Founding with ALG I

How does the start-up grant work?

The start-up grant (Gründungszuschuss) is a subsidy from the Federal Employment Agency for ALG I recipients who want to become self-employed on a full-time basis ^[2].

It takes place in two phases — a maximum of 15 months in total:

• Phase 1 (6 months): Payment of the last ALG I received plus €300 monthly for social security. That's 60% of the last net salary (67% with a child for whom you receive child benefit) ^[3].
• Phase 2 (up to 9 months): Continuation of a flat rate of €300 monthly, if there is still a need and the business development is viable ^[3].

The start-up grant is a discretionary benefit — there is no legal entitlement, so you should prepare well. Approval is granted by the Employment Agency ^[2].

Good preparation is important

The most important requirements for a successful application ^[2]:

1. Sufficient remaining entitlement to ALG I: At the time of business registration, at least 150 days of remaining entitlement to ALG I must exist. In case of disability according to § 19 SGB III, this value may be lower.

> Caution: On some websites it says that only 90 days of remaining entitlement are necessary. This is incorrect — the corresponding draft law from 2024 was not passed.

1. An expert opinion — e.g. from IHK, Chamber of Crafts, tax advisor or bank. It assesses the viability of the business venture and requires a business plan ^[4].

Further requirements:

• Professional suitability: Proof of the knowledge and qualifications necessary for self-employment
• Full-time self-employment: Part-time self-employment is not subsidized
• No previous start-up grant: No funding through the start-up grant may have occurred in the last 24 months
• No dormancy periods: e.g. for sick pay, severance payments or continued wage payments
• No suspension periods: e.g. in case of voluntary resignation (up to 12 weeks suspension period) or refusal of work

Support and advice

Meeting all requirements requires good preparation. Qualified advice increases the chances of success — and is completely subsidized, so that founders incur no costs.

Your local IHK (Chamber of Industry and Commerce) or HWK (Chamber of Crafts) not only reviews your project, but also prepares you for starting your business.

In addition, there are often supporting measures such as free coaching via the AVGS (activation and placement voucher) ^[2].

Keep an eye on finances

The basis for calculating ALG I is the average salary of the last 12 months. If fewer than 150 days of social security employment were worked, this is extended to 24 months. If 150 days are also missing there, a fictitious salary applies.

Calculation: Total gross ÷ working days = daily assessment salary. One-time payments (e.g. holiday/Christmas bonus) count. Taxes and social security contributions are deducted from the gross.

Benefit amount:

• 67% of the calculated amount with a child
• 60% without a child

Monthly amount = daily entitlement × 30.

The start-up grant is tax-free and is not subject to the progression proviso. You only pay taxes on the income from your self-employed activity. However, statutory health insurance companies count the start-up grant as income, which can increase your contribution ^[2].

Step by step to funding

1. Clarify initial situation (before ALG I)

• Check when your entitlement to ALG I arises (depending on employment duration and contribution periods).
• Pay attention to your notice period — in case of voluntary resignation, a suspension period of 12 weeks threatens. A termination agreement can be a solution, but must be negotiated well.
• Calculate now how long and at what amount you will receive ALG I.

2. Secure entitlement

• Register as job seeker: at the earliest 3 months before the end of the job, at the latest on the 1st day of unemployment. This can be done online or by phone at the Employment Agency.
• Apply for ALG I: for this you need, among other things, your termination/contract, employment certificates and bank statements.
• Conversation with the Employment Agency: Mention early that you want to start a business. This shows motivation and opens the way to the start-up grant.

3. Prepare business idea

• Do an idea check: What do you offer? Who is your target group?
• Create a business plan with concept, financial plan and profitability forecast. Templates are available, for example, from the IHK or Gründerplattform.
• Get feedback from founders, advisors or your local IHK or HWK.

4. Create requirements for funding

• Secure an expert opinion (e.g. from IHK, HWK or tax advisor) that confirms that your project is viable.
• If necessary, use an AVGS (activation and placement voucher) for free start-up coaching.
• Based on your financial plan, check whether you need own funds or microloans — in addition to the start-up grant.

5. Apply for start-up grant

• Submit the application while you are still receiving ALG I — but are not yet officially self-employed.
• Submit business plan, financial plan and the expert opinion to the agency.
• The grant is a discretionary benefit: The better your documents, the higher the chances.

6. Start self-employment

Now you can register your business! → Selbstständigkeit anmelden

• Start with marketing: website, social media, network.
• Keep an eye on income and expenses and regularly update your business plan.

7. Extension

After 6 months you can apply for the extension of the grant (€300 for another 9 months).