A Brief Explanation of the INVEST Grant

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How do investors receive the INVEST grant?

By André Jasch
4 minute read

A special feature of equity investments is that they may be eligible for INVEST grants. The INVEST grant is a state subsidy program for venture capital investments and is awarded by the Federal Office of Economics and Export Control (BAFA). The INVEST grant is intended to support young and innovative companies in their search for an investor. This grant is intended to encourage private investors, in particular business angels, to provide venture capital for these companies. However, the INVEST grant is subject to strict conditions.

 

Through the INVEST subsidy program, an investor receives an investment grant amounting to 20 percent of the investment sum. For the investor, this reduces the risk of equity participation. After submitting the application online and receiving a positive decision, the investor receives a refund.

For example, if an investor invests EUR 100,000 in a company eligible for INVEST funding and his application for funding is approved, the BAFA will refund EUR 20,000 to his account as a grant. The maximum eligible investment amount is EUR 500,000 per investor per year. This results in an annual maximum grant of EUR 100,000 per investor.

 

The shares acquired through the investment belong to the investor. The investor must hold these shares for at least three years. If he sells them before the end of the minimum holding period, he runs the risk of having to repay the investment grant. If the company fails before the end of the minimum holding period, the investor does not have to repay the subsidy.

For an investor to be entitled to the INVEST grant, he must be a natural person residing within the EEA. Alternatively, an investor can acquire the shares through a limited liability company (GmbH or UG). However, this investment company may not consist of more than six natural persons in order to be entitled to the investment grant.

The minimum investment amount must be EUR 10,000 and the acquisition of the shares must not be credit-financed. If an investor already holds shares in a company, subsequent investments are generally no longer eligible. An exception exists if the shares already held were already supported through INVEST at the time of acquisition. In this case, it is a follow-up investment that is compatible with the INVEST guidelines.

 

In addition to the investment grant, the INVEST subsidy program also includes an exit grant. If an investor sells his shares as part of a company sale (exit), he receives a subsidy of 25 percent of the profit in the form of a tax refund. The assessment basis for the amount of the capital gain is the difference between the selling price and the issue price of the shares.

The profit from the sale of the shares must be at least EUR 2,000. The maximum exit subsidy is 80 percent of the investment sum. For example, if an investor has acquired shares worth EUR 100,000 and sells them for EUR 500,000 after more than three years, he will receive an exit grant of EUR 80,000 if the application is approved.

For an investor to be able to apply for an exit grant, he must be a natural person residing within the EEA. In addition, the shares sold must have already received the INVEST grant at the time of acquisition.

 

First, the company must submit an application for INVEST eligibility to BAFA. An online application is sufficient. The applications are submitted before the start of a financing round. Companisto supports the companies in the application process and informs each investor whether the company is eligible for INVEST funding. The application procedure is deliberately kept very simple so that the investors receive quick and unbureaucratic support and the investment process is impaired as little as possible.

The investor then applies for approval of the investment grant. The application can be made online on the BAFA website and takes about 5 minutes. The investment contract can be concluded between the investor and the company once the online application has been submitted. The online application must then be printed out, signed and sent to BAFA. Complete processing can take up to 6 months. If both applications (application of the company and the investor) are approved, the grant will be transferred directly to the investor's bank account.

 

You will find all details on the INVEST grant on the BAFA website.

 

Have you ever applied for an INVEST grant? Write us a comment!


 


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André Jasch
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