Financing and funding

Have you worked out how much capital you need for your business idea? Now you need to raise it. On the following pages, you can read about the difference between equity and borrowed capital – and how to find the right investor.

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Equity: the financial cornerstone

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Equity is the financial cornerstone of your business. It is composed of your personal wealth in the form of cash or saved money as well as objects such as machines or equipment you will use for your business. Even though equity is sometimes called own capital, the wealth of third parties can also be part of a company’s equity, for example if you borrow money from relatives.

As a rule, the more financial resources you own, the more independent you will be. Banks will use equity as a security. Ideally, equity should amount to at least 20 percent of the overall capital. Surveys have indicated that “insufficient securities” and “lack of equity” are the most important reasons for banks to turn down a credit application.

Borrowed capital: bank loans

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You can obtain loans from banks or Sparkassen (savings banks). The type of bank and loan you require will depend on how much money you would like to borrow and how long you will need it for.

In your financing plan you’ll have determined your requirements. As a rule, the longer the credit period and the higher the risk is deemed to be, the higher the interest will be.  That’s why it’s important to draw up a well thought out business plan to convince the bank of your plans. It is also important that you can demonstrate that you have sufficient equity.

Please note: Make sure to prepare well for the meeting with your bank advisor. Remember to take with you any important documents, which will help you make your case. In Germany, it is common for your bank advisor to discuss not only your qualifications but also your weaknesses. Be open about your entrepreneurial weaknesses and explain how you intend to overcome them. If you are realistic in assessing your strengths and weaknesses, you will come across as more authentic and trustworthy in front of your bank advisor and others.

Before your bank meeting, you might want to turn to an information centre for entrepreneurs.

Funding programmes

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Germany supports entrepreneurs with a number of funding programmes. If your business idea is convincing, you may obtain funding to help you start up your business, which will put you in a more secure position. Most of these funding programmes consist of public loans, which offer you better conditions with regard to their interest, loan periods and repayment terms. In order to apply for such funding, your place of residence and your company’s operations must be located in Germany.

An overview of public funding programmes is available on the Startup Portal.

Usually, you will need to apply for funding through your own bank. There, you will also be able to find out what the conditions for this type of funding are, for example whether your industry is eligible and how you need to demonstrate use of the funds you are given.  Don’t forget to bring the documents you require, such as your business plan and your CV.

" It makes a lot of sense to set up a business in Germany. You get a lot of support. "

Matan, Israel

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Further information on available funding for business startups is also available directly at KfW Bankengruppe. Use the product finder to find out about programmes matching your requirements.

At http://www.investitionsbank.info/ you will find a list of funding institutes in Germany. There, you can see which development banks there are in your German state, so that you can look for suitable funding programmes there.


Establishment of technological or knowledge-based businesses

If you are a scientist and would like to set up a technological business, you are likely to require a lot of capital. At the same time, your risks will be relatively high. That’s why financing such enterprises can be quite a challenge. There are special funding programmes for this area, including the EXIST support programme.

There are numerous ways of obtaining state funding, and it can be difficult to find the right programme for you. That’s why it may make sense to make use of the available support (German). Help is also available online: The Funding Database will guide you to the right programme for you.

Information on this portal

Money and banks: managing your finances

Information for your investors

Information on the World Wide Web

Exist – University-based business startups

Find out about available support for technological and knowledge-based startups (German, English)

BMWi GründerZeiten no. 13: Krisenmanagement (crisis management)

How to overcome a crisis The answer is available here (PDF) (German)

BMWi GründerZeiten no. 14: Sicherheiten - Bürgschaften – Rating (securities – guarantees – rating)

Important information on securities and guarantees for obtaining loans (PDF) (German)

BMWi Overview no. 14: Applying for loans

What documentation do you need? (English)

BMWi Overview no. 25: Discussions with your bank

Prepare yourself for your discussions with your bank (German, English)

BMWi GründerZeiten no. 28: Start-ups: Financing and venture capital

Information on grants, loans, guarantees, equity and expertise (PDF) (English)