Growth costs money — whether for new employees, internationalization, product development or digitization. But many entrepreneurs ask themselves:
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Which type of financing is right for my company anyway?

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The answer: There is no The one solution, but a selection of Financial instruments, which make sense depending on the business model, level of maturity and objectives. In this article, you'll learn what options are there — and what you should pay attention to.

1. Equity financing — capital against participation

This form is particularly suitable for startups and growth-oriented companies with a scalable model. Investors provide capital and receive company shares in return.

Typical variants:

• Business angels (early stages)
• Venture Capital (Series A/B)
• Family offices or strategic investors

Suitable for: Tech startups, digital companies, highly growth-driven business models
advantage: Strengthening the equity ratio, access to know-how
Disadvantage: Share dilution, say rights

2. Debt capital — classic credit models

Bank loans or promotional loans are still important building blocks — especially when it comes to investment-driven growth (e.g. machinery, warehouses, locations).

variants:

• investment credit
• Working capital loan
• KfW/ERP funding programs

Suitable for: SMEs with stable cash flow
advantage: No share tax, calculable interest
Disadvantage: repayment obligation, credit check

3. Mezzanine capital — the hybrid middle ground

Mezzanine financing combines the advantages of equity and debt capital: economic as equity, but often treated as debt capital in terms of balance sheet.

examples:

• subordinated loans
• silent investments
• convertible bonds

Suitable for: Companies with growth potential but limited equity base
advantage: Flexibility, no immediate share transfer
Disadvantage: Higher costs than traditional loans

4. Funding — underestimated levers

There are numerous public programs at federal, state and EU level that subsidize or finance growth projects at a reduced price.

examples:

• investment grants
• Innovation programs (e.g. ZIM, go-digital)
• SME-specific funding lines

Suitable for: Innovation projects, digitization, sustainability
advantage: Partially non-refundable
Disadvantage: Application costs, duration of approval

5. Reinvesting from cash flow — solid but limited

Although financing from current earnings (accumulation) is low-risk, it is usually not sufficient for larger growth plans.

Suitable for: Long-term oriented companies with good profitability
advantage: Independence, full control
Disadvantage: slower growth

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