Starting a business with a loan – how a successful start should be prepared | Business loan

In the beginning was the idea. This is what Microsoft, Apple and the quick cleaning around the corner have in common. But the second step is always the same: if you want to implement your idea, you have to finance it. Fortunately, there are almost as many financing concepts as start-up ideas. Which of these suits you best and which steps you need to take to ensure that the financing is successful can be found here. More information at freedomtoons.org

From the idea to your own company

From the idea to your own company

Every start-up starts with the business plan.

He is the figurehead of the idea in the financing phase and the guideline of the entrepreneur for the first years. Learn how to set up a meaningful business plan in the next section.

With the finished business plan in your pocket, you start looking for your startup capital. There are basically two options: loans or participations. You will learn which design options are available and in which constellations they make sense in the sections “The start credit” and “Other forms of jump start”.

As your business overcomes the start-up phase and begins to generate profits, new ways of raising capital open up for growth.

In each of the above phases, founders can access numerous grant programs and government grants. We have compiled the most important ones for you in the last section “Promotions in view”.

The business plan

The business plan

A good business plan is both the company’s bid portfolio for investors and the structured summary of all the thoughts the founder has made so far. It pays to invest time and consider the preparation of the business plan as a planning phase. The aspects mentioned below are also the essential planning steps that you should go through before setting up a business.

The following basic rule applies to the division of work into the phases before and after the loan has been approved: Everything you can do without spending a lot of money should be done in advance and documented in the business plan. In this way you will prove initiative and collect positive points in the financing discussion. This category usually includes obtaining permits, making registrations, conducting market analysis and consulting experts. Everything else should only be tackled once the financing has been clarified. As a result, you do not capitalize on your equity and allow it to fully participate in the credit negotiations.

You should divide the business plan as follows:

  1. Summary of the most important facts
  2. Presentation of the founder person (s)
  3. Presentation of the product
  4. Presentation of the planned corporate structure (including the legal form)
  5. Market Overview
  6. marketing
  7. financial planning
  8. Opportunities and risks of the project

When creating and presenting the business plan, two things are important: honesty and professional competence. Address risks and vulnerabilities openly. Do not paint too rosy a picture in financial planning. Investors know that every start-up has weak points and expect entrepreneurs to disclose them on their own. Pluses do not exist here for the apparent freedom from risks, but for the strategies you present for dealing with them. Only then will the project become tangible. The same applies to the personal strengths and weaknesses of the founders.

Especially in the areas of market overview, marketing and financial planning, you must demonstrate expertise in business administration. If you are not a business administrator yourself, it is best to consult an expert at this step.

The starting loan

With the business plan in your pocket, you start looking for the capital you need for a successful start-up phase. There are essentially four options for borrowing:

  • The loan from a house bank
  • The guarantee from a promotional bank
  • The microcredit
  • The online loan

The house bank loan

If you have equity or collateral such as real estate or savings, starting a home loan is a good choice. The interest rates are comparatively low and the settlement professional. The disadvantage: there are no pluses for start-up readiness.

The same basic requirements apply to start-up loans as to all house bank loans. You must secure the loan or teach a guarantor. Unlike real estate loans, where typically the purchased property is secured by a mortgage, the bank can not accept your newly formed company as collateral.

The guarantee from a promotional bank

This gap can close a development bank. Promotional banks are public corporations that are to implement economic policy objectives with funds from the federal states, the federal government and the European Union. You can find out which promotional bank is responsible for you from the Federal Association of Public Banks (VOEB). A promotional bank examines the business idea of ​​the founders and issues a guarantee for up to 80% of the required loan amount.

With the guarantee, the founder can now apply for a loan from a house bank. The house bank bears only the default risk for a small part of the loan amount and the founder can assert that a development bank considers his business model to be promising. The promotional bank itself makes much lower demands on the guarantee than the bank would ask for a loan, because it only has to pay off the capital in the event of bankruptcy. In this way, even founders with little or no collateral get a loan.

The microcredit

Microcredits are loans in the amount of up to 25,000 €. The loan can be provided from the microcredit fund Germany or from a promotional bank.

The micro-credit fund Germany consists of funds from the federal budget and the European Union and is managed by the SDG bank. The loan is not requested directly from the SDG bank, but from a local microcredit institution. The institute accepts all documents, checks the application and, if accepted, forwards it to SDG.

In addition to the above guarantees, the development banks also provide microcredits directly. The decision between SDG Bank and promotional bank should be made on a case-by-case basis on better terms. Incidentally, promotional banks often offer technical support and networking events that are not available at SDG.

The online loan

Online loans are worthwhile for founders who require a quick and uncomplicated processing of smaller loan amounts. The conditions differ greatly between the platforms and should be compared on a case-by-case basis. On some platforms, the credit is granted according to the crowdfunding principle by other users. Here a convincing project description can compensate for other factors such as lack of collateral or a bad credit bureau rating.

3 rules for the first conversation with the bank

3 rules for the first conversation with the bank

If you have opted for a loan, the personal conversation with the bank prepares the way for the acceptance and terms of your loan application. We recommend start-ups to adhere to the following three rules:

  • Be professional and at eye level!
  • Be honest!
  • Bring as many documents as you can!

The professional appearance is first and foremost the external appearance. Choose a business outfit that makes you feel good. A good rule of thumb is to dress a little more chic than in your professional life. In conversation, you should act as an equal business partner.

You are not a petitioner – the bank invests in your business model in order to earn money. A good impression also gives a good preparation: You should know exactly how much money you need and what conditions you can imagine. Bring a finished business plan if possible.

Honesty is important to building a bond of trust. The chances of success of deception over important facts are low in the long run anyway. Borrowers should always keep in mind that the business relationship with the bank begins at the conclusion of the loan agreement and lasts several years. An unexpected termination by the bank can ruin an otherwise well-positioned company.

Apart from the deception over facts also a beautiful speech or downplaying the weaknesses and risks of the project is not recommended. Lenders are professionals in their field of business and often know the risks and weaknesses of start-ups better than the founders themselves. Therefore, by openly addressing the problems, one gets a free trust advantage.

Confidence-building also acts voluntarily brought documents. In case of doubt, you will take all documents related to the foundation in a separate folder. It also does not hurt to inquire in advance at the bank what documents are needed. In any case, bring along and present the following documents:

  • credit bureau information
  • proof of income
  • Balance sheets (if available)
  • Complete asset statement
  • Proof of all eligible collateral
  • Business plan (if available)

Other forms of jump start

Other forms of jump start

In addition to the classic loan, the free market economy offers various other forms of capital acquisition. All have in common that they attach great importance to a promising business model.

Incubators and accelerators are conceptually not clearly separated. Both have in common that they get involved from the start-up phase. In addition, both usually acquire shares in the company and thus provide for liquidity. The incubator accompanies the new company in the start-up phase with its own team of experts, who take on administrative and advisory tasks in the start-up.

In addition, office space is often provided and contacts arranged. If the company succeeds, the incubator retreats. The accelerator usually gives the founders more freedom, but also provides office space and a “mentor”. The focus here is on infrastructure support. Accelerators often aim for a takeover after the start phase or at least maintaining very close business relationships.

Business Angels and Venture Capital companies invest in an already established company. Business angels are typically high-net-worth individuals with industry experience who acquire shares in the early stages of a start-up and more or less actively engage themselves in the company for a few years. They invest about € 100,000 per company.

Venture capital providers are often corporations that invest some of their risk assets in smaller companies. Unlike business angels, they do not invest until the company has proven itself on the market (“proof of concept” principle) and do not bring in their own know-how. The investment sum is open at the top.

Promotions in view: founders receive these services free of charge

Promotions in view: founders receive these services free of charge

For founders in the start-up phase, every penny counts. Below we have compiled the most important free services you can rely on.

You can obtain economic advice either through the responsible ComBank of Crafts. The consultations are free of charge and also provide a quick connection to the industry. Anyone who hires an independent management consultant can have their fee subsidized by intrasavings (Kreditanstalt für Wiederaufbau). The subsidy must be approved by the relevant industry association and covers up to 90% of the costs, depending on the individual case.

The EXIST Garu promotes start-ups from the academic environment. Start-ups can receive funding if one of the founders is still studying or has completed their studies a maximum of 5 years ago. Prerequisite is an innovative science-based project with high economic potential for success.

Unemployed people can receive state subsidies if they plan to start a new business out of unemployment. Beneficiaries of unemployment benefit I receive a continuation of the unemployment benefit for up to 6 months if the chances of success are good. Residual IV recipients receive an initial payment, grants of up to € 5,000 and a loan if the Job Center considers the grant to be the best way to free the applicant from unemployment.

In addition to receiving financial support, it is advisable to seek contact with local start-up initiatives and networking events. Funding and financial benefits are sometimes available here, but in particular offers the opportunity for sharing experience and free advertising.