Where does the money come from? 
The purpose of financial planning for you is to establish your capital requirements. Here, you have two questions to consider: How does financing work and where does the money come from? The possible answers to these can vary considerably: Equity comes from your own pocket, initial sales or loan capital in the form of bank or promotional loans. In certain cases, you can even opt for venture capital, state-run grant programmes or even a crowd-funding campaign. Generally speaking, it makes sense to have a combination of different financing types. 

Equity – financing with your own resources

If you have savings that you use while starting up your business, these take on an essential role as equity in your company. On the one hand, you are in a flexible position with sufficient equity, making you ideally equipped for dealing with liquidity shortfalls and allowing you, for example, to offset unforeseen fluctuations, pre-finance orders and respond to changing market requirements. On the other hand, equity puts you in a better negotiating position with banks and savings banks (Sparkassen) whilst also improving your rating, which can result in lower interest rates. 

Bootstrapping – financing with initial takings 

Bootstrapping is the ideal type of financing for you if you can accommodate your company set-up and strategy within a very tight budget and with minimal resources.
By avoiding expenditures whilst at the same time increasing revenues, bootstrapping only manages to keep your company afloat with its cash flow. Bootstrapping is primarily advisable for setting up a company that only requires a little starting capital – also known as a low-budget model.

Credit financing from financial institutions

As in-house funds are rarely sufficient and equity financing is not suitable for every venture, you may need to top up the capital requirements with credit from the bank (also called loans). Depending what it is that needs to be financed, regular banks and savings banks offer various different lines of credit. 
Investment loans can be used to finance fixed assets for new, alternative or expansion investments and are guaranteed for the medium to long term. With capital loans, you can cover short-term financing requirements such as personnel costs or marketing expenses, and also pre-finance orders. 
In addition to demonstrating a promising concept, another decisive factor for banks and savings banks when it comes to granting credit is their ability to remain protected. To this end, they generally request standard bank collateral that they can fall back on in the event of a credit default. Examples of collateral include mortgages, chattel mortgages on machines and vehicles, or fixed deposits. If you do not have enough collateral available (to cover the amount of the loan), you can ask the Bürgschaftsbank NRW  to act as a guarantor.

Bank loans with public funding

Public funding options can also be included in the finance required to set up your company. Generally speaking, this is a grant for individuals in the form of loans with special conditions, guarantees or also subsidies. As far as these are concerned, it is always important to submit your application before starting your venture. It is only once you have submitted your application that financial and contractual obligations with regard to ordering goods and signing contracts or similar are covered and the business activities are registered. 
Please be aware that there are no legal claims to be made with regard to granting public funding.

Promotional loans

Promotional loans are the most common form of public funding for start-ups. For companies based in NRW, both NRW.BANK and the KfW Bankengruppe offer various different types of credit. The advantage of these generally centres on their favourable interest rates, lower capital requirements, long maturities, and a repayment-free start-up period for the first few months. Promotional loans are typically requested via regular banks and savings banks (commercial banks), with whom you can also set up your business account – also known as the local bank (or ‘house bank’ principle). It is only when the commercial bank is satisfied with the details of your venture but does not want to make you an offer without funding that it forwards the funding application to the promotional bank. This institution also checks the application and offers up the money if a positive decision is made. An exception to this can be found in the NRW.Bank micro-credit, which is offered for minor capital requirements of no more than 50,000 EUR, and can be requested directly from the NRW.BANK for a more direct route rather than having to go via a commercial bank. The funding is issued based on its intended purpose, which means the relevant proof (in the form of receipts, etc.) of the investment provided must be submitted to the bank retrospectively.


As a general rule, public loans are to be secured in line with standard banking practice just like bank loans. If the required level of collateral cannot be achieved through personal collateral, a guarantee can be requested from the Bürgschaftsbank NRW when setting up a company in NRW. 

Venture capital

Venture capital is an appropriate financing option for technology-oriented or innovative, fast-growing start-ups. In such cases, the risk of default is often either difficult to estimate or else clearly going to be high, with a particularly long time required to get to market. As a result, credit financing from financial institutions often fails to meet the risk management requirements. Venture capital increases the equity of a company through external financing.
Equity financing in the early/growth stages of innovative start-ups is frequently referred to as venture capital. Various equity options can come into play here depending on the investment phase and venture, not to mention the company profile. The terms and conditions of the investment form are determined by contract on an individual basis. 
The following investment options are commonly found in practice:
  • Direct (open) investment
    This is where the external equity provider participates in the company’s share capital (GmbH) or capital stock (AG) and thus becomes a co-shareholder. The investor generally sees a return at the end of the investment phase (after 3 to 7 years) upon selling its share (exit). As a result of having shares in the company, investors are also granted co-determination rights.
  • Silent partnerships and subordinated loans (mezzanine capital)
    Mezzanine financing is characterised by its subordinated status and high interest rates. Unlike for equity investment, companies do not need to surrender any information or control rights. In basically any legal form, the investor can participate as a silent partner as a result of their capital contribution. On account of their participation in profits, they become a creditor of the company but have no visible involvement in it as far as outsiders are concerned. In the case of a subordinated loan, the lender grants an interest-bearing loan to the company, for which neither collateral nor a declaration of resignation are required. This makes the loan of an equity nature without losing any shares.
  • Convertible loans (mezzanine investment form)
    These are subordinated loans than can be converted into equity at a later stage. In most cases, the interest is deferred and included in the loan amount, which is converted to equity at a later stage.
Where start-ups are concerned, venture capital can be split into different phases. The pre-seed phase frequently makes use of mezzanine investment forms or convertible loans from family, friends or business angels. 
In the seed and start-up phase (also known as ‘series A’) direct investments from business angels (private investors), incubators/accelerators and start-up-phase venture capital companies (VCs) are becoming increasingly popular.
In the growth stage and beyond (also known as the ‘expansion stage’, ‘later stage’ or ‘series B/C/D’), you can primarily expect to find direct investments from VCs or private equity providers.

Alternative: Funding-based investment companies

An alternative to private investors can be found in the form of publicly funded investments – such as those awarded by Kapitalbeteiligungsgesellschaft NRW (KBG), High-Tech Gründerfonds (HTGF) and the KfW-Coparion-Fonds.
HTGF supports technology companies in the start-up phase (up to a year after setting up) with a convertible loan. As for KBG and KfW, these award open investments. In such cases, a private investor who is involved on equal terms with at least half of the total is always required. 


As they do not have to be paid back, grants are the most popular form of funding; however, they are only awarded in special circumstances. Students and university graduates can apply to their universities for grants from the EXIST funding programme for technology-oriented and knowledge-based business start-ups, or else apply for the Gründungsstipendium NRW

Funding Provisions for International Settlement

The Cologne Soft Landing Programme is a funding instrument designed by KölnBusiness to support the international settlement of startups and companies.
The funding programme is intended to promote the settlement of international startups and companies in the area of Cologne.
The programme accepts applications from international startups and companies. Commercial rental costs, consultation fees, material costs and staffing costs can be funded. A maximum of 3,000 euros is awarded to each successful startup or company.

Crowd-funding and crowd-investing

You should check the extent to which new types of financing are suitable for your start-up. Crowd-funding allows you to access capital to finance your business idea via an interested online community, whilst also relying upon this same crowd as a sales channel or multiplier. 
Crowd-investing is another interesting prospect for start-ups with a particular emphasis on growth, and generally involves the crowd participating in a mezzanine investment in the company. Crowd investors stand to benefit from a share in the profits or through the profitable sale of the start-up further down the line (exit).