Can I apply for the Gründerstipendium NRW? When does the funding start? What is the "Verwendungsnachweis"? Some questions reach us again and again. Therefore, we have collected the most important information for you here.
The FAQ are divided into three parts: The first part answers questions about the requirements that must be fulfilled in order to apply for the Gründerstipendium NRW and gives insight into the process of application. The second part answers questions regarding the ongoing funding. For example, you can find notes on taxes, secondary employment or the receipt of other grants. The third part covers the role of start-up networks and the coach.
In the following, you find answers to frequently asked questions regarding the Gründerstipendium NRW. These concern aspects of application and funding requirements, questions that may occur during the funding process and questions on the role of the start-up networks.
In case of divergences to the German version of the FAQ, the latter is the relevant one.
Application and Funding Requirements
The Gründerstipendium NRW is a grant for business start-ups located in North-Rhine Westphalia. It can be used to fund founders who intend to become self-employed through the establishment of an innovative enterprise that has not yet been founded at the time of applying for the grant.
In addition, anyone who has founded an unlisted, innovative micro-enterprise can be funded if they have entered their micro-enterprise in the trade register or commercial register no more than twelve months before submitting their application to Project Management Jülich, if no distribution of profits has occurred yet, and if the enterprise was not founded as a result of a merger or division as described in Section 123 of the German Transformation Act (Umwandlungsgesetz, UmwG). Only founders who hold the position of an executive director in the relevant enterprise can be funded.
To be funded, founders must be at least 18 years of age, and have both their primary and registered places of residence in North-Rhine Westphalia.
A founder is an individual who has established an enterprise or company on their own or with others. Founders must have been involved in their start-up from no later than the formal incorporation stage. This can be established from the enterprise’s initial entry in the trade register or commercial register or from its initial articles of association.
Founders who at some point in the past have already received the Gründerstipendium NRW cannot be funded once again.
Yes, they are. A maximum of three applicants per team can be funded. The beneficiaries should have different, complementary areas of expertise (different qualifications generally), or different roles within the enterprise. One of the team’s founders must have specific know-how that they have used to make a substantial contribution to the development of the idea.
If an additional team member wishes to apply for the funding after the project has started, the following points must be taken into consideration:
- Only founders can be funded. This means that the additional team member must be able to prove that they were involved in the formal incorporation process, unless the enterprise has yet to be founded.
- To receive funding for an additional team member, the entire team must present their business idea to the jury again. In the event of a positive jury decision, the new team member can then apply for the Gründerstipendium NRW grant.
- The maximum number of beneficiaries per team is three and this figure may not be exceeded.
In owner-managed enterprises, the entrepreneurs operate the business and so are considered to be equivalent to managing directors.
What time frames must be taken into account when submitting an application for an enterprise that has already been founded?
If a micro-enterprise was already founded before the founder applied for funding, it must not have been entered in the trade or commercial register more than twelve months before the submission of the application to Project Management Jülich. It must be a newly founded enterprise. A notification of change of business details (Gewerbeummeldung) or a corporate transformation (Unternehmensumwandlung) does not equate to a newly founded enterprise. The date of application is the date on which the completed application documents are submitted to Project Management Jülich.
The newly founded enterprise must be a micro-enterprise.
According to the European Commission’s definition of small and medium-sized enterprises (SMEs), a micro-enterprise is an enterprise with fewer than ten employees and an annual turnover or annual balance sheet total not exceeding € 2 million. The Commission’s user guide on the definition of an SME is a useful resource here.
Any enterprise established by means of a merger or a division as described in Section 123 of the German Transformation Act (Umwandlungsgesetz, UmwG) is not eligible for funding. A merger involves the establishment of a stable, generally permanent relationship between two or more enterprises, most often established under corporate law. A merger therefore not only refers to the amalgamation of two enterprises, but also to cases where one enterprise can exercise decisive influence over another enterprise. Having decisive influence over an enterprise means having the ability to determine important decisions relating to business strategy or the composition of its executive bodies.
Section 123 of the UmwG considers dissolving, spinning off from, or splitting up an existing enterprise to be types of division. Division is understood to mean the various ways in which an enterprise acting as a legal entity can transfer its assets to a new or acquiring enterprise acting as a legal entity.
Listed enterprises are also ineligible for the funding.
Founders who have already established an innovative micro-enterprise can only be funded if no profits have yet been distributed or withdrawn from their enterprise. What needs to be taken into consideration here?
The date of application is decisive in determining whether or not profits have already been distributed or withdrawn.
Distribution of profits refers to payments made by the enterprise to its shareholders. Depending on the type of enterprise, these payments can have different names: Payments from public limited companies (Aktiengesellschaften, “AG” companies) to their shareholders are called dividends, while shareholders in companies with limited liability (Gesellschaft mit beschränkter Haftung, “GmbH” companies) receive profit distributions, and private entrepreneurs and partners in general partnership companies (offene Handelsgesellschaften, “oHG” companies) make withdrawals.
Generally, the entrepreneurs or owners of the enterprise do not decide on the appropriation of profits until after the annual profit or loss has been calculated. Since the application for the Gründerstipendium NRW grant must be submitted by the end of the enterprise’s first financial year, it can therefore be assumed that in the vast majority of cases, no profits have been yet distributed or withdrawn.
Unlike limited companies (GmbH, AG), sole traders draw on their enterprise’s capital, rather than paying themselves a salary. This enables them to support themselves insofar as their cash flow allows. Private withdrawals from cash or from a bank account do not affect the enterprise’s profit; they only affect the enterprise’s assets initially.
The grant provides funding to founders for the preparation, implementation, or further development of an innovative business idea. The purpose of the funding is to establish or further develop an enterprise that can then be entered in the trade register or commercial register. Start-up projects that cannot be entered in the trade register or commercial register are not eligible to receive funding. As a rule, freelancers who are not entered in the trade register or commercial register cannot be funded.
Associations can be entered in the commercial register if their business operations correspond to a commercial enterprise.
In these cases, to receive the Gründerstipendium NRW grant, founders must enter their business in the commercial register, or have plans to do so.
The Gründerstipendium NRW grant cannot be used to fund start-ups involving fishing and aquaculture, the primary production of agricultural products, or the processing and marketing of agricultural products.
When submitting an application for a business that has already been founded, who is considered a founder?
In the case of enterprises that have already been founded at the time of application, a maximum of three founders only will be funded. These founders must hold an executive role in the enterprise, or they must be general managers with statutory authority (“Prokurist”) with a voting share in the enterprise. The founders must be named either in the enterprise’s initial entry in the trade register, its articles of association, or in a duplicate of its first commercial register certificate.
One individual from a team of three founders is applying for the Gründerstipendium NRW grant. The other two co-founders want to continue in their full-time employment and are not applying for a grant. Is that allowed?
Decisions concerning the awarding of the Gründerstipendium NRW grant are made on an individual basis. This means that the applicant in question must fulfil the requirements (in this case in particular, the requirement not to have another main occupation in parallel, i.e. paid secondary employment must be limited to fewer than fifteen hours per week). It is therefore possible for just one founder out of a three-person founder team to be funded through the Gründerstipendium NRW grant if they are the only member of the team who fulfils all the requirements.
However, the Gründerstipendium NRW grant is meant to give founders the freedom to concentrate on their start-up idea full-time, to launch it during the year of funding, and to drive significant progress. If individual members of a founder team want to remain in full-time employment, it is up to the jury to decide whether sufficient progress on the project can still be guaranteed during the funding period. This is also part of the coach’s role, as they must ensure compliance with the coaching/mentoring road map.
Grant applications are only accepted through accredited, certified start-up networks. A list of participating start-up networks can be found here. It is recommended that you contact a start-up network close to your place of residence or to the enterprise’s registered office. To make an application, you must submit an informative concept proposal to the selected start-up network.
Founders from countries outside the European Union or the European Economic Area, and who are also not Swiss citizens, can be funded if they hold a valid temporary residence permit for the purpose of gainful employment (Aufenthaltserlaubnis zu Erwerbszwecken) or a permanent residence permit (unbefristete Niederlassungserlaubnis). Temporary residence permits must be valid for the entire funding period. In addition, the supplementary sheet attached to the residence permit must not include any restrictions that are incompatible with working full-time on a start-up business.
The relevant immigration office decides on the residence permit and the details included on the supplementary sheet.
The term “innovation” essentially refers to creating something entirely new or improving on something that already exists. It includes any business idea that involves the creation of a new, progressive solution for a specific problem, especially the development of a new product or the application of a new process.
The jury selects start-ups based on the following five criteria:
a) The personality of the founder or founder team members and their skills
b) The innovativeness of the business idea
d) Customer benefits and demand
e) The target market, sector, and competitive environment
The juries evaluate the projects using a standardized evaluation sheet to ensure the equal treatment of all applicants. The corresponding form is provided by Project Management Jülich.
During the meeting, the founders have the opportunity to pitch their business ideas and win the jury over. The founder teams or individual founders introduce themselves and their business idea. The jury then has five minutes to ask the founders questions regarding their business idea.
Once the start-up project has been recommended for funding by the jury, the applicants are informed and asked to submit an application for funding using the online submission platform provided by Project Management Jülich. Project Management Jülich will make a decision regarding the approval of the project within three months of receiving the completed application. If the start-up is approved for funding, the beneficiary will be sent a grant notification, which will specify the grant period.
The application must be accompanied by a valid, up-to-date jury decision. The complete application and all necessary documents must therefore be submitted to Project Management Jülich as soon as possible after the jury meeting. We recommend submitting the application to Project Management Jülich in good time, within four weeks of the jury meeting, if possible. This will allow Project Management Jülich enough time to check whether the application is complete or if further documents need to be submitted. Once six months have passed following the jury meeting, it can no longer be assumed that the jury decision is up to date.
Appliactians can indicate their desired start date for the funding period in the application documents. Project Management Jlich generally tries to take the desired date into account, but applicants must be aware that there is a processing period of up to three months. Members of founder teams should choose the same desired start dates for the funding, if possible. If the desired dates are several months apart, Project Management Jülich may request an explanation from the coach or network, if necessary.
During the funding period
Can changes in the founding team be made? Can the Gründerstipendium NRW be combined with other forms of state support? These and other questions occur frequently during the founding process.
As grant beneficiaries are not employees, they are not entitled to compensation for reduced income in the event of illness, pregnancy, or maternity leave. The grant can still be awarded during periods where the beneficiary is ill, pregnant, or on maternity leave, provided that the founder fulfils their obligations as described in the coaching/mentoring road map. If the founder is not able to fulfil their duties and this results in a lack of project progress, the coach must request that the jury make a decision regarding the continuation of the project. A temporary suspension of the grant is not possible.
As a rule, the grant cannot be suspended. If the programme has not started yet and no payments have been made, beneficiaries can submit a request, accompanied by supporting reasons, to postpone the entire funding period. Project Management Jülich will make a decision on this, after consulting with the jury or coach, if necessary.
If funding payments have already been made, the funding period cannot be postponed. The beneficiary must then decide whether they want to take up the internship and withdraw from the grant programme.
According to Section 48(5) of the North Rhine-Westphalia Act on Higher Education (Hochschulgesetz NRW, HG), students can be granted a leave of absence for important reasons, including the establishment of a business; the relevant further details are governed by the individual enrolment regulations of the respective institution. According to the legal justification provided for the HG, in relation to the launch of the Gründerstipendium NRW grant on 1 July 2018, taking two semesters off should be an important stepping stone towards giving students the space needed to found an innovative business without having to give up their studies at the same time.
What should I do if my personal circumstances change and I no longer fulfil the funding eligibility criteria, or if it becomes apparent that the project goal can no longer be achieved?
If the funding eligibility criteria are no longer fulfilled, this must immediately be reported in writing to Project Management Jülich and the coach. Where applicable, the beneficiary must then withdraw from the grant programme prior to completion and the grant notification will be revoked.
May I receive other grants during the grant period, e.g. funding through the German Federal Training Assistance Act (BAföG), or a parental allowance?
Beneficiaries are prohibited from receiving the Gründerstipendium NRW grant in parallel with another grant or funding programme aimed at funding living expenses. For example, beneficiaries are not permitted to receive the funding concurrently with the EXIST Business Start-up Grant, the German national scholarship (Deutschlandstipendium), or the Federal Employment Agency business start-up grant for jobseekers (Gründungszuschuss).
I receive full or partial temporary reduced-earning-capacity pension. Can I apply for the Gründerstipendium NRW grant?
The grant is intended to give founders the freedom and space to work full-time on preparing, implementing, and further developing their business idea. The beneficiaries must therefore be in a position to put in a substantial number of working hours per week in order to drive development of the business.
Individuals who can only work less than three hours per day in any profession due to health reasons, i.e. due to illness or disability, may be entitled to full temporary reduced-earning-capacity pension. Individuals who can work fewer than six hours per day, but more than three hours per day, may receive partial temporary reduced-earning-capacity pension. Consequently, such individuals cannot work in a self-employed capacity for the amount of time required by the Gründerstipendium NRW grant.
It is not possible to be funded through the Gründerstipendium NRW grant while participating in second-level education. According to the North-Rhine Westphalia Act on Education (Schulgesetz NRW, SchulG), pupils are obliged to regularly participate in lessons and other compulsory school events. The amount of lesson time depends on the type of school attended.
The grant is intended to give founders the freedom and space to devote themselves to intensively preparing, implementing, or further developing their business idea. Beneficiaries may only take on paid secondary employment if it involves less than 15 hours per week.
While compulsory education does not constitute paid secondary employment, the classes that students are obliged to attend usually amount to significantly more than 15 hours per week. In addition, students are obliged to contribute to their classes so that the school can fulfil its role and achieve its educational goals. In particular, students are obliged to prepare for their lessons, participate actively in them, carry out the necessary assignments, and complete their homework. This means that preparation for class and follow-up work also requires time.
As secondary-level education takes up so much time, it does not seem possible for students to simultaneously work full-time on setting up an innovative business.
Can the Gründerstipendium NRW grant be awarded in parallel with unemployment benefits or the Federal Employment Agency’s start-up grant for jobseekers (Gründungszuschuss)?
Receipt of the Gründerstipendium NRW grant in parallel with unemployment benefits is not permitted. One of the eligibility criteria for receiving unemployment benefits is to be unemployed (Section 137(1)(sentence 1) Social Code (Sozialgesetzbuch, SGB) III). Being unemployed is defined as being available for offers of employment arranged by the Federal Employment Agency. A person is considered to be available if they can and may take on reasonable employment, subject to compulsory insurance and the usual conditions of the person’s labour market, for a minimum of 15 hours per week (as per Section 138(5)(sentence 1) of SGB III). In such cases, the individual must be prepared to accept and take on any employment as described in above-referenced sentence 1.
When awarded the Gründerstipendium NRW grant, beneficiaries may only take on secondary employment if it involves less than 15 hours per week. Beneficiaries of the Gründerstipendium NRW grant would therefore not have sufficient availability for any offers of employment arranged by the German Federal Employment Agency.
Similarly, receipt of the Gründerstipendium NRW grant in parallel with the federal business start-up grant for jobseekers (Gründungszuschuss) is not permitted.
It is not permitted to be in receipt of the grant concurrently with other personal funding and/or payments intended to cover the same expenses (principle of non-cumulation of funding). The Gründerstipendium NRW grant provides funding for any expenses that are necessary for the implementation of the start-up project, which may include living expenses. In line with this, the funding regulations prohibit beneficiaries from receiving the Gründerstipendium NRW grant concurrently with another grant or funding programme aimed at financing the beneficiary’s living expenses. However, receipt of concurrent funding for expenses for the start-up or newly founded enterprise is permitted if these expenses are not already financed by the Gründerstipendium NRW grant. Prize money from business plan competitions can therefore be accepted if the principle of the non-cumulation of funding is complied with.
The grant amount is a gross figure. Awarding of the grant does not establish an employment relationship of any type. Consequently, any income tax or social security contributions, etc. payable on the grant must be paid by the beneficiary directly (see also the following answers). It is advisable to consult with a tax expert as soon as possible.
In accordance with Section 22(1)(sentence 1) of the German Income Tax Act (Einkommensteuergesetz, EStG), recurring payments must be recorded as other income if they do not fall under any other category of income. According to this interpretation, funding payments made under the Gründerstipendium NRW grant essentially constitute earnings from commercial operations as described in Section 15 of the EStG – this applies to both individual founders and founder teams. The tax-free allowance for commercial tax is € 24,500. Neither Section 3(11) nor Section 3(44) of the EStG provides a basis for the tax exemption of funding payments received under the Gründerstipendium NRW grant.
The grant does not establish an employment relationship subject to social security contributions. However, when establishing the enterprise, the legal implications in relation to social security must be checked. This includes, in particular:
• Statutory health insurance: It is essential for beneficiaries to take out health insurance coverage and to pay the contributions themselves.
• Statutory accident insurance: In general, beneficiaries are required to register with the relevant accident insurance provider. Apart from a few exceptions, entrepreneurs and freelancers themselves are not automatically insured by law or based on the statutes of the relevant professional association. However, every entrepreneur can obtain insurance from their professional association to cover the consequences of work- and travel-related accidents. For more information, please contact your accident insurance provider.
• Statutory pension insurance: Whether or not beneficiaries are obliged to obtain pension insurance depends on a variety of factors, such as the type of business activity or whether they have employees. Beneficiaries should seek advice from the German Statutory Pension Insurance Association (Deutsche Rentenversicherung Bund) in good time regarding issues such as pension coverage and contribution payment options – specifically for founders. In addition, it is strongly recommended that beneficiaries have their employment status determined by the arbitration office of the German Statutory Pension Insurance Association (Clearingstelle der Deutschen Rentenversicherung) – if it is subsequently established that they do have an obligation to have pension insurance, they may be required to make back payments.
• Statutory unemployment insurance: Beneficiaries can enquire at their local federal employment agencies as to whether it is possible to make voluntary unemployment insurance contributions in their specific case.
Each beneficiary is personally responsible for the legal obligations arising from the Social Code (Sozialgesetzbuch, SGB), in particular the proper payment of social security contributions.
No. Funding payments that have already been made do not have to be paid back. The founders must agree on the common goals of the project and on the means to achieving these goals before they apply for funding, in order to remove any potential sources of conflict in advance. However, in exceptional cases, disagreements may arise within the team that must be resolved through discussion with the start-up network, with everyone participating on equal footing. If it is anticipated that the goals of the project may not be achieved due to the conflict within the team, the coach must request that the jury make a decision regarding the continuation of the project.
A founder wants or needs to withdraw from the funding programme early – what steps must be taken here?
The entrepreneur must inform the funding approval body (Project Management Jülich) of their withdrawal by means of an informal letter of withdrawal with a legally binding signature. The letter must include the following information:
- The name of the beneficiary
- The file number (Aktenzeichen, e.g. 2012gr099a)
- The reason for withdrawal (e.g. a placement involving 15 working hours per week or more)
- The date from which they intend to withdraw from the programme or from which the funding requirements will no longer be fulfilled
- Statement as to whether funding payments for the months after withdrawal from the programme have already been applied for or paid out
- The legally binding signature of the beneficiary (not a digital signature)
Obviously, no funding payments may be applied for or requested after a beneficiary has withdrawn from the programme. If funding payments for the months after withdrawal have already been paid out, this must be reported to Project Management Jülich. In consultation with Project Management Jülich, any excess funding payments that have been paid out must be paid back with interest.
If one beneficiary in a team withdraws from the programme, how does this affect the funding for the other team members?
In this case, the team must engage in discussion with the coach and the network.
The coach must evaluate whether the team member’s withdrawal has jeopardized the project, or whether it is still conceivable that it will be completed successfully. If it is anticipated that it will not be possible to achieve the project goals due to the departure of a beneficiary, the coach must request that the jury make a decision regarding the continuation of the project.
Once the coach or jury have given their assessment, Project Management Jülich must be informed in writing (ideally via email) as quickly as possible.
The founder team should not move to another city during the funding period, as the link with the chosen start-up network must be maintained. If the team relocates, it can no longer be guaranteed that they will receive mentoring from their coach or the network. In the case of distributed teams, the founders must reassess whether completion of the project is still feasible (this also applies at the application stage).
If the team relocates to another German state or to a country abroad, the criteria for receiving the funding will no longer be fulfilled. In this case, the grant will be revoked.
The role of start-up networks
Start-up networks take on a crucial role in the Gründerstipendium NRW. What exactly are their tasks?
Working through one or more advisory centres, the start-up network provides a first port of call for making initial contact and for receiving upfront advice on applying for the Gründerstipendium NRW grant. The start-up network also provides founders with additional contact information for experienced start-up consultants or coaches (start-up consultant assigned to a project) based in the region as well as financiers. The start-up network appoints the jury.
The coach provides one-to-one consulting support to the beneficiaries. The aim of this support is to verify the plausibility and feasibility of the business idea, and to advise on the relevant incorporation and licensing formalities for the project in question.
This involves the following:
- Performing an in-depth, conclusive analysis of the viability of the project
- Supporting the beneficiary in the development of their business idea
- Analysing the beneficiary’s consulting requirements going forwards, i.e. whether they need intensive, in-depth consulting support on specialist issues (e.g. contract law, taxation, etc.) and drawing up a detailed action plan for implementation of the project
- Sharing information and making referrals to other consultants within the start-up network or to independent consultants, depending on the action plan
Once the start-up has been established, the coach must provide ongoing mentoring to the founders until the last grant payment has been made, in collaboration with another network consultant where necessary. During this time, an action plan must be developed and implemented with the support and guidance of the coach. The coach will manage and coordinate the entire consulting support process, where this includes contacting and bringing in other consultancy companies, deciding on the allocation of responsibilities, acting as a moderator for coordination and planning meetings, and integrating independent consultants into the overall consulting process. When the grant programme comes to an end, the coach or a network consultant must inform the founders about the options available for follow-up consulting support and advice.
According to the funding regulations, any individual with experience in supporting business start-ups or in starting their own business can take on the role of coach.
For example, anyone with experience in start-up consulting support, as a result of their education or career, can act as a coach. This is the case, for example, if the coach has successfully completed a course on a relevant subject or has relevant professional experience in the commercial domain and in business-related consulting support. Entrepreneurs with a background in starting their own businesses can also be considered to have relevant start-up experience, even if they do not fulfil the criteria mentioned above. Many entrepreneurs volunteer to support and share their knowledge and experience with people who are interested in starting their own business.
In addition, coaches must be familiar with the services provided by partners based in the region, the relevant contact people for these partners, as well as any other services or consultancy companies that may be pertinent to the beneficiaries. The coach can also provide the necessary information to the beneficiaries through the network. In performing their role, coaches can also collaborate with other experts in start-up consulting support.
If a coach drops out temporarily without affecting the beneficiary’s ability to adhere to the mentoring road map, no negative consequences will ensue. In the event of a longer absence that makes it impossible to adhere to the mentoring road map or that reduces the likelihood of the business idea being implemented during the term of the grant programme, the start-up network will provide a replacement coach.