Financing a startup in Germany - finding state funding and support
If you have a great idea for the German market, or you’ve already set up your business and you’re in the difficult ’startup‘ phase, you are probably one of the majority of entrepreneurs who could do with a little (or a lot) of advice, assistance and cash. You may be in luck. In times of economic crisis and high unemployment, the German state makes it easier than ever to start your own business.
The Fatherland lends a hand
The state is especially friendly to job-seekers and keen to facilitate their effort to become independent of benefits. The Employment Agency offers startup grants, seminars and one-to-one advice from a business consultant; support programs to promote professional consultancies; and cheap loans from the KfW bank, owned by the Federal Republic and the Länder (federal states).
While the Employment Agency’s programmes are intended primarily for those trying to get off unemployment benefit, the federal government itself provides a range of additional support programmes for new business owners. Bear in mind that most government information available online is in German, with no obvious English version available. If you are setting up a business here, you will need a German speaker in your team.
In the regions, the Investment Bank of Berlin, the HEI initiative in Hamburg network and the KBG capital investment company for North Rhine-Westphalia are just a few examples of funding sources at the federal state level. For a complete list, see here.
Coaching for beginners
You may qualify for funding for coaching support. The criteria for each programme vary from state to state, so contact the organisations directly. Regional banks and chambers of commerce usually have all the necessary forms and information on their websites. You can also apply online as part of the Gründercoaching Deutschland (GCD) scheme, offered by the KfW bank.
Those who have already made the first steps and got their startup up and running can apply for business consultancy services via the GCD scheme, which offers generous subsidies (covering as much as 90 percent of your fees). Your application should be made with the local IHK (Chamber of Commerce) or Handwerkskammer (Chamber of Trade); every federal district has one. If you decide to consult a specialist independently, ensure that they are accredited by the KfW bank as this guarantees they are properly qualfiied and regulated.
If you meet all the necessary criteria, you can apply to the Employment Agency for a Gründungszuschuss (startup grant). This amounts to €300 plus whatever sum you are owed as a job-seeker and need not be repaid. You need to be registered unemployed and under 65. You also have to convince the agency that your business concept is viable and that you have the skills to manage the startup effectively. If you can subsequently demonstrate that you put the money to good use in the start-up phase, you may be granted an additional €300 a month for a six-month period.
For those not entitled to startup grants, startup loans are the next best option. Cheap loans are avaialble from both the central KfW and the regional state banks. For further research, the funding database is recommended.
Loan applications should be made before you start the company and need to include the following:
- Meaningful description of a business plan to explain the business idea
- The opinion of a competent authority on the sustainability of the business
- Evidence of knowledge and skills in the start-up team
- Proof of self-employed status.
Where appropriate, additional content is required:
- Confirmation of registration with the local Handwerkskammer (Chamber of Trade)
- Certificate for participation in a federally run Existenzgründerseminar (Startup Entrepreneurs Seminar)
About author Friedhelm Kremer:
Since 2005, Friedhelm Kremer has been a management consultant specialising in the fields of accounting, SOX and due diligence. Since 2009, he has worked at ACC Group advising clients on SMEs (small and medium enterprises) and startups.
He is a KfW Bankengruppe-accredited consultant for the Gründercoaching Deutschland scheme, which offers coaching support to new founders and startup entrepreneurs.