- R&D Tax Incentive
- Target groups
The economy is currently struggling with various crises. Do you think that this means that companies are focusing more on subsidies?
Our customers have used and continue to use economic downturns very successfully to revamp their own structures and product portfolios. A key entrepreneurial task in times of crisis is, on the one hand, to secure financial security in good time and, on the other hand, to prepare for the time afterwards – for the subsequent upswing. Subsidies can be helpful for both strategies. For example, liability programs are available to maintain or create liquidity leeway in challenging times. Good development projects can receive funding of up to 100 percent. Ambitious projects can thus gain valuable competitive advantages. At the same time, qualified and experienced personnel can be retained. With such measures, the company can start the race stronger after the crisis.
How well are the existing support instruments used by domestic SMEs?
Knowledge about subsidies is unevenly distributed. There are many companies that regularly use subsidies and are well positioned in this area. This is estimated to be about one third of all companies. Another third know about subsidies, but are far from using everything. And at least a third are not aware of the wide range of options available. This was exactly the starting point of our company foundation more than 25 years ago: To open up to companies those subsidies to which they are entitled. And that’s precisely why we developed our 360-degree screening, in which we examine all areas of support and look specifically for support potential. We make the results of this screening available to our customers in a clear report.
What is the biggest challenge when companies want to collect funds?
There are a few challenges. First, selecting the right programs. This is because various subsidies are eligible for certain projects, but they cannot be combined. Second, the timing. The application must be submitted before the first action and that is almost always the order. Unfortunately, too often we come into contact with projects that are already underway. Then, unfortunately, it’s too late. Third, the structure of the grant applications. There are, of course, certain “invisible traps” that you can’t fall into. Answering questions that at first glance seem unremarkable can turn out to be a knockout criterion. Furthermore, certain contingencies of the project implementation should already be taken into account in the funding application. Cost increases, cost shifts, project delays or a change in focus should be considered, included and also communicated. Fourth, accounting. Deadlines must be monitored and changes communicated and agreed upon in a timely manner. This has become increasingly complex over the past decade. With appropriate care, however, all of this can be implemented well. In any case, the grant project is not successfully completed until it has been settled and audited and the grant amount has been credited in full to the account.
How well can grants be combined with other financing methods?
Subsidies are often equated with classic grants. In this context, guarantees or direct loans (e.g. ERP funds) are also understood as subsidies, as these represent a real monetary benefit for the companies. The financing of the overall project must already be proven when the application is submitted. Funding agencies do not accept that, for example, current revenues or a major business contribute the last 20 percent to the out-financing. This involves too much uncertainty and could have a negative impact on the project. If the applicant company does not have the money for the project in advance – and this is the case in very few cases – it will have to resort to various financing instruments. For example, a classic combination might be: 20 to 25 percent existing equity, while the remaining financing is provided by the bank – possibly with liability from the public sector. However, other forms of financing, such as financing with the help of an investor, crowdfunding or a silent partnership, are also absolutely typical and welcome. Leasing or hire-purchase variants, on the other hand, usually lead to problems or rejections from a funding perspective.
What is a classic misconception that you encounter most of the time?
When I started the company 25 years ago, the term “subsidy” was still very common for funding. For me, that always smacked a little of political influence and smoky backrooms. Even today, I encounter the assumption that subsidies are only available to large, well-connected companies. In fact, it is precisely the smaller companies that have significantly more options available to them at higher subsidy rates. Of course, this is associated with a great deal of bureaucracy – keyword forms and the adequate preparation of necessary documents. On the other hand, however, it is indispensable for the people in charge. After all, they have to collect all the information, prepare a funding decision transparently and document everything in a comprehensible manner. This precision is absolutely necessary, since all funding agencies in Austria and also in other countries are regularly inspected by the EU – which is a good thing and exactly how it should be. I am convinced that 99 percent of all funding decisions are made absolutely transparently and without interference.
What is one mistake that many SMEs make around grants?
Most mistakes are due to timing. It regularly hurts my heart when we talk to a company and the project is already underway. Then, in most cases, it’s too late and several hundred thousand euros can be lost – money that is very valuable, especially in light of current economic developments. Lack of knowledge about funding is another problem. Even before the project is started, various sources of information should be used to obtain an overview of suitable funding opportunities. Classic contacts are banks, funding agencies or the chamber of commerce. Banks sometimes have good know-how on investment subsidies and guarantees, but tend to have less knowledge in the fields of environment and R&D. Funding agencies are mostly focused on their own instruments. All three contact persons lack the experience and know-how around the operational handling. At Inspiralia we handle about 200 projects per year in Austria, covering all relevant areas such as R&D, investment, environment and growth. We know the challenges – from structuring to application to final accounting. Companies should draw on this expertise – it is free of charge in the early stages and does not oblige to place an order. In my view, a very efficient approach is to determine the focus of one’s own strategy for the next two years and to consider what funds and one’s own resources should be used for and to what extent. On the basis of this, funding opportunities can then be assessed very well. In this way, you can stick to your own goals and perhaps be inspired by funding activities, but not significantly influenced by them.
Where are there currently interesting funding pots?
The funding landscape responds quite well to the respective current economic developments and challenges. For example, funding for environmental projects has been increased, e.g. for projects on ecological energy generation, energy efficiency measures or – particularly topical – projects relating to the circular economy. These topics are very well grouped together at the handling office kpc. For ambitious development projects, there are good programs both at the national level (FFG) and in many countries (WWFF, SFG, etc.). On the one hand, a distinction must be made between topics such as IT or medical technology, and on the other hand, the complexity of the project must be well assessed in terms of implementation risk. Various programs on the subject of digitization come along at regular intervals, but are usually quickly out of print. I would like to mention the kmu.digital program. There is also great – though mostly still unknown – potential in EU funding. With the long-standing Horizon Europe program (2021-2027), the European Commission has created several instruments that benefit not only large companies and research institutions, but also startups and SMEs. These are supported, for example, with the “EIC Accelerator” program, which provides both grants and equity for individual projects with up to 17.5 million euros.