Financing options for start-ups and the self-employed

Those who want to set up their own business with a new business idea are faced with the task of financing the planned investments. Financing is sometimes the biggest problem for start-ups and young entrepreneurs in Germany. Obtaining financing from banks involves a great deal of effort, and a convincing business plan is only one component of the process. Good and thorough planning is indispensable in order to obtain a loan for the business idea.

The entrepreneurial spirit is still unbroken in Germany. More than half a million new businesses were started in 2014 alone. In 2016, over 380.000 Start-ups embarking on entrepreneurial independence. The start-ups not only stimulate competition in the German market, they also create new jobs. This is another reason why the federal government has an interest in supporting young companies. It offers subsidies in various forms. The free funding database is comprehensive, professional and always up-to-date.

Finding the right credits and loans

Young entrepreneurs venture into new, in some cases completely unfamiliar territory. High-tech start-up funds, guarantees, funding databases – there is a wide range to choose from. It is important to research exactly which options for financing a start-up are available in advance of founding a company.

Banks generally only grant start-up loans if potential borrowers are creditworthy and submit a meaningful business plan. This must include a market and competition analysis as well as a financing plan. Before an appointment with a local bank, you should prepare well – also in order to be able to give coherent answers to more detailed questions about the business concept. The self-confident presentation of the calculated figures is just as important as the convincing presentation of the business idea.

Experienced business or start-up consultants help to create such a business plan. If you want to work on it on your own, you can find helpful support at the Federal Ministry for Economic Affairs and Energy in the form of checklists, apps, overviews and sound information on the subject of business plans and more.

Take out loans online

Founders and young companies do not always need the very big cash injection. Many micro-enterprises get by with a four-digit or low five-digit amount, which serves them as start-up financing or bridging finance. Tip: A credit comparison is the quickest and easiest way to get an overview of the credit offers from the various financial institutions and service providers. Here you can see the monthly installments as well as some essential framework data of the loans at a glance.

The Internet has greatly increased the financing options for startups as well as the number of providers. There is a difference between short and long term business loans that can be granted. Existing enterprises or self-employed persons must fulfill completely different requirements, in order to receive the credits, as in the contribution ?firm credit/company credit: Ways to the favorable financing? to read is.

Old and new forms of financing

A classical promoter of existence founders is the credit institute for reconstruction (KfW). The KfW is considered the world's largest development bank and is under the legal supervision of the Federal Ministry of Finance. Germany's third-largest banking group offers start-ups in particular a wide range of development loans, as well as innovative forms of financing such as equity investments or subordinated capital. In 2012 alone, the KfW has supported medium-sized entrepreneurs with 17 billion euros.

Independent of reputable lenders, new forms of financing such as crowdfunding or crowdbanking have emerged. The term crowdfunding has only been used since 2011. The idea of providing capital to projects or product developments via Internet-based "swarm financing" emerged in the early 2000s. The capital providers are many individuals who support a business idea or an entrepreneurial project with – often very low – equity capital. Many startups have now been able to use it to finance themselves. The concept has success. The list of crowdfunding platforms on the Internet is now long and extensive.

Well secured work independently

Self-employed and freelancers need to protect themselves especially (© pixabay.com / Tumisum)

Self-employed people and freelancers need special protection (© pixabay.com / Tumisum)

Those who embark on new professional paths with their self-employment or start-up must also secure themselves anew socially. Self-employed and freelancers enjoy certain advantages, for example in terms of time planning. At the same time, they bear the entrepreneurial risk, which can have existence-threatening consequences if the business goes badly. This professional group would do well to take out individual insurance against these particular risks.

There are no blanket guidelines as to which insurance policies are the most suitable, but there are corresponding recommendations. The Berlin Chamber of Industry and Commerce has listed and discussed the most important forms of insurance in an informative guidebook. For the self-employed, it is advisable to deal with the contents and provide for basic coverage.

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