Getting out of Unemployment with Self-Employment: The Gründungszuschuss
If you are facing unemployment in Germany or are right in the middle of it, you might be interested to know about a grant that the Agentur für Arbeit offers to job seekers on ALG1 unemployment benefits if they want to start a business in Germany. The idea of this “new business grant” (Gründungszuschuss) is to get people out of unemployment (ALG I) by encouraging them to become self-employed or to start a company. Naturally, this won’t suit everyone, so the Agentur für Arbeit is really interested in making sure that you’re the entrepreneurial type and that you have a viable idea before they approve your application.
It is difficult to find information about the Gründungszuschuss in English. Here are the basics.
How the Gründungszuschuss Works
Whether you intend to be a freelancer (Freiberufler) or self-employed (selbstständig) in a trade type of activity (Gewerbe), you can still apply. It is also possible to apply if you are forming a partnership under certain circumstances.
The first phase goes for six months and there’s an extension option for nine months after that. In the first phase, you’ll get your regular ALG I payments plus an extra 300 EUR flat fee. In the next nine months, if your application for an extension is successful, you continue to get the 300 EUR flat fee.
Are You Eligible to Apply?
You could be eligible to apply for this business grant if:
- You are currently receiving Arbeitslosengeld I, or you will be when you submit your application
- You still have at least a 150-day claim to Arbeitslosengeld I when you submit your application
- You haven’t been granted a Gründungszuschuss in the last 2 years
- You intend to work at least 15 hours a week (self-employment will therefore be your main occupation)
- You have had or will have difficulty finding traditional employment
- The establishment of your new business will end your period of unemployment
A side note: It’s OK if you have already been working on the side (nebenberuflich) as a self-employed person or freelancer while you were receiving ALGI, as long as it wasn’t your main occupation. (You didn’t exceed 15 hours a week).
You need:
- The application form (you can’t download it online! It has to come directly from your case worker at the Agentur für Arbeit)
- A strong business plan with a feasible concept
- Detailed financial documents such as a capital requirement plan, a revenue forecast and liquidity reserve. Information about your startup costs and ongoing expenses.
- A compelling reason why you are suited to self-employment
- A compelling reason why you need the grant (if you predict you’ll make tens of thousands within your first month of business, you probably don’t need it).
- CV, relevant qualifications and references
One thing that will really help you is a good relationship with your caseworker at the Agentur für Arbeit. They are the ones who give you the paperwork and the information, and they will make a recommendation once they’ve looked at your application. But regardless of whether your case worker is enthusiastic, dubious or downright hostile about your intention to start a business, they shouldn’t deny you the opportunity to apply if you’re eligible. So get the paperwork and get cracking.
Before you submit your application, you’ll have to get it checked for feasibility by a competent authority such as the chamber of commerce (IHK). You’ll also have to register your self-employment with the Finanzamt and maybe the Gewerbeamt (certain professions only).
If you want more detailed guidance, please let me know. Having received a Gründungszuschuss myself to start Red Tape Translation, I would be delighted to go through the paperwork with you in closer detail and give you lots of tips and anecdotal pearls of wisdom. I can also refer you on to top English speaking professionals who can help you hone your supporting documents and make sure they tick all the bureaucratic boxes.
Cheers and have a great weekend!
Kathleen Parker
Hi Kathleen,
I am right now about to apply for the Gründungszuschuss and am more than a bit confused. While googling for answers I found your great post and am wondering if you would have time to explain how and when I get an authority to look over my application? How do I know what authority to reach out to and should this be done just in the end of the process when everything else is already taken care of?
Thank you very much!!
Best,
Magdalena
Hi Magdalena, this document (in German) takes you through who can look over your application, in which order you have to do everything and which documents you must include. This requirement has changed slightly since I applied in 2012. Most people just go to the IHK (Chamber of Commerce).
Hi there,
I really enjoyed your article, thank you for posting it! I am looking to open my own fashion brand and just wondering if it is even eligible for this sort of grant? I recently moved from London to Berlin and really needed some financial support in order to give my full attention to the brand. Just wanted to ask a few questions… How good / formal was your business plan? ( because to be honest, I don’t know much about business plan writing); also, how easy do you think it is to get this grant? Anyways, I don’t want to bombard you with questions… Thank you very much for your attention. I’m looking forward to hearing form you.
Best wishes,
Daria
Hi Daria, my business plan was quite detailed with statistics and information about things like legal form, marketing plans, what my competition is doing, what I can do better, why self-employment is the right choice for me, and financials included profit forecasts for the first 12 months, capital and assets etc. If you want some help, book a coaching and I’d be very happy to go through it all with you. In any case, good luck! It’s quite a lot of paperwork but worth it in the end.
This is really nice, thanks for posting! One question though: how did you get the ball rolling? I wrote the arbeitsagentur with some questions about the process, and was told to make an appointment. I called to make an appointment, and the woman was downright hostile and told me to go speak to a handelskammer! I want to found a GmbH as I expect to have additional employees besides myself, so my basic question is if I can make the application AFTER having founded the GmbH, or does having the GmbH then disqualify me from applying (i.e., I should apply first, and then found the GmbH.) A simple question I think, but just getting in contact to ask it seems difficult 🙁
Hi Lewis!
You should apply for the Gründungszuschuss as your first step – you’re right, you need to have “not started yet” when you apply. Your case worker should offer you a consultation and then accept your application, even if she feels the need to discourage you. Definitely make an appointment with your case worker and mention when you make the appointment that you’d like a “Beratung” and that she should give you the forms to apply for the Gründungszuschuss. First.
PS you can have employees as a self-employed sole trader too.
Hi Kathleen,
Thanks for this nice post!
I’m currently under under notice after signing a mutual agreement with my employer. I worked here since September 2016 and my last day will be May 1st 2018.
I’m thinking about going Freelance then, and I’m currently working on the procedure to ask my freelance number.
Then, I will be super interested by the Gründungszuschuss! But in my situation, as I want to do Freelance providing consulting in Design/Research, do you think it’s possible? And, do I need then to wait for the unemployment, ask for Gründungszuschuss and finally get my freelance status?
Thanks a lot for your help!
Matthieu
Hi Matt, yes, you’re supposed to apply for the Gründungszuschuss before you make any moves, so when you next visit your case worker, mention that you’d like the application forms (you have to get them from your case worker specifically). Consulting in design/research might be possible – it depends on your qualifications and work experience in this area and how strong your business plan is.
If you’re a non-EU citizen, by the way, just make sure that your work permit isn’t tied to your job. If it is, that might stop you from being able to access services from the Agentur für Arbeit. But you didn’t mention your nationality, so maybe all that isn’t an issue! Good luck and let me know if you want a coaching. Cheers, Kathleen
Hi Kathleen,
I am just starting my own process with the Gründungszuschuss and was wondering if you might have a recommendation for a person that could go over my application and give me the needed stamp of approval. I was thinking it might be easiest to go the Steuerberater route. What would you recommend?
Thanks again for this lovely post, it’s been a huge help already!
All best,
Claudie
Hi Claudie, if you mean you want someone to check your application and give you tips before you send it away, then go see business consultant Christiane Schild, she speaks English and is great. If you’re happy with your plan and wish to submit it for the “Fachkundige Stellungnahme”, then either go to her, or the IHK or to a tax advisor or bank or your professional association in Germany. There are also plenty of other consulting agencies who will take care of it for you for around 40EUR, just google “fachkundige Stellungnahme Gründungszuschuss” and pick one you trust.
Hi Kathleen,
Feeling thankful for this post as I finish up my application for the Gründungszuschuss! (Also, used Red Tape for translating our wedding certificates a while back — good to be back on the site / reminded of your great service! Will keep you in mind for this future business.)
One perhaps obvious question — did you submit your entire business plan and finance plan in English, German or both? The IHK for example offers a lot of support for founders in English, and of course there are many businesses in Berlin with founders who are not fully competent in German. I am just wondering if it’s worth my time to translate everything word by word from English, or if only the application forms need to be in German.
Thanks!
SJ
Hi SJ, thanks for the lovely feedback! I submitted my plan in German, and my business advisor told me to. I know IHK offers welcome services for businesses with English-speaking founders etc., but a lot of people work at IHK and you have no idea who will be assessing your plan and what their standard of English is. You could always call the department of the IHK in advance and ask if they would accept it in English to save yourself some time and money, but most people I know who have applied get it translated professionally. Please send it to me if you want a quote for translation! Certification is definitely not necessary, so it won’t be as expensive as getting certificates done, etc. My colleague has done a fair few of them in his time. Cheers, KP.
Hi Kathleen, it’s great to find a bit of information about this in English, thank you very much. My question is this:
I’m on my 3th month of ALG and I’m almost done with the Gründungszuschuss process. My plan is to start my freelance activities the 1th of August and everything indicates that I will be able to do so. My problem is that meanwhile, I have been contacted by a company back in Spain (I’m a Spaniard) for a 7 month contract starting August.
My conundrum is whether I will be able to still apply to the Gründungszuschuss when I’m back from Spain in February 2019 assuming that I interrupt the process before it’s completed. My understanding is that the Gründungszuschuss is directly link with the ALG and that I will lose any right to claim the later after working for a period of time abroad.
I hope I explained myself properly, the whole situation is pretty confusing…
Thanks in advance!
Iosu
You might be right, there, Iosu, about invalidating your eligibility for the Gründungszuschuss. I would just ask your case worker directly, since this is a bit complex. Just say “I have been offered freelance work in Spain for 7 months, but if this nullifies my eligibility for the Gründungszuschuss I might not accept the contract.” Your case worker will know the exact rules for your situation. Then, based on their information, you can make the decision.
Hi Kathleen, I recently left my job as a software developer (after working for the company for four years) with the specific purpose of working on an idea full time. I aim to build a basic prototype and getting it into the hands of potential customer to try it out. Having gotten feedback from the customer, I would then decide to either continue with the idea or look for work. Today is officially my 3rd day as being unemployed. I’m interested in applying for grundungszuschuss, however I’m not sure exactly where to start – I’ve registered with the arbeitsagentur.de, however I’m not sure what process to start with. I don’t want to say that “I’m looking for employment” since I’m not. Do I register as “self-employed”?
Register as looking for employment – to get the Gründungszuschuss, you have to have been unemployed for at least one day. Cheers, Kathleen
Hi Kathleen,
My name is Ritik Goel, holding German PR. I am currently employed and getting my arbeitenloss benefits from December 2019 via Agentur fur arbeit. Now, If I start my freibufler or freelancing work, Will I get benefits further?. If yes then how to proceed. If you can help then let me know.
Hi Ritik. You. must mean you’re unemployed, if you are receiving arbeitslosengeld. Yes, it seems like you can probably apply for a Gründungszuschuss. I’d go get your application forms for the Gründungszuschuss (in the face of COVID-19, you can probably do this by phone) and then you can start preparing business plans, etc. Let me know if you’d like to set up a coaching for more info.
Hi Kathleen,
So happy I found your website and this article! Thank you for this great job, it’s very helpful in all these German documents I cannot really understand much. 🙂
I have a question, I will be unemployed starting August and will apply to receive Arbeitslosengeld. After this, I would also like to apply for a Gründungszuschuss because I am already a freelancer and I would like to grow my business. My question is, are you allowed to make extra money when/while you receive Arbeitslosengeld? Or is it okay if you made extra money before? (I was a freelancer in paralell with my job but I couldn’t make a living yet from my freelancing). If I could get the Gründungszuschuss I could boost my business and start making more, but for now it’s very hard.
Thank you so much in advance,
Ioana
Hi Ioana, it’s fine to have already been registered as a freelancer before you apply for the Gründungszuschuss as long as freelancing wasn’t your main activity, e.g. you worked fewer than 15 hours per week. If you’re just receiving Arbeitslosengeld but are NOT receiving a Gründungszuschuss, then you can only work 15 hours a week or fewer otherwise you’re no longer eligible for benefits. You can earn up to 165 EUR per month without affecting the amount of money you receive, but once you exceed 165/month, your benefit payment gets reduced. Now, once you get the Gründungszuschuss, there is no restriction on how many hours you work or what you can earn during the 6-month period that you are on it, and it won’t influence the amount you get paid by the AfA. That’s the huge advantage. Good luck!
Hi Kathleen,
Thank you so much for your answer! This is really good news, I haven’t been working more than 15 hours per week, actually my part-time job I had was 26 hours/week so I can even prove this. I am getting ready now to receive Arbeitslosengeld and will work hard to get the business plan done starting September. I will probably need help with it and would love to do it with you, I saw you have this on your website and I could book coaching sessions. I am afraid to go alone with this, I heard it’s hard to receive it.
I know you are also an expert with KSK, do you know if I can apply to enter KSK while I receive Arbetslosengeld? Or while I (hopefully) receive the Gründungszuschuss? I am a freelancer but also have an Etsy shop where I sell my art prints, I guess this is accepted in KSK…
Thank you so much in advance Kathleen!
Ioana
Also, what I actually wanted to ask is…if I was already registered as a freelancer, do you think my Gründungszuschuss could be rejected? Thank you so much!
Ioana
Not if your freelance work is a “Nebentätigkeit” (you work 15 hours or fewer per week).
Hi Kathleen,
Would I be eligible for Gründungszuschuss you think If I just want to be a freelancer working for other companies (I’m a videographer so would be making videos for clients)? Or does it only apply to people starting their own business?
Best,
Björn
It doesn’t matter which legal form you choose for your business – even just sole trader freelancer is still a business. That’s what I did. So go for it – apply!
Hi, thank you so much for this article, there is indeed so little information in English about it. I am myself thinking what to do, I might drop you an e-mail, but will write it down here to for others to see – maybe it will help someone.
I am still on my maternity leave, finishing it in two months and then there is no further job for me at the company. My concerns are about not only Gründungszuschuss itself, but also about entitlement to unemployment benefit and Gründungszuschuss right after finishing Elternzeit period. I already have a business idea (based on photography), that I would like to work on, but I really need to have a safe income (arbeitlosgeld) as I am providing also for the family. Knowing all that – I have numerous questions, like – can I apply for unemployment benefit before actually losing a job (when I know, I won’t work further)? And can I try to receive Gründungszuschuss right away too? If that’s something you could help me with, and then support along the process of applying for Gründungszuschuss, please let me know, as I am completelpely clueless about it.
Thank you!
Hi Kasia, yes I can answer those questions. And if more questions pop up along the way that I can’t answer, well, we can always call the Agentur together and ask. I’ll keep an eye out for a booking from you.