Anyone starting a new business or taking over a company as part of a business succession often needs start-up capital. According to figures from the KfW Startup Monitor 2019, just under a quarter of the approximately 547,000 new entrepreneurs in 2018 raised external capital for their ventures. At first glance, this percentage may seem low. However, a large number of these founders are solo entrepreneurs who require only a small amount of capital, which they can cover with their own funds. Business successors, on the other hand—who are also counted among new business founders—often need larger sums because they are taking over an already operating business.
Anyone who relies on outside capital must prepare thoroughly—regardless of whether it comes from their primary bank or as a grant for business successors. A well-developed business plan and a compelling presentation of the business venture are essential, as is determining the capital requirements as accurately as possible.
Low-interest subsidy loans help business successors
The traditional route to startup capital is to approach your primary bank to apply for a loan. However, new business owners in particular must pay relatively high interest rates for traditional bank loans—if they can even secure one. While business successors may have a slight advantage here, as they can demonstrate a company’s track record, they, too, should not overlook an alternative or supplementary source of funding: startup grants.
These are provided by state governments, the federal government, and the EU, among others. In most cases, they take the form of low-interest loans. The range of options is quite diverse; there are special funding programs not only in individual states but also for specific industries. For founders in the technology sector, who often require significant capital, there is, for example, the High-Tech Start-up Fund, where capital comes from the federal government as well as from private investors.
Tips and Search Tools for Startup Funding
Interested parties can search for specific offers in the Federal Ministry of Economics’ funding database. The DUB business exchange also offers tips on funding for business succession, as well as an overview and explanation of various funding programs.
A key component of business succession support is the ERP loans, which are made available through KfW. Applications are typically submitted through the entrepreneur’s primary bank. ERP stands for European Recovery Program, better known as the Marshall Plan. The ERP Special Fund, administered by the federal government, is primarily used today to support small and medium-sized enterprises. Three different types of startup loans (StartGeld, Universell, Kapital für Gründung) are available to meet various needs.
Guarantees and grants also support the transition to self-employment
Guarantees are another form of support for business succession. This is because new entrepreneurs cannot always provide the collateral typically required by banks for loans. The state guarantee banks therefore offer them guarantees. These can be applied for along with the loan through the primary bank, or, if one is not available, directly through the relevant guarantee bank.
