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Promotional loan, grant or tax incentive: choosing the right route for funding in Germany

Editorial team artemis-ju.eu · Updated 27 October 2026

In Germany, a grant (Zuschuss) is free money with conditions, a promotional loan (Förderkredit) is borrowed money on better terms, and the research allowance (Forschungszulage) is a tax incentive you are legally entitled to, claimed through the tax office. Which route fits depends on three questions: how much capital you need, when you need it, and whether your project has already started. In practice, companies often combine all three.

The three routes compared

Feature Grant Promotional loan Tax incentive (research allowance)
Repayment no (if conditions are met) yes, with interest and repayment no
Entitlement none, limited budget none, credit check legal entitlement if conditions are met
When to apply mostly before the project starts, often with deadlines usually before the project starts after the financial year ends
How to apply directly with the funding body or agency through your house bank BSFZ certificate, then ELSTER
Typical use R&D, consulting, start-ups, investment investment, working capital, innovation R&D staff, contract research
Own contribution almost always required loan finances, equity expected no co-funding share as such

Grants: no repayment, but conditions

Grants cover a share of eligible costs; you pay the rest. Our guide to funding rates and own contribution explains how this works and how to pre-finance it. Grant budgets are finite, as the temporary application freeze in the federal ZIM programme since July 2026 shows. Typical conditions include applying before the project starts, proof of use and possible repayment if you breach the terms.

Promotional loans: the house bank principle

KfW, Germany’s state-owned promotional bank, generally does not lend directly to businesses. Instead it works through commercial banks and savings banks. This house bank principle (Hausbankprinzip) means:

  1. You present your project to your bank in Germany.
  2. The bank checks creditworthiness and collateral and submits the application to KfW.
  3. KfW refinances the bank at promotional terms, and the bank passes the loan on to you.
  4. The bank generally carries the credit risk; in some programme variants KfW takes on part of it (Haftungsfreistellung).

Examples from KfW’s current range, each with its programme number:

  • ERP-Förderkredit KMU (365, 366): investment and working capital for SMEs; variant 366 includes a risk release in which KfW, according to its programme page, takes on 50 % of the risk.
  • ERP-Förderkredit Gründung und Nachfolge (077) and ERP-Gründerkredit StartGeld (067): for start-ups and business takeovers.
  • ERP-Förderkredit Digitalisierung (511, 512) and ERP-Förderkredit Innovation (513, 514): for digitalisation and innovation projects, with an additional grant element in the higher funding levels according to KfW.

Terms, caps and interest rates change regularly; the current information sheet (Merkblatt) and rate overview on kfw.de are binding. The federal states’ promotional banks also offer loans, often through the house bank as well; see our overview of state funding programmes.

The third route: tax incentive

The research allowance works differently from grants and loans. There is no budget to run out and no application before the project starts. You first have the certification office (BSFZ) confirm that your project is R&D, then claim the allowance from the tax office after the financial year. Since 2026 it is 25 % of the cost base, or 35 % for SMEs on request.

For companies with their own R&D team, it is often the most predictable funding source. It does not replace investment finance, though: machinery, buildings or market launch are better financed through loans or investment grants.

Combining routes

The routes are not mutually exclusive. Common combinations:

  • A promotional loan for an investment plus the research allowance for R&D staff.
  • A state innovation grant plus a promotional loan for the own contribution, if the programme allows it.
  • A consulting grant, such as BAFA’s consulting support, before a larger investment.

Three ground rules apply:

  1. No double funding: the same costs cannot be funded twice.
  2. Accumulation limits: public support adds up under EU state aid law. Many programmes are de minimis aid with a ceiling per company over three years; others follow the General Block Exemption Regulation with maximum aid intensities.
  3. Read the programme rules: whether a combination is allowed is set out in each programme’s information sheet or guideline.

The federal funding database (Förderdatenbank) covers federal, state and EU programmes and can be filtered by type of funding (grant, loan, guarantee, equity), region and topic. The site is mainly in German. For help with choosing and combining programmes, see the grant consultants directory.

Sources

This guide does not replace tax or legal advice; the funding guideline, information sheet and decision of the funding body are binding.

Sources and further reading

Frequently asked questions

Can a newly arrived founder get a KfW loan?

KfW business loans are granted through German banks and savings banks, which assess the project and creditworthiness. A founder without a German credit history may find this harder, so a solid business plan and a bank relationship in Germany help. The eligibility rules are in each programme's information sheet (Merkblatt).

Is a grant always better than a loan?

Not necessarily. Grants usually cover only part of the costs, are limited and come with conditions. A loan can be available faster and finance larger amounts. Combining both is common.

Can I combine the research allowance with a loan?

Generally yes. The allowance supports certain R&D costs, the loan finances the project. Check the combination rules in the loan's information sheet and in the Research Allowance Act so that no costs are funded twice.

When do I need to apply?

For grants and promotional loans, usually before the project starts. The research allowance is the exception: it is claimed from the tax office after the financial year ends.

Related guides

Germany's research allowance (Forschungszulage) in 2026: who qualifies and how to claim Germany's R&D tax incentive in 2026: 25 % of eligible costs, 35 % for SMEs, a cost base of up to 12 million euros and a new 20 % overhead flat rate, explained. Funding from Germany's federal states: which promotional bank covers your region Regional funding in Germany: the promotional banks of all 16 federal states, documented innovation programmes such as Pro FIT and PROFI, and search tips. De minimis aid: the EUR 300,000 ceiling, the rolling three-year period and the new central register De minimis aid under Regulation (EU) 2023/2831: EUR 300,000 per single undertaking over three rolling years, the declaration, the register and cumulation. Funding rates and own contribution: how much of your project a grant really covers How funding rates and own contribution work for R&D grants in Germany: EU GBER ceilings, SME bonuses, a worked example and why you must pre-finance costs. EXIST and start-up funding in Germany: business start-up grant, Transfer of Research and alternatives EXIST start-up grant and Transfer of Research according to Projektträger Jülich, plus the start-up subsidy, the KfW start-up loan and state programmes.