How to apply for german government funding for startups
Requirements, typical mistakes and consequences under german law
Young startups in particular are increasingly faced with a multitude of funding options in Germany and the EU. For promising or technology-based innovations, there are often quite a few options to choose from for financing the startup.
In this context, it is important to keep an overview, to recognize, check and comply with german legal requirements and to use the funds according to the application after truthful funding. But step by step.
German Government funding - What types are there?
From the government side, there are various different types of funds that can be availed. Government funds are either tendered directly by the public sector or distributed through private "middlemen".
In particular, the following four types should be distinguished:
- Subsidies for german start-ups, e.g. assumption of living expenses in the start-up phase or subsidies for start-up consultancy services.
- Loans: Publicly subsidized loans usually have a long term and are repayment-free in the initial phase. Interest rates are significantly below those of the regular capital market.
- Guarantees: The provision of guarantees makes it easier to find a loan
- Equity and venture capital (e.g. convertible loans): More favorable conditions than private venture capital providers, e.g. High-Tech Gründerfonds.
Non-repayable subsidies are usually only granted for very specific projects. Particularly well known is, for example, the EXIST start-up grant for start-ups from universities and colleges for scientific purposes.
Loans and credits, on the other hand, are the predominant means in german practice. Of great importance, for example, are the so-called KfW loans, in which KfW assumes part of the default risk from the financing bank. The federal states also have investment banks that maintain subsidy programs to strengthen the regional economy. Incidentally, the EU also distributes EU subsidies.
Applying for funding in Germany: What do I have to consider?
When applying for funding, founders should check and pay attention to the following points in particular, step by step:
1. Will my project be funded by the program?
The first thing to do here is to read the guidelines and, if necessary, seek legal help to interpret the conditions. Does my project meet the conditions? Perhaps my project must have a scientific or university aspect? Can these conditions also be sufficiently substantiated and demonstrated? Legal criteria must be checked and fulfilled here.
2. Is the funding suitable for my project?
Not every funding program is suitable for every startup. Are the conditions compatible with my business plan? Can I, for example, repay loans in the allotted time? Am I willing to sell shares early? Or is such a high level of equity required that an additional loan needed for this would restrict me too much? Here it is important to take economic considerations into account and to plan ahead.
3. Do I have to comply with additional rules?
Again, a detailed reading of the grant program guidelines is necessary here. Sometimes certain restrictions apply to the project if the grant money is accepted. For example, it must be founded within a certain time, or a university driving force of the venture may only hold a certain number of shares in the company afterwards. Nothing can be said in a blanket way here. Read your guidelines thoroughly; if in doubt, ask the sponsors themselves or the lawyer you trust.
Errors in the application - what are the risks in german practice?
If you fill out the application incorrectly, you of course risk having the grant rejected in the first instance. But even if the grant is initially approved, there are consequences in the long run if the application is not filled out truthfully or the money is not used according to the application.
- What are the consequences if false information is provided in the application? Anyone who obtains funding by misrepresenting facts not only has to repay the funding, but also risks criminal prosecution for fraud or subsidy fraud. Anyone who has been asked to make a declaration in lieu of an oath can also be prosecuted for this if the declaration is incorrect. If the company has applied for the funds, however, consequences are not only directed against the company. Anyone who knowingly disregards his duties as a managing director risks personal criminal prosecution and a ban on managing directors for future undertakings. ? But even below the management level, assistants can be liable to prosecution.
- What is the threat of misuse of funds? Anyone who applies for funding for a specific purpose must also use it for that purpose. If he does not do so, the above applies - the information in the application may become untrue and there is a risk of prosecution for subsidy fraud or fraud. In addition, the wrong use can also result in criminal prosecution for breach of trust or, depending on the individual case, even for tax evasion.
The most important funding programs for startups in Germany
What government subsidies are available for startups? Here is a selection of the most important public funding programs for startups:
- Beratungsförderung des Bundes
- ERP-Kapital für Gründer
- Mein Mikrokredit
- Mikromezzaninfonds Deutschland
- ERP-Digitalisierungs- und Innovationskredit
- ERP-Mezzanine für Innovation
- Gemeinschaftsaufgabe „Verbesserung der regionalen Wirtschaftskultur“ (GRW)
In addition, the following important funding programs should also be mentioned for technology and knowledge-based startups:
- High Tech Gründerfonds
- INVEST – Zuschuss
- EXIST – Gründerstipendium
- EXIST – Forschungstransfer
- German Accelerator
- Deutsche Börse Venture Network
- Venture Dept
In addition, there are special funding programs for so-called green startups that promote sustainability or environmental protection: