For modern entrepreneurs and business owners, understanding public funding is no longer optional — it's a key part of building a financially resilient company. Whether you are a startup developing your first product or an established SME planning to scale, public funding can make a significant difference in your ability to grow strategically and sustainably.
Many companies still rely almost exclusively on private investment or traditional bank loans. But public funding offers something different: it can reduce financial risk, increase liquidity, and stimulate innovation. Beyond that, it also supports broader societal goals like sustainability, circularity, digitalization, and social inclusion.
These public instruments don't necessarily replace private financing — they complement white. When used together, they can unlock entirely new growth opportunities that would otherwise remain out of reach.
1. Grants: Direct Financial Support for Specific Projects
Grants are the most visible and well-known form of public funding. They represent direct financial contributions from public bodies — whether at the EU, national, regional, or municipal level — designed to support specific activities such as research and development, innovation, sustainability, or employment.
In practice, grants usually reimburse a percentage of eligible costs, typically between 30 and 70 percent. This could include personnel hours, the purchase of equipment, consultancy fees, or travel expenses.
While grants can significantly reduce the cost of ambitious projects, they also come with responsibilities: clear project goals, structured reporting, and compliance with strict timelines.
2. Tax Credits: Reducing Your Tax Burden Through Innovation
Tax credits offer an indirect form of public support. Instead of receiving a direct payment, a company benefits through a reduction in taxes owed.
This type of funding becomes relevant when a business has taxable income or payroll tax obligations. A good example is the R&D tax credit — in the Netherlands, the WEBSO scheme helps companies reduce wage tax when developing new technologies or innovative products.
Tax credits are particularly valuable for profitable companies, but less so for early-stage startups that are not yet paying significant taxes. To make the most of them, timing and fiscal planning are essential.
3. Public Financing: Affordable Loans for Growth
Another important category of public funding is financing — loans provided or backed by government agencies or development banks.
These loans often come with lower interest rates, longer repayment terms, or more flexible collateral requirements than commercial bank loans. They are specifically designed to support companies that might otherwise struggle to obtain credit, especially startups and SMEs with limited track records or higher perceived risks.
Public financing can be a powerful tool to invest in innovation, expand into new markets, or scale operations. It is often combined with grants or guarantees to further lower overall financing costs.
4. Guarantees: Making Private Financing More Accessible
Guarantees are a less visible but equally valuable form of public support. In this case, a public institution promises to cover part of the losses if a borrower defaults on a loan.
By reducing the lender's risk, guarantees encourage banks to extend credit to companies that might otherwise be considered too risky. This makes private financing more accessible and affordable — particularly for younger or fast-growing businesses.
For many entrepreneurs, guarantees serve as a critical bridge between ambition and access to capital.
5. Putting It All Together
Public funding can significantly enhance, not replace, traditional financing methods. Each instrument has its own strengths and ideal use case:
- Grants fund specific projects and activities.
- Tax credits reduce your tax burden.
- Public loans offer affordable growth capital.
- Guarantees make it easier to access private financing.
Understanding how these mechanisms work — and how they can complement one another — enables smarter funding decisions and a more strategic approach to growth.
💡 Find Out What You're Eligible For
Navigating public funding can seem complex, but it doesn't have to be.
At Subsidies.io, we help entrepreneurs and business owners discover the most relevant grants, tax credits, and financing opportunities — tailored to their business activities, internship, and goals.
Start your free Subsidy Scan today and uncover the opportunities your business may be missing.
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