 in a start-up for at least three years, he receives a subsidy of 20 percent of his investment. In addition, from 2017, the tax, which is attributable to a later capital gain, can be compensated by a lump-sum grant.