Germany
Business start-ups with the help of micro-loans
The support of business start-ups is one of the main activities of the European Social Fund in Mecklenburg-Western Pomerania. These activities are being financed with means of the ESF.
Many founders of business start-ups experience difficulties when it comes to financing their project. Frequently business start-ups having only small capital requirements experience problems on the capital market when looking for financing their undertaking. Either the founders get no credit due to the small operational size of their businesses or they are being offered unfavourable conditions only. For this reason the “Promotion of business start-ups through granting of micro-loans” was introduced. The program for the support of business start-ups through micro-loans is carried out on the basis of a separate, revolving and independent fund being established for this aim only. The micro-loan program is an initiative of the Ministry of Labour, Building and Regional Development.The fund is being financed through the ESF and Mecklenburg-Western Pomerania, the ESF contributing 70% and the province supplying 30% of the total volume. Duration of the fund, for the time being, is limited until 31 December 2008. This applies to granting of loans, however, because of expected repayments the fund as such operates until 31 December 2013. retail industry leads the statistics The fund volume totals 7,5 million Euros, which were deposited into the fund in 2004 and 2005. With this funding available during the first three years, annually about 300 start-ups can be approved with an average loan of about 8,300 Euros each. Taking into account the general situation of business start-ups in Mecklenburg-Western Pomerania this seems necessary and adequate. Almost 500 micro-loans were granted by October 2006. Most business start-up’s (20,7%) are accomplished in the retail industry (excluding trade with automobiles and petrol stations), followed by performance of services predominantly for enterprises (14,2%), the hotel and restaurant industry (12,4%) and the performance of other services (12,2%). two stePs to lendinG The loan program is implemented with the help of a two-stage process. As first step a decision has to be taken whether to grant or refuse a loan. This evaluation lies with the provincial authority (the Ministry), delivering an administrative decision subject to public law. Following a positive decision, and consequently as second step, the actual micro-lending is being granted under private law in concluding a loan contract. Granting of the loan takes place in accordance with the “de-minimis”-regulation.
terms and conditions of the micro-loan: •Loan period: maximum 5 years •Loan height: maximum 10,000 Euros •Interest rate: 5% for total running time •Grace period: normally 6 months, max.12 months •Payment: 100% •Handling charges: none •Securities: none •Dates of payment: quarterly •Loan type: redeemable loan •Premature repayment: at any time possible
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Project information
implementation:
Gesellschaft für Struktur- und Arbeitsmarktentwicklung mbH Schwerin
objectives:
- Mobilisation of the business start-up potential in MecklenburgWestern Pomerania. - Closing the financial gap in particular of small business structures. - Qualitative improvement of planning- and preparation phase aiming at positively effecting the realization of the start-up.
outcomes achieved:
- By October 2006 493 micro-loans could be granted, in total 4,349,434 million Euros. The average amount of the granted loan amounts to 8,822 Euros, 48% of the loans are handed out to women. - The experiences after almost 2 years since the introduction of the micro-loan correspond full and completely with the expectations.
contact information:
Uta Buenger Ministry for Labour Market Affairs and Construction of MecklenburgVorpommern Tel. +49-385 - 5883904 Fax +49-385 - 5883092 E-mail: uta.buenger@am.mv-regierung.de
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Visions for the Future - ESF Innovations
www.esr.fi
Visions for the Future - ESF Innovations
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