Supporting business start-ups: The 7 most important funding programmes for founders in Germany

By Daniel Schäfer, Business Consultant & Founder at X-Group

In short: Anyone starting a business in Germany must comply with numerous formalities — but is also entitled to a wide range of funding opportunities. From financing living expenses to investment support and free advisory funding: this article provides an overview of the seven most important programmes.

Contents of this article

1. Why financing your living expenses is crucial at the beginning
2. Start-up grant (Gründungszuschuss): Funding via the Employment Agency
3. Support for full-time start-ups through the Job Centre
4. Regional funding programmes from the federal states
5. Investment support: KfW StartGeld and state funding programmes
6. Advantages of subsidised loans compared to traditional bank loans
7. Advisory funding: AVGS and ESF funding
8. Conclusion: The right roadmap for your funding applications

1. Why financing your living expenses is crucial at the beginning

What you need most at the beginning of your self-employment is financing for your personal living expenses. The reason is simple: your business will rarely be able to cover its costs from the outset – and certainly will not generate enough surplus to support your living expenses. That is why the legislator has established several programmes that apply nationwide.

2. Start-up grant: Support from the Employment Agency

The first nationwide programme is the Start-up Grant (Gründungszuschuss). You are eligible if you have an ALG I (German unemployment benefit) notice and at least 150 days of entitlement remaining. To apply, you submit your business plan, financial plan, and an expert opinion – the latter can be prepared by us at X-Group, for example. This entitles you to 6 months of start-up grant plus an additional subsidy for your health insurance contributions of €300.

“You submit your business plan, financial plan, and the expert opinion and are entitled to 6 months of start-up grant.”

3. Support for full-time start-ups through the Jobcenter

The second nationwide option is support for your full-time start-up through the Jobcenter. The Jobcenter also supports you in achieving the end of your need for assistance: it continues to pay you ALG II, covers your health insurance and other costs, and additionally provides at least an integration allowance – for a period of 12 to 24 months.

4. Regional funding programmes of the federal states

The third component for your living expenses is regional funding programmes. Each federal state has specific programmes through which you can have your business supported – as a 100%, 80%, 60% or 50% grant. In Berlin, for example, there is the Gründerbonus Plus with grants of up to €50,000; Brandenburg and Baden-Württemberg each have their own regional grant programmes. These usually also include the managing director’s salary, from which you can cover your living expenses.

5. Investment support: KfW StartGeld and state funding programmes

The second area of funding concerns resources for your necessary investments or the establishment of a working capital reserve. The working capital reserve can also include provisions for personnel costs or a share of your living expenses – but essentially, it is intended to finance everything you need in terms of machinery, equipment, furnishings, furniture, and technology: up to a maximum of €80,000 in working capital.

While the KfW StartGeld (also known as ERP Start-up Loan) can be applied for nationwide, there are also state funding programmes: microloans or SME microfinancing, usually up to €50,000, as well as larger financing options – depending on the federal state, up to €5 million, in others only €3 million or €1.5 million. This is usually sufficient to finance larger projects such as a workshop, a production facility, or a larger business.

6. Advantages of subsidised loans compared to traditional bank loans

A subsidised loan offers several advantages:

• Lower interest rates – instead of a high interest rate of around 10% for risk projects, you often pay only half.
• Subsidies for guarantee costs, which are partially covered or subsidised.
• Repayment-free periods, which give you financial flexibility at the start.

The biggest advantage: As a new founder, you can obtain a larger amount of financing at all – regular commercial banks usually only grant loans of this size once you can demonstrate at least three successful business years.

7. Advisory funding: AVGS and ESF funding

The third major funding component is Consulting funding. Institutions such as the Employment Agency, Job Centre, State Bank or KfW all require a plausible business plan and financial plan. If you are starting your own business for the first time, you have to describe a journey you have not yet experienced yourself – without experience, this is a real gamble, which can take three times as long on your own and often contains numerous mistakes that frequently lead to rejection.

This is why there are nationwide advisory cost funding programmes:

• The Activation and Placement Voucher (AVGS), which can cover 100% of pre-start-up coaching and advisory costs. The requirement is an active ALG I or ALG II notice – or that you are registered as seeking work at the Employment Agency, even without receiving benefits.
• If you are not entitled to AVGS or your caseworker does not issue it: the ESF funding via the Federal Office for Export Control, a European funding programme with grants covering 50 to 80% of advisory costs (typically 80% in the new federal states, otherwise 50%) – paid directly into your account.

8. Conclusion: The right roadmap for your funding applications

The biggest challenge with funding programmes is often to present a future you have not yet experienced yourself in such a way, in numbers and text, that a decision-maker you will never meet is convinced by it. This is exactly where experience, contacts, the right tools and templates, as well as knowledge of the internal approval guidelines of the respective programmes, are needed.

X-Group has been active in the market since 2002 and has supported many thousands of founder-entrepreneurs – from start-up to exit or company sale, through to succession and business acquisition.

Ready to clarify your funding options? In a free initial consultation, we will jointly analyse which funding programmes you are eligible for, which are suitable for you, and in which order you should apply: x-group.de/#kalender