Loans and other Means of Financing for Start-ups

Start-up loans for financing your business idea

Most start-ups fail due to a lack of capital, so I exert a good deal of my effort as a business consultant helping my customers secure the necessary funding to launch their business.

Not only do most start-ups lack capital, many also lack the necessary securities banks like to see before they grant a loan.

Read on below for the most common, often state-subsidized start-up loans (for Saxony)!

The KfW StartGeld start-up loan up to 100,000 euro

This KfW product was a favorite in start-up financing for years. But those days are unfortunately over. Still, the program does boast the following:

• Low interest rates
• 80% liability exemption for KfW (you assume the full credit risk, but your house bank is released to encourage granting the loan)
• No own resources necessary
• 100,000 euro per start-up

Sounds great, right? Here is the catch:

• Of the 100,000 euro, only 30,000 can be used for equipment; the rest has to be invested
• Your house bank is still involved
• A house bank is usually not thrilled to have the KfW on board and prefer working with the Bürgschaftsbank Sachsen.

To sum it up: This loan is not the right solution for everyone and getting the loan via your house bank is becoming more difficult. Usually, the next solution is the most sensible for start-ups. The classic among start-up loans. Today, more out than in.

Here is a link to the program (in German): KfW StartGeld

A loan from your own bank with liability exemption for the surety bank Bürgschaftsbank Sachsen (BBS) up to 200,000 euro (potentially up to 2 million euro)

Today, this is the more frequent option. It is quicker and less complicated than the KfW solution and regional banks love it. It offers the following advantages:

• Up to 2 million euro loan amount (200,000 euro as the “small-sized” version)
• Only 10% of your own resources down
• Losses may be planned in the first year
• 80% liability exemption for BBS (you assume the full credit risk, but your house bank is released to encourage granting the loan)
• Preferred method of your house bank
• Quick application process so you get your money fast
• Lower risk for your bank means lower interest

But the disadvantages are clear:

• 10% of the total investment down (but there is plenty of leeway here so don’t worry)
• Slightly higher interest and processing fees than KfW
• 1% p.a. guarantee commission plus interest and 1.5% processing fee (of credit amount)

To sum it up: You have practically no securities and need 20,000 plus euro if this the path you decide to choose. Otherwise there are the following microloans. The home run among start-up loans in Saxony for various situations and projects.

Here is a link to the program (in German): BBS-Bürgschaft

The SAB Microloan

To sum it up: This microloan is a quick and easy solution if you need up to 20,000 euro. But you require 5,000 euro in you own resources or assets (but there is plenty of leeway here so don’t worry). The low interest rate of about 1% p.a. can’t be beat. The application process isn’t any less complicated than the other loan types discussed here, which is kind of disappointing when held against the disproportionate ratio of the relatively small loan itself to the share you must put down up front. One of the most popular start-up loans for small-scale projects.

Here is a link to the program (in German): SAB Microloan

Additional financial aid

In addition to the loans I have discussed here, there are also other ways to secure financial aid for your start-up. One more thing about loans: There are countless others, but the few I discussed here cover at least 95% of all the start-ups I work with. So I’ve saved us both the time of presenting products to you that we would never apply for together anyway. The following products are used by an increasing number of my clients:

Arbeitsagentur start-up loan

This great program allows you to receive ALG I in full for 6 months in addition to your company profit. The program also pays up to 300 euro more monthly for up to 15 months to help you afford health insurance!

Read more here: Arbeitsagentur support

 

Subsidized consulting

Since procuring any method of financing discussed here including the unemployment office Arbeitsagentur start-up loan without specialized business consultant is practically impossible, you are probably asking yourself how you are supposed to afford business consulting services. Since subsidies are often the only reason I can provide my clients with my professional services, it is especially important to me and I would like to emphasize:

Don’t worry! Any start-up can enjoy professional business start-up consulting at very little to even no costs! In the worst case scenario in Saxony (excluding the great Leipzig area), you will only need to pay 20% of invoiced services yourself.

Here are the 3 most popular subsidies for consulting that my clients use. (In most cases, we can complete the application and settlement process together in no time.)

AVGS vouchers

Anyone launching a business from unemployment (Arbeitsagentur start-up loan) can use this voucher for up to 60 hours to develop a business plan or learn about business management 101 under my expert guidance! The financial side of things is taken care of at the unemployment office. The problem is that few of my customers have ever received this voucher and in the event that you do, we would be required to spend 100% of our working time together, which is, especially for the process of developing a business plan, complete and utter bull malarkey (to use the technical term).

Link to the program (in German): AVGS voucher for start-up consulting services

BAFA subsidy

A very low-hassle program both for start-ups and existing companies. In this program, the Federal Office of Economic Affairs and Export Control “BAFA” subsidizes up to 80% of the fees (to a max. of 4,000 euro) for verified consultants in all of Saxony (except the greater Leipzig area)! This is the program I most often take advantage of with my clients because it is available to practically anyone, the application process is simple and it is significantly more flexible than other programs.

Link to the program (in German): BAFA program: “Förderung Unternehmerischen Knowhows”

SAB start-up consulting

Again, the Development Bank of Saxony SAB entices start-ups with a 100% subsidy … that is so full of catches it is hardly really any option for most start-ups:

• You are reimbursed for 100% of the consulting fee (up to 4,000 euro) but that means you have to advance the sum (plus VAT) and then wait … And wait and wait and wait for reimbursement.
• At least 50% of the working time must be spent together, making it more of a business coaching program.
• The consultant receives only 50% of his usual fee, making this the obvious favorite among professionals in the field.

Link to the program (in German): SAB start-up coaching and consulting