An incentive program for business financing is a great way to get some financial support for your business. These programs can come from either the federal government, individual states, or private institutions, and they are designed to provide financial support to companies during different stages of their development. The three primary stages of development for companies are the pre-seed stage, the start-up or seed period, and the growth period. Pre-seed stage refers to the initial development phase of a company where it is not yet generating revenue, and financial incentives can provide the necessary funding for market research, prototyping, and team building. 

The startup or seed period is when the company begins operations and requires funding for product development, marketing, and customer acquisition. 

During the growth period, the company has established itself in the market and needs financial incentives for expanding production, hiring additional staff, and entering new markets. 

The financial incentives are intended to serve several different purposes, which include: 

  1. Investments – incentives that are aimed at encouraging investment in a particular region, industry, or sector. 
  1. Working Capital – funding that is used to cover the day-to-day expenses of running a business or organization, such as paying employees or purchasing supplies. 
  1. Research & Development – incentives that are designed to encourage investment in research and development projects, to drive innovation and competitiveness. 
  1. Specific Purposes – incentives that are provided for very specific purposes, such as environmental sustainability or social welfare initiatives. 
  1. Personnel – incentives that are aimed at attracting or retaining highly skilled or specialized personnel, such as tax breaks or other financial rewards. 

Types of Financing and funding programs for Start-ups in Germany 

In Germany, there are over 2500 incentive programs for start-ups, which can be can be broadly classified into five categories: grants, promotional loans, guarantees, equity capital, and mezzanine capital. 

1. Grants: are financial support for start-ups and self-employment, based on specific criteria, that typically do not have to be repaid. Tax incentives can also be provided to encourage investment, such as allowing for depreciation of assets or reducing taxable income. 

2. Promotional loans: are a type of loan that offers favorable terms, such as lower interest rates, longer repayment periods, and sometimes no interest payments. These loans are provided by development banks, which are financial institutions that support projects that promote economic and social development. By providing promotional loans, development banks can encourage investment in projects that might not otherwise receive funding from private lenders. 

3. Guarantees: are a form of financial assistance, typically provided by a third party, often a public institution, to ensure the payment of a debt or loan. They can increase the borrower’s creditworthiness, making it more likely for them to be approved for a bank loan. The Association of German Guarantee Banks lists the guarantee banks responsible for each federal state. 

4. Equity or venture capital: This involves a financier providing a sum of money in exchange for shares in the company, making them a shareholder. The amount of shares received is based on the company’s valuation. This option is often used by start-up businesses or those in need of significant funding to grow.  

5. Mezzanine capital is a type of financing that combines elements of debt and equity. It can help a company raise funds for growth without giving up ownership or control. 

But which subsidies actually lead to success? The next is one of the most common and important ones for start-ups:  

1. Non-repayable grants for Start-ups and young businesses  

1.1. Consultation funding grant to set off your business 

To be eligible for financial grants, certain requirements must be met, such as having a professional business plan to convince investors of your business idea. Consulting services can provide guidance on how to apply for the subsidy, as well as help with business plan preparation and preparation for the application review process.  

These services are certainly chargeable, but luckily there are grants available to help cover these expenses. Depending on their personal circumstances and the state in which they are located, entrepreneurs may be eligible for funding to cover the cost of a start-up consulting service. This funding can cover up to 70% of the cost of the service. 

The most well-known of these include the following:  

Read more about these programs here.  

1.2. Business start-up grant from unemployment:  

One way start-ups can get funding is through a start-up grant provided by the Employment Agency. This grant helps people who were receiving ALG I (unemployment benefits) and want to start their own business after being unemployed. It’s meant to support them financially until their business earns enough income. The grant doesn’t need to be paid back, even if the company fails. The grant can last for 6 to 15 months, with the first 6 months based on the previous unemployment benefits plus an additional 300 EUR for social security. 

After the first 6 months, additional funding can be applied for up to 9 months, although it’s usually a flat rate of 300 EUR for social security without the unemployment benefit amount. Since 2023, the grant can be obtained even if the applicant is employable in the labor market, as long as all other requirements are met. 

You must provide a viability certificate or an expert opinion to prove the economic viability of your start-up. This is issued by reputable institutions such as trade chambers, start-up centers, or banks. To obtain this certificate, you must first submit a comprehensive business and financial plan so that the experts at these institutions can evaluate the potential of your business idea. 

You must also be registered as unemployed for at least one day, be under 65 years old, have at least 150 days of remaining unemployment benefit entitlement (exception is made if the founder has a disability), and show that your self-employment will be your main profession. You’ll also need to demonstrate your personal and professional suitability for self-employment, which may involve participating in training courses or other measures. 

1.3. GRW cash grants for investments in fixed assets 

This program is designed to promote regional economic development and job creation by providing financial assistance to businesses in the manufacturing and service industries. 

The GRW grant covers up to 45% of costs during the establishment phase, including capital expenditures (such as new buildings, equipment, or machinery) in the first three years and personnel costs of newly-created jobs in the first two years. 

The amount of funding available depends on your company’s size and location within Germany, and the maximum proportion of investment costs refunded varies by region and company size. Small, medium, and large enterprises may be eligible for different levels of funding. 

The regional policy aims to mitigate economic disadvantages in certain regions and promote equal standards of living throughout Germany. As a result, the regions with higher incentive rates are primarily located in Eastern Germany, with the highest rates found in border regions. 

To apply for a GRW cash grant, you will need to submit an application form, financing statement, business plan, and SME (Small and medium-sized enterprises) status verification (if applicable) to the state development bank in your federal state. It’s important to note that you must submit your application before your project begins, but the turnaround time is usually very quick. 

1.4. Start-up Scholarships for strong and innovative business ideas 

Most startup scholarships are aimed at founders from universities. Your startup should be based on a strong and innovative idea, often with a technological and/or scientific background. One of the most well-known nationwide scholarships is the EXIST Startup Grant. Additionally, the federal states offer startup scholarships with varying requirements and subsidy amounts 

2. Promotional loans for start-ups from KFW or regional investment banks 

The Kreditanstalt für Wiederaufbau (KFW) is one of the best-known institutions when it comes to financing start-ups. The KFW offers various funding programs for founders, which can be used for start-ups as well as for existing companies.  

Additionally, there are regional investment banks in each federal state that offer credit programs tailored to your needs. 

Regardless of whether you are seeking funding from the KfW or a regional investment bank, your first point of contact is usually your own bank, as they will review your application. This is known as the „house bank principle“. 

 Next, we will take a look at the most well-known programs offered by the KFW: 

2.1. The ERP Gründerkredit Startgeld for founders and young companies 

The program is specifically designed to support new entrepreneurs, including those who are self-employed (Freiberufler), business successors (Unternehmensnachfolger), young companies, and small businesses.  

The program allows for loans up to 125,000 euros, with up to 50,000 euros specifically allocated for operational expenses. It is possible to apply for the loan multiple times, up to the maximum amount of 125,000 euros. Entrepreneurs can receive 100% of the requested loan amount upon approval, and team founders can each apply for up to 125,000 euros individually. 

Repayment terms for the loan are flexible, with a period of interest-only payments followed by equal monthly payments of both interest and principal. Entrepreneurs can choose to repay the loan fully or partially ahead of schedule, though they will be required to pay a prepayment penalty. 

It’s important to note that borrowers are personally responsible for the repayment of the loan and will be held liable for any outstanding amounts. Repayments are made through the borrower’s bank. 

2.2. The ERP Gründerkredit Universell  

The ERP Gründerkredit Universell is a loan program that is designed for more extensive business projects and can offer up to 25 million euros in financing. Borrowers have a repayment period of up to 20 years, with the first 3 years being „tilgungsfrei“, which means that they are not required to make any principal repayments during this time. This loan program offers good interest rates and can be used for things like buying equipment, machinery, or anything you need to run your business. Companies with no more than 250 employees and a maximum of 50 million euros in annual sales or 43 million euros in total assets, including freelancers and small business owners, can apply for this loan program. 

3. Micro-mezzanine and micro credits as an alternative financing option for Start-ups 

Micro-mezzanine funds and microcredits are other interesting support instruments for business start-ups. They differ as follows: 

3.1. Micro-mezzanine Funds 

Mezzanine capital is a hybrid form of capital that combines elements of both equity and loan. Micro-mezzanine funds, which provide small-volume investments in startups, fall into this category. These funds are particularly appealing to young companies as they have less stringent requirements than traditional bank loans, with the ability to offer up to €50,000 in a combination of loan and equity. This type of financing can improve a company’s creditworthiness and create new opportunities for credit. It provides a flexible and longer-term financing solution, usually lasting between 3 and 10 years, without requiring collateral or a personal guarantee.

Another advantage is that micro-mezzanine funds offer not only financial support but also guidance and networking opportunities. They are structured as a subordinated loan or a silent partnership, which allows the investor to participate in the company’s success without having control over its management. In exchange for financing, the investor usually receives a percentage of the company’s future profits and an option to convert the loan into equity later on. To learn more about and submit an inquiry for a fund, visit Mikromezzaninfonds Deutschland. 

3.2. Features and advantages of microloans 

Microloans, on the other hand, are small loans that are particularly suitable for founders with low capital requirements. The advantage of microloans is that they are often available quickly, as they take little time to process, involve non-bureaucratic application procedures, and require a lower credit score than other types of loans. However, interest rates can be higher than for traditional loans. Microloans are generally limited to amounts between 1,000 and 20,000 euros and can therefore be ideally used to finance smaller purchases or as a bridging loan in the start-up phase. 

4. Business Angels as source of finance

In addition to government funding, there are also private investors who support founders. These include Business Angels, who invest their capital and experience, particularly in young companies. Business Angels are usually experienced entrepreneurs or managers who not only provide financial support but also valuable know-how and their network. They often look for promising business ideas that they believe in and potentially profitable companies. Therefore, it is particularly important to make a good impression and present a convincing concept. 

Finding the Right Business Angel 

To find a suitable Business Angel, founders can use networks such as the Federal Association of German Business Angels (BAND) or regional Business Angel networks. It is important to find a Business Angel who not only fits financially but also professionally and personally with the startup to ensure successful cooperation. 

5. Crowdfunding Models and how they work

Crowdfunding is an alternative financing method where multiple people invest in a project or company together. This form of financing has become particularly popular in recent years and can be an interesting option for startups looking for capital. 

There are various crowdfunding models, such as reward-based crowdfunding, where supporters purchase products or services in advance, or equity-based crowdfunding, where investors participate in the company and receive shares in the company capital in return. Crowdfunding is particularly suitable for innovative projects or products that appeal to a large number of people. The successful implementation of a crowdfunding campaign can not only generate financial resources but also increase the visibility of the startup and provide valuable feedback from the community. The advantage of crowdfunding is that even unusual or risky projects can be financed that may not have had a chance with banks or investors. 


Starting your own business can be made easier with the help of numerous funding opportunities offered by the state. KFW loans, micro-mezzanine funds, microloans, start-up grants, Business Angels, and crowdfunding are just some examples of them. To find the right funding option for your business, it’s important to filter through the various programs available based on criteria such as company size, region, business phase, age, funding purpose, amount of funding, type of funding, special industries, and target groups. Here you can do your own research on different incentive programs or you can seek help from consulting services to choose the best option for you. It’s important to make an informed decision because funding not only provides financial support but also helps build networks, connects you with valuable contacts, and provides valuable know-how.