Below is a brief description of the financing options available to you. If you need further assistance, feel free to contact the Gründerlotse Bayern (External link) (The Founder's Guide Bavaria).
You can also find a detailed overview of all federal funding opportunities via the federal funding database (External link) .
Business angels are private investors who put their money into start-ups. They generally invest in the very early stages in fast-growing, innovative businesses and are a step down from conventional venture capital investors. Ideally, such funding would take the same shape as the subsequent venture capital investment, i.e. the business angel would buy shares in the business. No money is paid out until completion of the planned exit (by selling the start-up to another company, for example). If the value of the business has risen and the exit is successful, business angels sell their shares along with all other shareholders (founder(s), other investors). They then – hopefully – get back more than they invested. Given the enormous risk, they expect very high returns (in the double digits, at least).
BayStartUP is one of the most important ports of call for start-ups looking for capital. It supports start-ups with services ranging from business planning to building the business up to the first round of financing. The BayStartUP investors’ network includes some 300 active business angels, 100 institutional investors and public funding agencies, making it one of the largest of its kind in Germany and Europe. BayStartUP puts you in touch with specific suitable investors. while coaches give you and your team in-depth training for potential financing negotiations.
You will find a list of various business angel associations on the website of the German business angels network (Business Angels Netzwerk Deutschland, BAND).
Crowdfunding is obtained via a crowdfunding platform that encourages investments in projects, real estate or start-ups through social media channels. The platform specifies the contracts and advertises the relevant funding in your network in return for a fee. The capital is usually provided by a large number of people who normally invest micro or mini amounts in a coordinated manner, thus raising the required sum as a ‘crowd’.
Bundesverband Crowdfunding is the central interest group and network of commercial crowdfunding platforms in Germany.
You take out loans with your normal bank. You agree a fixed term with them whilst you pay back the borrowed money with interest. The amount you have to pay the bank therefore ultimately depends on the amount of the loan. You will need to be able to provide certain collateral (such as assets) to obtain a loan. As a company founder, you are always personally liable, which is also classified as collateral. The bank has no say in your business decisions, but as your lender, you should keep them updated on the performance of your business.
Learn more about development loans and risk mitigation programmes offered by LfA and KfW; they can reduce the default risk for a bank, or you as the borrower may be able to agree more advantageous terms and conditions than the standard market rate of interest.
The start-up loan (Startkredit) offered by LfA Förderbank Bayern is designed for people wanting to setup companies, or small and medium-sized businesses and/or freelancers who started business less than five years ago. As well as new companies, acquisitions and active stakes can also qualify for such subsidised loans. The start-up loan (Startkredit) is used to fund planned new full- or part-time businesses. You can use these loans to fund up to 100% of the eligible investments and the purchase of your first stock. The interest rate on these start-up loans is particularly low. Loans can run for up to 20 years, with interest rates fixed for up to 15 years. In the absence of sufficient collateral, LfA may grant liability exemptions to facilitate your access to loans. Alternatively, if the collateral is not sufficient, you can apply for a guarantee from LfA or Bürgschaftsbank Bayern GmbH. The same applies for loans in excess of 2 million euros.
If you are planning to, or have set up, a commercial enterprise or freelance business (full- or part-time), you should enquire about the LfA general purpose loan (LfA Universalkredit). You can use it to fund the acquisition of stock or to pay for the general operating materials you need. The interest charged on general purpose loans is at the lower end of the standard market scale. You can apply for these loans as an alternative or in addition to the start-up loan, even if you plan to acquire a company. Lending amounts range between 25,000 euros and 10 million euros. In the absence of sufficient collateral, LfA may grant liability exemptions to facilitate your access to loans. Alternatively, if the collateral is not sufficient, you can apply for a guarantee from LfA or Bürgschaftsbank Bayern GmbH. The same applies for loans in excess of 2 million euros.
The innovation loan 4.0 (LfA - Innovationskredit 4.0) is designed for start-ups, small and medium-sized businesses and freelancers. The loans can be used for digitalisation and innovation projects. If companies satisfy a particular innovation criterion (rapid growth, high R&D/innovation costs, innovation subsidies, venture capital), they may even qualify for funding without any specific projects planned. In addition to attractive interest rates, the innovation loan 4.0 also subsidises repayments to the tune of 1% of the borrowed amount. You can select borrowing and fixed interest terms of up to ten years. In the absence of sufficient collateral, LfA may grant liability exemptions to facilitate your access to loans. Alternatively, if the collateral is not sufficient, you can apply for a guarantee from LfA or Bürgschaftsbank Bayern GmbH. The same applies for loans in excess of 5 million euros.
With the ERP start-up loan – StartGeld offered by KfW (ERP-Gründerkredit - StartGeld), you can borrow as much as 100,000 euros to set up and operate your business. What makes it so special is that KfW assumes 80% of the default risk vis-à-vis your bank, which generally makes it easier for you to borrow. The ERP start-up loan – StartGeld is also suitable for people starting out in self-employment on a part-time basis for the time being.
With the ERP start-up capital loan offered by KfW (ERP-Kapital für Gründung), you can borrow as much as 500,000 euros for up to three years after setting up your business. You can partially fund as much as 50% of your entire investment needs, but must be able to provide at least 10% equity capital. No collateral is required. KfW does not demand the repayment of any principal for the first seven years.
The ERP SME loan is aimed at businesses with fewer than 250 employees and a maximum annual turnover of 50 million euros. Funding is provided for business start-ups, succession and participation, acquisitions such as plant and machinery, running costs, as well as materials and stocks of goods. You can receive a loan of up to 25 million euros, and as a business up to five years old you benefit from a particularly favourable interest rate.
This type of financing features elements of both equity capital (i.e. an investor shares in the value appreciation) but also third-party loans (borrowings). Mezzanine loans must be paid back within an agreed period, just like other borrowings. The cost of capital is usually a mixture of fixed interest payments that you agree, and a variable component, which might be based on earnings, for example. Generally, whoever is providing the capital has little or no say in how the business is run, i.e. you continue to make all company-related decisions on your own.
BayBG invests in people wanting to set up or acquire a business in Bavaria. The business must not have been set up or acquired more than five years previously. Generally, investments by BayBG take the form of a typical silent holding to co-fund investment and operating equipment needs. The investments run for ten years.
In the field of VC, BayBG Bayerische Beteiligungsgesellschaft acts as lead or co-investor in all sectors, funding growth- and tech-oriented start-ups. Your company needs to have generated its first revenue and be based on a scalable business model.
Venture capital investors (or venture capital lenders) invest in shares in your company – but only for a limited period. The money is intended to fund strong growth in the value of a business so that it can be sold to another company a couple of years later, earning a big return for all shareholders (founder(s) and investors). The bigger the growth of your start-up, the more an exit in the shape of an initial public offering (IPO) may be planned.
You do not repay any money while the venture capital lenders remain invested in your business. Venture capital lenders are co-shareholders and have – in some cases, extensive – rights to co-determination and control.
Bayern Kapital is a wholly-owned subsidiary of LfA Förderbank Bayern and only invests venture capital in companies that operate a site in Bavaria. The Bavarian seed fund (Seedfonds Bayern) generally provides investment capital, together with independent private investors, for up to two years after you have set up your company with the aim of funding the growth of your business.
The Bayern Kapital innovation fund (BKI) works with an independent private investor to provide investment capital to young Bavarian tech companies to co-fund innovation projects (operating equipment and investments) at various stages of a business’s development. As the recipient of the capital, you are free to choose the private investor.
As a co-investment partner, the Bavarian growth fund (Wachstumsfonds Bayern) operated by Bayern Kapital cooperates with one or more independent private investors to provide young, tech-oriented small and medium-sized enterprises (SMEs) in Bavaria with investment capital to fund growth. The fund gives innovative Bavarian start-ups access to more funding to enable them to tackle the next stage of growth – by venturing into new sales markets, for example.
BayBG Bayerische Beteiligungsgesellschaft acts as lead or co-investor in all sectors, funding growth- and tech-oriented start-ups. Your company needs to have generated its first revenue and be based on a scalable business model.
Coparion is a venture capital fund for young German tech companies offering innovative products or services and above-average growth potential. Coparion only invests together with private investors who commit at least the same sums to the financing rounds, and on the same terms and conditions (‘pari passu’). Investors are free to make their own investment decisions.
The high-tech start-up fund (High-Tech Gründerfonds) is an investment fund for tech start-ups in the early stages of up to three years since setup. Investments focus on start-ups demonstrating growth potential in the fields of software, media, internet, hardware, energy and automation, life sciences and chemicals.
A directory of various VC companies in Germany can be found in the list of Bundesverband Deutscher Kapitalbeteiligungsgesellschaften (BVK) members.
A subsidy is a public grant that generally does not have to be paid back. As such, subsidies are the cheapest way to fund a start-up. Subsidies are available for different fields at regional, national or international level. So it is worth taking a bit of time to learn more. Finding out more about possible subsidies early on is particularly crucial as some require applications to be filed prior to incorporating the business.
‘Start?Zuschuss!’ is a digitalisation subsidy programme for tech-oriented start-ups with an innovative business model that is particularly fit for the future. The programme targets businesses set up no more than two years previously. The subsidy is 36,000 euros and the business must be registered in Bavaria.
Digitalbonus helps SMEs in Bavaria with digital transformation. The subsidy programme focuses on digital products, processes and services, and IT security. The amount of subsidy is dictated by the size of your business; to apply, go to digitalbonus.bayern (External link) external Link: Digitalbonus Bayern where you will learn more about the procedure.
If you have a small business or trade based in Bavaria employing less than 50 people and have an innovative idea you want to realise, you can use the innovation voucher (Innovationsgutschein) to plan, develop or implement new or improved products, production processes or services. The eligible cost of the same must be no less than 4,000 euros and no more than 80,000 euros. Caution: since the subsidy amounts vary depending on the region in Bavaria, the business and the project in question, find out more about the programme first at Bayern Innovativ (External link) external Link: Innovationsgutschein.
The EXIST start-up grant (EXIST Gründungsstipendium) is aimed at academics, graduates and students who want to realise technologically innovative projects or develop innovative knowledge-based services that build on scientific lessons learned. To successfully apply for EXIST, you must have not yet set up your company – the grant programme run by Germany’s Federal Ministry for Economic Affairs and Energy (Bundesministerium für Wirtschaft und Energie, BMWi) is only available during the pre-start-up phase. Applications must be filed in cooperation with a university.
EXIST research transfer phase I (EXIST Forschungstransfer Phase I) is aimed at research teams at universities and non-university research facilities. Grants are given to execute development projects for verifying technical feasibility, to develop prototypes, to compile business plans and, finally, to set up the company. The aim is to enable the further development of research findings that could form the potential basis for setting up a business.
EXIST research transfer phase II (EXIST Forschungstranfer Phase 2) sponsors the performance of further development work, measures to enable you to start doing business, and the creation of the preconditions required to obtain external business funding. Tech-oriented small caps with paid-in capital of at least 25,000 euros can apply for phase II if they were set up during EXIST sponsorship phase I, subject to the key knowledge owners from phase I contributing their knowledge and labour to the new company and being represented by at least one of them on the management board. The founders working for the company must own well over 50% of the shares in the business.
BayTOU aims to promote start-ups in tech areas promising a bright future, and to strengthen newly established businesses. The programme organised by the Free State of Bavaria supports projects focusing on the experimental development of new products, processes and technical services relating to the establishment of tech-oriented businesses. The compilation of a technical concept for setting up a company (pre-development) is also eligible for sponsorship. Applications must be filed with the state of Bavaria, as organiser of the project.
The FLÜGGE programme is aimed at students, university graduates and university staff at state-owned Bavarian colleges who want to realise an innovative business idea focusing on production or services offering clearly recognisable market volumes through their own company. Applicants can be either teams or individuals. Implementation of the innovative business idea must be presented in an informative business plan – with milestones – that indicates the chances of success. Start-up projects must be supported by a university lecturer (‘Mentor’) as well as by experts with practical experience (‘Coaches’) and a start-up network. Projects must be at the pre-start-up phase, with establishment of a company planned during or at the end of the sponsorship period.
The Bavarian regional sponsorship programme sponsors investments in tangible or intangible fixed assets. It is designed especially for companies in economically deprived regions, in rural areas and areas hit particularly hard by unemployment problems. You have to submit your grant application to the local government for the district where you are planning to execute your project. Prior to submitting your application, you should get in touch to set up a consultation.
Start-up International supports innovative technology/digital-oriented start-ups that want to tap into new markets. The program is aimed at start-ups that were founded no more than five, or in exceptional cases eight, years ago. Support is provided for the development of an internationalization strategy and its implementation in the target country. The funding amounts to up to 23.000 Euros per target market.The funding is eligible for maximum two new target markets.
If you are unemployed and want to set up a business to go full-time self-employed, you can apply for a start-up grant (Gründungszuschuss) from the Jobcentre (Agentur für Arbeit). It can be used to cover your cost of living and social security during the first months while you build your business. Since there is no legal entitlement to the start-up grant, you should seek out the Jobcentre as early as possible for a consultation regarding the terms and conditions (and potential subsidy amount available to you individually). Tell your adviser that you want to set up your own business. Among the other things you should know, be aware that you must have a residual entitlement to at least 150 days of unemployment benefit and that you will need to provide an expert opinion (issued by a chamber of commerce, chamber of trade or bank, for example) on your business model.
The tax allowance is intended to specifically stimulate the research activities of small and medium-sized enterprises. Unrestricted and restricted taxpayers are eligible, provided they are not exempt from taxation. The tax subsidy relates to research and development projects in the categories of basic research, industrial research and experimental development that were started after January 1, 2020. The subsidy takes the form of a tax allowance and amounts to 25% for personnel costs incurred in research and development within the scope of in-house research and development. Research contracts are subsidized at 15%. The assessment basis for eligible expenses is a maximum of EUR 4,000,000 for eligible expenses incurred after June 30, 2020 and before July 01, 2026. Activities that can be attributed to pure product development are not eligible. Please check if you can get support from your consultant.