Financing: How do you properly invest in setting up a company?

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Every professional business plan contains the financing plan as an indispensable element . It is essentially based on the capital requirement plan . This takes into account the likely sources of money and the costs of financing. Creating the capital requirement plan is therefore step one in corporate financing. After that, it is important to ensure the right mix of equity, debt and subsidies for financing.

The capital requirement plan

Your own savings are usually not enough to finance a business start-up. Exceptions are freelancers or small business owners who do not have to invest much in real estate financing, machines or employees. Some franchise or license systems also enable partner companies to be set up with minimal start-up investments . What many founders overlook, however, is securing their own cost of living in the start-up phase.

Most businesses need capital to start up. With the borrowing, the entrepreneur enters into liabilities. Without a precise capital requirement planning, the risks cannot be assessed. If you run out of money in the start-up phase, there is a risk of bankruptcy. Bank loans do not give a bankrupt company. And the subsidy banks also decline, because their loans can only be applied for before they are founded. But not for emergency funding.

Calculate the capital requirement:

  • to finance the formal establishment or preparation of the business opening
  • to finance the start-up phase
  • to secure a livelihood
  • for (re-) financing borrowed capital such as credits and loans

How much is to be financed in the preparation of the business start-up ? The preparation costs include, for example, registration fees, approval costs, consultancy and notary fees. “First aid” and information on the calculation are often provided by the free initial consultations of the IHKs or HWKs. Founders in a franchise system can draw on the information and experience of the franchisor and other network partners.

The largest investments are likely to be made in financing the start-up phase . Real estate, land, machines, plants, cars, shop fitting or office equipment, for example, are to be financed as so-called fixed assets. It is also important to secure the financing of the initial current assets . This is where all ongoing operating expenses such as wages and salaries, purchasing goods and administrative costs arise. As a rule, the sales and revenues in the first four to six months are insufficient to cover the costs. The best lead times to be expected can be found out from industry colleagues or industry associations. A financial buffer must be kept ready in the event that business success comes later than expected.

However , there is also potential for savings in the start-up phase – for example through used equipment or office furnishings. There are leasing offers for vehicles or systems. In the long run, however, leasing is usually more expensive than buying. The purchase should therefore be considered, especially with a long lease term. Cooperations or purchasing groups can be formed with companies that purchase similar products or goods. Certain services can be outsourced inexpensively , for example to a secretarial or reception service. Call centers can take over the phone and arrange appointments.

Many founders overlook the financing of living expenses when planning  . If you only factor in the average monthly expenses, you are taking a risk. After all, illnesses, accidents or unscheduled repairs could result. This should be covered by the entrepreneur’s salary or the manager’s salary. A profitability forecast should be prepared to calculate these costs . Forms can be downloaded from the Internet, for example on the website of the German Ministry of Economic Affairs (BMWi) .

Borrowed money entails costs. Hence, the financing of the repayments must also be secured. In the financing plan, therefore, all installments for repayments and interest must be entered in the amount, term and due date. To ensure solvency, companies also need a liquidity plan . It includes future costs and income and helps to anticipate bottlenecks.

Where does the funding come from?

Companies are usually financed with a mix of equity , borrowed capital, subsidies and, if necessary, grants. Those who start a business out of unemployment can apply for a start -up grant for partial financing. This does not have to be repaid. The start-up advice can also be subsidized.

The founders either have to raise the equity themselves or acquire it from family and friends. Start-ups with large capital requirements mainly turn to business angels or investment companies. In addition, they can also attract investors through crowd investments, incubators and venture capital.

In addition to classic bank loans and online loans, promotional loans or microfinance can also be considered as outside capital . This almost inevitably leads to questions about the existing securities or possible guarantees. With crowd investing, a new form of corporate finance has emerged, which is increasingly helping to solve the financing problems of business start-ups. On special crowdfunding platforms, founders can present their business concepts to a large number of donors. Each individual usually only invests a small amount, but in the “bulk” they provide the necessary loan amount.

Public subsidies play an important role in financing business start-ups . They cannot be applied for directly from the funding institute, but only via the house bank. Due to the comparatively low margin or doubts about the business concept, house banks are sometimes reluctant to submit applications. Then it can make sense to involve a start-up advisor or change the bank.

To the pots: Funding in Germany, Austria and Switzerland

German and Austrian founders can apply for funding from the EU’s microfinance program. The Brussels authority offers loans of up to 25,000 euros for starting your own business. This primarily promotes business start-ups from unemployment. The best-known sources of money for founders in Germany are the KfW-Mittelstandsbank and the Landes- und Bürgschaftsbanken. For example, KfW grants the ERP start-up loan starting money of up to 100,000 euros. Equity is not necessary for this, but a professional business plan including detailed financing planning. The advantages of the development loans are low interest rates, long terms and repayment-free starting years.

In Austria , state funding programs are set up by institutions such as the AMS employment service , the AWS Austria Wirtschaftsservice and the Austrian Chamber of Commerce . Here too, up to 100,000 euros in government funding can be generated. The Austrian Federal Ministry of Labor (  BMASK) supports founders who are rejected by credit banks with microcredits.

In Switzerland , direct funding from the Confederation or the cantons to help start-ups is not common. To this end, government agencies are trying to optimize the framework conditions for founders. For example, by brokering cheap building plots or through tax breaks and waivers. The Federal Foundation for the Promotion of the Swiss Economy is an exception . If the founder makes his own financial commitment, it grants interest-free loans up to a maximum of 150,000 francs. But Swiss private banks also provide cheap start-up loans with good credit ratings.

Hello, I have been working as an investment consultant and author for more than 20 years. I love what I do and I have enriched everyone around me. A lot of money is not important, the main thing is how you use the money.

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