KfW funding
Particularly suitable for young entrepreneurs, there is the possibility of taking out loans from the Reconstruction Loan Corporation (KfW). These are subsidized and, according to Christian Hadan, lawyer and specialist in commercial and corporate law at “SBS Legal”, are cheaper than loans that are taken out at a bank. In his article for the specialist website “gi Geldinstitute” he notes: “These loans have the advantage that they have significantly lower interest rates than ordinary bank loans. They also offer repayment-free start-up years and can sometimes even be taken out without equity.” For example, an entry fee of up to 125,000 euros can be requested from the KfW, which bears interest at a rate of 1.21 to 2.82 percent. The same range for the interest rate applies when drawing foundation capital of up to 500,000 euros. The credit risk is partially or even fully assumed by KfW.
Advisory Funding
The start-up phase is often very risky, as young founders in particular still lack market experience and many factors have to be taken into account. Coaches and consultants can therefore be consulted for questions about starting your own business in order to increase the chances of success. Although these are often not completely free of charge, they are considered to be extremely useful and are therefore subsidized by the state. Regarding the remuneration of the consultants and the state funding, Hadan says: “However, the support varies from state to state and can amount to up to 90 percent of the consultant’s fee, depending on the initial situation.”
High-Tech Start-up Fund (HTGF)
Particularly suitable for young entrepreneurs in the field of technology, the HTGF supports founders in the high-risk initial phase of their self-employment with services of up to 600,000 euros. In return, the HTGF receives 15 percent of the company shares. The premise is: There is equity of less than 500,000 euros and the company is not older than three years. According to Hadan, the financial advantage lies in the particularly good networking of the HTGF and the opportunities that this offers. In addition to coaching, this also includes consulting options that the HTGF can arrange for the founders if necessary.
Mezzanine Financing
Mezzanine financing is suitable for young entrepreneurs, but also for those who want to start their business out of unemployment. This type of funding fund also supports people with a migration background and companies who want to set up their business around the areas of environment, care and social affairs. The aim of mezzanine financing is to strengthen the founders’ equity base by providing support of up to EUR 50,000. According to Hadan, this type of start-up support is more expensive than other forms, but it is worthwhile when it comes to creating a basis for being able to obtain a business loan at all.
Exist start-up grant
The Exist start-up grant requires a specific catalog of services and is paid out to students, scientists and graduates of non-university research institutions – provided certain criteria are met. It supports innovative and economically promising projects in the field of technology. Material expenses as well as coaching and living expenses are funded with up to 3,000 euros per month – limited to a maximum of one year. It should be noted that the founding of a company may only be started once the funding has started. Hadan is positive about the benefits of the Exist start-up grant, saying, “It’s worth it on two counts: the financial help that can be very generous, and an enormous increase in knowledge.”
business angels
Private individuals who invest their assets in young companies are called business angels. In addition to money, they also provide their economic know-how and also help founders to network. The investment of one or more business angels, who receive company shares in return, usually takes place during the start-up phase. This method of financing became known through the TV show “Die Höhle der Löwen”, in which founders have to convince investors of their idea in order to receive capital. Hadan takes a critical view of this model: “Ideally, both win. The danger lies in giving away too much of a company for too little money.”
Invest support program of the Ministry of Economic Affairs
Startups that already exist and business angels who would like to participate in such can take advantage of the Invest funding program of the Ministry of Economics. In order to minimize the risk for investors and thus encourage them to support young companies, the Federal Ministry of Economics provides an acquisition grant for business angels. With a minimum investment amount of 10,000 euros in venture capital, you receive 20 percent of your investment back – tax-free. The investment sums amount to up to three million euros per calendar year when several business angels join forces. A business angel alone can provide capital of up to 500,000 euros.
Start-up grant from the employment office
Recipients of unemployment benefit (ALG I) who are striving to become self-employed can claim the start-up grant from the employment office to convert their unemployment into self-employment. The support is implemented in the form of continued payment of the ALG I amounts and also with grants of 300 euros to cover social security expenses. The period of validity is up to 15 months.
Entry fee (with ALG ll)
ALG ll or Hartz IV recipients can also apply for funding to become self-employed. The so-called entry fee is calculated individually depending on the situation. In advance, however, personal requirements must be met that qualify the respective founder to receive the funding. The amounts can be up to 5,000 euros. Loans for material goods, coaching and consulting services are also provided if required – all of these services are limited to a maximum of 24 months.
Inna Warkus / Editor finanzen.net
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