Flexible financing

The eligibility criteria vary depending on the partner company. Generally, your business’ eligibility for financing will be determined by the following factors:

1. how long your company has been active,
2. how long you’ve had a Qonto business account,
3. your company’s location,
4. its revenue,
5. tax considerations.

Additional factors, such as your company’s growth potential or its proportion of equity, can increase your chances of obtaining financing. However, it's important to emphasize that Qonto cannot guarantee that you will receive financing, even if you meet all the criteria. Ultimately, the decision lies with the respective partner company to accept or reject your financing application.

Most companies need funds to strengthen their business growth or expand their operations. Among the primary financing methods for businesses are:

Equity

Equity financing is a key factor in establishing a company. To cover financial needs, company partners make capital contributions. For instance, this includes the minimum capital contribution of €1 when setting up a UG (Unternehmergesellschaft) or deposit of €25,000 when establishing a GmbH (Gesellschaft mit beschränkter Haftung). This capital can be provided either in cash or as in-kind contributions (for example machinery, land or other assets). When setting up a GmbH, at least 50% of the share capital (€12,500) must be paid in.

As a company grows, it may be necessary to increase equity. In this case, partners have various financing options:

1. capital increase through new contributions,
2. introduction of funds from the current account of a business partner,
3. raising external capital.

In Germany, there are also various government institutions and programs that can offer financial support to businesses. The main advantage of this financing method is that businesses are typically not obligated to repay the granted amounts.

Business Loans

Many firms prefer business loans as a source of financing. However, it's not always easy for entrepreneurs to convince banks to grant them a loan.

Banks always try to minimize the risk of business failure. Therefore, they often demand a significant contribution from the borrower as a deposit, usually between 10% and 50% of the borrowed amount. In addition to this personal contribution and a convincing business plan, banks require collateral from the borrowing company or its partners before granting a loan. These securities can include:

1. guarantees: there are private guarantees and citizens' associations in Germany,
2. a security over a portion of the company's capital,
3. other external financing means.

If you don't have sufficient funds and/or personal contributions to persuade banks to lend you money, there are other options. If you want to buy equipment or property, leasing can be a good alternative. For this, contact specialized leasing companies that buy these assets and then rent them to you. At the end of the leasing contract, you have three options:

1. Return the asset to the leasing company.

2. Extend the leasing contract.

3. Purchase the asset at a reduced price that takes into account the payments you’ve already made.

Factoring

Another solution for businesses wanting to improve their liquidity is invoice factoring. Through factoring, companies can ‘sell’ their outstanding invoices to a factoring company, which then takes over the collection of the invoiced sums. In addition to covering short-term financing needs, factoring protects the company from unpaid debts from its customers. The factoring company pays you the invoice amount minus a fee they retain for their services. This fee is usually between 0.5% and 5% and includes interest and factoring fees.

Crowdfunding

Crowdfunding is another external financing source that’s suitable for many small and medium-sized businesses. Choosing a crowdfunding platform allows companies to quickly raise money from private investors. Rather than being an alternative to bank credit, crowdfunding often complements a business loan.

If your business project has high growth potential, you can turn to venture capital firms or experienced private investors, known as business angels.

If you wish to start a new company, there are various financing options available to you, including bank loans. However, most banks typically require equity participation before they meet your financing needs.

If you can't provide your own capital contribution, there exist alternative sources of financing:

1. Look for partners, especially if your venture has high growth potential.
2. Consider applying for an unsecured loan from specialized organizations.
3. Seek financial support from friends or family members.
4. Initiate a crowdfunding campaign to generate investments from individuals.
5. Consider taking out a micro-loan. These are usually limited to €10,000 and are particularly suitable for low-risk projects like craft activities.

Other financing options include:

Bootstrapping (self-funding)

Advantages: full control, no debt/equity obligations, flexibility

Disadvantages: limited funds, personal risk, slow growth

Subsidized loans

Advantages: favorable interest rates, longer repayment terms

Disadvantages: lengthy application process, strict conditions

Venture Capital

Advantages: access to large sums, VC expertise

Disadvantages: loss of shares, pressure for high returns

Government subsidy programs and scholarships

Advantages: no equity loss, networking opportunities

Disadvantages: complex application processes, specific criteria

Incubators

Advantages: access to resources, intensive support

Disadvantages: possible share relinquishment, influence on management

Accelerators

Advantages: expert knowledge, access to investors, growth support

Disadvantages: time-consuming, possible share relinquishment

Startup competitions

Founders present ideas in front of a jury.

Rewards are often in the form of startup capital and/or guidance.

Despite the required securities and personal contributions, taking out a business loan offers several advantages:

Maintaining control over the business

When you approach a bank or another lender to finance your company, you retain full control of your business since the loan is not considered equity. By taking out a loan, you maintain complete control over the direction of your company, rather than relinquishing a degree of control of your business to third parties.

In addition to addressing your short-term financing needs, with a business loan you can finance any project within your company, such as:

1. investments in equipment or machinery,
2. increasing your inventory.

The main advantage of a loan over other sources of financing is that you can tailor the term of the financing to your needs. This way, you maintain a clear view of your repayments and cash flow.