A manufacturer has developed a new product and now needs to set up a new product line to take it to series production, tooling, equipment and the related process changes. The investment is sizeable and sits in the gap between R&D and a paying market: too far along for an R&D grant, but with a payback period that makes ordinary borrowing expensive. The company needs capital on better terms to bridge that gap.
Unlike a grant, a KfW innovation and digitalisation loan is low-interest debt finance: the company borrows at favourable conditions to fund an innovation or digitalisation project, and repays the loan. The financing volume can reach up to EUR 25 million per project, and the loans are open to SMEs and mid-caps. The amount shown for such a case is the financing volume secured, not a subsidy. A KfW loan can often be combined with other support, and is the right instrument when a project needs capital on better terms than the market offers rather than a grant.
The company finances the new line with a low-interest KfW loan tailored to innovation and digitalisation projects. The loan covers the equipment and the related investment, with a long term and favourable conditions that ease the cash-flow burden until the line pays back. On a project of this size, the financing volume comes to about EUR 8 million. Because this is debt rather than a grant, the company keeps full ownership and simply repays the loan over its term.
A KfW loan is applied for through the company's own bank rather than directly at KfW, the so-called house-bank principle. The company discusses the project with its bank, which forwards the application to KfW and passes on the favourable conditions. The loans typically offer a long maturity and the option of one or more repayment-free start years, with a low fixed interest rate set for an initial period. Because the financing is debt rather than a subsidy, it does not duplicate a grant on the same costs, and a loan can often be combined with grant funding on a different part of the project. The decisive advantages over ordinary borrowing are the rate, the term and the grace period, which together match the slow payback of an innovation or digitalisation investment. For a project that is past the stage where grants typically apply, this combination is often the difference between proceeding now and waiting for internal cash to build up.
A €8M KfW loan.
The favourable financing lets the company commit to the new product line without overstretching its cash flow or giving up equity. The new product reaches series production on a serious timeline, financed on better terms than the market would offer.
KfW innovation loan · up to 100% financingFor a sizeable innovation or digitalisation investment that falls between R&D funding and a paying market, a low-interest KfW loan provides capital on favourable terms while the company retains full ownership. It is the instrument to reach for when the need is financing, not a grant.
The questions we hear most. Short answer first, detail after.
No. A KfW innovation and digitalisation loan is low-interest debt finance: the company borrows at favourable conditions and repays the loan. The figure shown is the financing volume secured, not a subsidy.
The financing volume can reach up to EUR 25 million per project, and the loans are open to SMEs and mid-caps.
Innovation and digitalisation projects, including research and development, new products and processes, and the related investment, on better terms than the market typically offers.
A loan can often be combined with other support, because it funds the financing rather than duplicating a grant on the same costs, subject to the applicable rules.
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