My Microcredit - Microcredit Fund Germany

Program description

Self-employed persons, freelancers, microenterprises, small or medium-sized enterprises in all sectors can receive a microcredit under the Microcredit Fund (Mikrokreditfonds Deutschland) to finance start-ups and to strengthen and expand their business. They receive the funding as a loan. The amount of the loan is from EUR 1,000 to EUR 25,000.

The interest rate is (currently) 6.9 percent plus a closing fee of EUR 130. The loan term is up to 4 years.

The subsidy is awarded for

• Establishment of a new business/self-employment
• Support for the start-up phase (seed capital and start-up capital)
• Expansion of an existing business
• Strengthening the general activities of a company
• Implementation of new projects by a company
• Development of new markets by a company
• Support for new developments by an existing company

Microcredits may be used exclusively for entrepreneurial purposes. The funds may be used for investments in tangible and intangible fixed assets as well as in working capital. At the time the loan is granted, the investments planned with the funds must neither be physically completed nor fully implemented.

With the Microcredit Fund Germany, the Federal Ministry of Labor and Social Affairs (BMAS), in cooperation with the Federal Ministry for Economic Affairs and Climate Protection (BMWK), promotes a nationwide and low-threshold offer of loans up to 25,000 euros. Access to bank loans is structurally more difficult, especially for micro and small enterprises as well as young businesses and those run by women or people with a migration background - the aim is to give them access to dept capital.

The Microcredit Fund Germany is a guarantee fund created by the German government in 2010. The fund guarantees loans granted by a lending bank on the prior recommendation of an accredited microfinance institution. The improved access to debt capital is intended to strengthen the competitiveness of the supported enterprises and help secure the training and jobs associated with these enterprises.

Institution

Federal Ministry of Labor and Social Affairs (BMAS)

Funding period

The credit period is based on the company's financing requirements and the terms customary in the industry and may not exceed the maximum of 48 months (four years). Optional grace period: Upon recommendation of the microfinance institution, an initial grace period of six months may be granted. In this case, the maximum credit period is extended to 54 months.

Funding criteria

Natural persons as well as micro, small and medium-sized enterprises are eligible to apply.

Funding is subject to the following conditions:

• convincing personal credibility and a viable business model
• Borrowing requirements cannot be covered with own funds
• Collateralization of the microloan with a directly enforceable guarantee

Microloans can only be secured with directly enforceable guarantees. If the application is made by a partnership or corporation, a directly enforceable guarantee from all owners in the amount of the loan is obligatory. The inclusion of other securities is not possible.

The combination of support under the Microloan Fund Germany with financial support from other public funding programs of the European Union, the federal government and the federal states for the same project is excluded.

Additional conditions

The following are not supported

• services provided by management consultancies
• the redemption of current loans

The following are excluded from support

• companies that are in insolvency proceedings or meet the requirements for such proceedings
• companies in the process of being established and other unincorporated associations
• corporations under public law or cooperatives

An approved loan must be drawn down within three months of its approval by the lending bank. If the credit is not called within this period, the financing commitment shall cease to be valid. Six months after disbursement of the loan, proof of use must be provided to the supervising microfinance institution using the form provided and, if necessary, additional documents.

The microloans can be granted as annuity loans (amortizing loans with constant installments over the entire term). There may be a gradual increase in the loan amount (step loan). Even several loans together may not exceed the maximum loan amount per credit unit of 25,000 euros. A credit unit is determined as the sum of all microloans received by a borrower and guaranteed by a borrower. The granting of a further loan requires that the first loan has been repaid without any problems over a period of six months.

Unscheduled repayments of at least 100 euros are possible. A processing fee of 50 euros is charged for unscheduled repayments.

Expenses for (commercial)

Pre-financing/Liquidity, Investment costs, Patents/Intellectual property rights protection, Material costs, Operating expenses, Third-party services/orders, Development costs, Production costs, Marketing expenses

Funding focuses on

Start-up/Foundation & consolidation, Corporate growth, Strengthening competitiveness

Funding conditions (commercial)

surety bonds required, no house bank required

Stage of the company/self-employment

up to 1 year after founding, up to 3 years after founding, up to 5 years after founding, up to 7 years after founding, existing company, company succession

Company Sizes

solo self-employed/one-man business, micro enterprise, small enterprise, medium-sized enterprise

Application procedure/documents

Potential borrowers send their request to a microfinance institution of their choice. These are contractual partners of the fund that specialize in granting microloans and are the point of contact from the initial meeting to the application and repayment of the loan. The individual microfinance institutions have in part specific orientations and access criteria and provide individual information on the application procedure and required documents. Some of them also provide counseling and guidance in different languages.

General application procedure: In an initial assessment, the microfinance institution evaluates the project. If the result of the assessment is positive, the microfinance institution can make a recommendation to the lending bank. To this end, the microfinance institution sends the application data to the lending bank. The lending bank then makes the credit decision and, in the positive case, sends the credit agreement to the microfinance institution for signature by the applicants. After return, the lending bank disburses the loan directly to the applicants. The loan is also repaid by the borrowers directly to the loan account at the lending bank.

Jury/Decision-making body

The prerequisite for support is a recommendation to conclude a loan agreement by an accredited microfinance institution based on an assessment of the economic viability of the business and the sufficient creditworthiness of the applicant(s).

There is no entitlement to support under the Microcredit Fund Germany.

FAQ Url

Funded by

Funded by the European Union as part of the Union's response to the COVID-19 pandemic (REACT-EU).

Funding area

Germany