An interest rate subsidy, also referred to as interest bonification, does not cover the investment itself but part of the interest cost of the loan financing the investment. The recipient takes out a standard commercial or subsidised loan, and the public source subsequently reimburses an agreed percentage of the interest or a fixed part of it over a set number of years. The advantage is lower administrative burden and the fact that the support is spread out over time instead of being a one-off contribution. The value of this advantage is again calculated as state aid through the gross grant equivalent. The model is used in support for housing, agriculture and investments by small businesses. For a company, the decisive factor is comparing the total interest savings with the cost of meeting the conditions, since for short loans the effect tends to be small.
See also: Combination of a grant and a loan, Aid intensity, Repayable financial assistance.
