Are you finally ready to turn your dream into reality and become self-employed? Many individuals with the same dream often face initial financial challenges when taking this significant step towards professional independence.
However, there are various start-up grants you apply for to potentially overcome these obstacles. Here, we will introduce you to the most important options you can consider.
Starting a business: A Definition
For many, setting up their own business is a tempting opportunity to finally bring their own visions and ideas to life and create their own personal success story. But how does one become a business founder? The answer is simple: You must first become self-employed, engaging in an occupation where you work in your own name for your own account. You are responsible for your own success, but you also bear all the risks.
As a self-employed professional who starts his own business, you don’t necessarily have to found a startup or a company and employ staff in order to be self-employed. You can also be a small business owner (called Kleinunternehmer in Germany), register a trade (Gewerbe) or become a freelancer. No matter which path to self-employment you choose: For every business start-up, you first need start-up capital. You can draw on various forms of funding.
KfW-Gründerkredit: state funding for your business start-up
The ERP start-up loan from the Kreditanstalt für Wiederaufbau (KfW), also known as the KfW start-up loan, is one of the state subsidies that are particularly popular with business founders. The reason: Unlike traditional bank loans, the conditions are significantly more favorable. This is reflected, for example, in the low interest rates and extended repayment periods. An particular advantage of the ERP start-up loan is the grace period, allowing the repayment to be postponed.
f you would like to take advantage of KfW funding for your business start-up, you can choose between two variants of the ERP start-up loan:
- ERP-Gründerkredit-StartGeld: financing amount up to EUR 125,000
- ERP-Gründerkredit-Universell: financing amount up to EUR 25 million
The ERP start-up loan-StartGeld is designed for smaller businesses, such as Kleinunternehmer (small business owners) or freelancers. For them, the high funding amount of the ERP start-up loan-Universell is generally uninteresting. The key conditions of StartGeld are as follows:
- Funding up to EUR 125,000, including up to EUR 50,000 for operating expenses
- From 3.81% effective annual interest rate
- KfW assumes 80% of the credit risk
- No equity capital required
- 100% of the loan amount is disbursed
- Accessible within nine months after approval
- Grace period: You only pay the interest, followed by equally high monthly installments
- Option for unscheduled repayment
- You are personally liable for repaying the loan
How to apply for the KfW-Gründerkredit
Whether you are already working as a freelancer, initially planning to become self-employed part-time, or need capital for your start-up in general, if you are looking for suitable funding for your business, the ERP start-up loan-StartGeld is a good option to realize your dream. To apply for this, you don’t need to approach KfW directly but instead your usual bank or another bank of your choice.
For your bank appointment, make sure to bring the following completed and well-prepared documents:
- Your CV
- The application for the ERP start-up loan StartGeld
- Business plan including profitability and liquidity plan for amounts over EUR 25,000
- Self-declaration
- Risk attachment A
- Risk attachment C
- De-Minimis declaration attachment
- Declaration of consent for requests for information, e.g. SCHUFA information
Afterward, the bank will prepare your documents and apply for the ERP start-up loan-StartGeld on your behalf at KfW, which will review your application and decide on funding for your start-up. If your application is approved, you will conclude the loan agreement with the respective bank and can embark on your journey to self-employment.
Support with setting up a business from the job centre
For many unemployed people, starting a business is a promising way to find their way back into working life. However, it is much more difficult for them to realise self-employment from unemployment. For this reason, unemployed people have the opportunity to have their business start-up subsidised by the job centre with the so-called Gründungszuschuss (start-up grant) or the Einstiegsgeld (start-up allowance).
Which of the two start-up grants can be claimed depends on whether you are receiving unemployment benefit 1 (ALG 1) or unemployment benefit 2 (ALG 2): In the case of ALG 1, there is the possibility to receive the Gründungszuschuss, in the case of ALG 2 to the Einstiegsgeld. The two benefits differ quite a bit in the way they support business start-ups.
Setting up a business: Support through the Gründungszuschuss
The Gründungszuschuss aims to ensure your liquidity during the starting phase from unemployment until you can generate sufficient income from your self-employment to cover your living expenses independently. The amount of the subsidy depends on your individual ALG I standard rate and is divided into two phases:
- In Phase 1, during the first six months, you receive your ALG I standard rate plus a flat-rate social security contribution of EUR 300.
- In Phase 2, the ALG I payment is discontinued, and for the following nine months, you only receive the social security contribution. However, this is only paid if you can prove your self-employed activity.
To receive the Gründungszuschuss for your self-employment from the job centre, you must submit the completed application, a business plan, and your CV with certificates and evidence of your professional qualifications during the application process. Additionally, you have to demonstrate the viability of your business idea. However, it’s important to note that if approved, your entitlement to ALG I decreases automatically with each passing day.
Setting up a business: Support through the Einstiegsgeld
Unlike the Gründungszuschuss, the amount of the Einstiegsgeld depends on your individual situation. Two things are considered for the assessment:
- Flat-rate assessment: Applicable to applicants classified as particularly eligible, such as long-term unemployed individuals. They receive a maximum of 75% of the ALG II standard rate, or a maximum of EUR 424 per month.
- Individual assessment: The subsidy amount is 50% of the ALG II standard rate, with the possibility of a 20% increase for long-term unemployment. The monthly maximum amount is also EUR 424.
If your Einstiegsgeld application is approved, you can claim it for a maximum of 24 months. The prerequisites are that you engage in self-employment for at least 15 hours per week as your main occupation and that your business idea is viable. Additionally, the following documents are required:
- Business plan with financial planning
- Proof of your expertise and necessary qualifications for your activity
- Evidence of personal suitability
Professional consultation for starters is also supported
In addition to financial support in the form of a start-up loan or grants from the job centre, professional consultation for starting a business is also subsidised. As part of this coaching, you will be supported by a business start-up consultant, for example, in optimising your business idea, creating a business plan and calculations and clarifying important questions about financing and funding. However, the amount of funding varies depending on the federal state: while Bavaria reimburses up to 70% of the coaching costs, for example, Saxony-Anhalt reimburses up to 90%.
Advice on setting up a business from the Cchamber of industry and commerce (IHK) is one of many other options for obtaining detailed advice before becoming self-employed in order to successfully launch your own business. The programmes differ from state to state: in North Rhine-Westphalia, for example, business founders can take part in the “NRW Business Advice Programme”, while the Bavarian branches of the IHK offer “Pre-start-up and Succession Coaching”. There are also differences in the level of funding here.
Founders consulting: Support for business know-how
The IHK also works with the federal office of economics and export control (BAFA), which subsidises advice for small and medium-sized companies with its programme for the promotion of entrepreneurial know-how. Provided your company is no more than two years old, you can take advantage of the programme shortly after setting up your business and receive advice on economic, financial, personnel and organisational issues.
Depending on the type of consulting or a standard consulting fee of 4,000 euros for the coach, you will receive a 50% subsidy. If you want to claim these grants after setting up your business in order to receive consulting, you must submit the application online via the BAFA application platform. Please note that for commercial activities, the date of business registration counts as the date of founding. For freelancers, the date of registration with the tax office is decisive.
