ZIM

Non-Repayable Grants in Germany for SMEs

Non-repayable grants in Germany are earmarked funding that neither needs to be repaid nor bears interest. For founders, the self-employed and growing SMEs they are the most efficient financing instrument – provided one knows the right programmes, requirements and pitfalls.

Kirill Rubinstein·April 11, 2026 · 11 min read

Summary

For innovation-driven SMEs, the Research Allowance 2026 is typically the most important non-dilutive funding instrument, as it requires no repayment, scales predictably with R&D costs and can be combined with VC, loans and selected grant programmes.
Key parameters for 2026 are the 35 percent SME rate, the assessment basis of up to 12 million Euro and the resulting maximum allowance of 4.2 million Euro per fiscal year.
Eligible R&D costs include wages, 70 percent of contract research fees, owner-performed R&D and, since March 2024, depreciation on specific movable capital assets.
The most common errors: routine development classified as R&D, time tracking missing or imprecise, contract research incorrectly structured, project documentation only created retrospectively.
For CFOs and founders, the Research Allowance is a strategic instrument that demonstrably improves liquidity planning, strengthens bank conversations and reduces dilution.

Non-repayable grants in Germany are earmarked funding that neither needs to be repaid nor bears interest. For founders, self-employed individuals and growing SMEs exploring startup financing in Germany, they are the most efficient financing instrument – provided one knows the right programmes, requirements and pitfalls.

What Are Non-Repayable Grants in Germany?

Non-repayable grants – also known as lost grants, direct grants or allocations – are government funding where no repayment obligation arises, as long as the funds are used in compliance with the rules. The legal consequence is clear: no repayment schedule, no interest burden, no debt on the balance sheet.

According to the Federal Funding Database of the Ministry of Economic Affairs, over 2,000 active funding programmes at federal, state and EU level are available in Germany – a significant portion of which require no repayment.

Non-Repayable Grants vs. Subsidised Loans and Guarantees

The distinction is critical for CFOs and founders:

Non-repayable grants: no repayment claim, no dilution, no credit agreement
Subsidised loans (e.g. KfW business loans): improve liquidity but remain debt with repayment obligations
Guarantees: replace missing collateral but do not constitute funding

A KfW loan for small businesses solves a liquidity problem. A non-repayable grant permanently finances costs – a structurally different instrument.

In German funding practice, several terms are used synonymously:

Lost grants (Verlorene Zueschuesse): emphasise the lack of repayment from the grantor's perspective
Direct grants: delineation from indirect instruments such as tax incentives
Allocations (Zuwendungen): administrative law term under Sections 23, 44 BHO for public funding

A repayable grant is conditionally repayable – for instance upon misuse of funds, false declarations or impermissible double funding of the same cost item.

The Most Important Non-Repayable Grants for Founders and Self-Employed

Government funding in Germany without repayment can be separated into two categories: person-based programmes for the transition to self-employment and company-based R&D funding for technology-oriented growth. Those who know both levels can combine them.

Start-Up Grant and Entry Allowance for Founders from Unemployment

The start-up grant from the Federal Employment Agency is for persons transitioning from unemployment to self-employment. It comprises the remaining ALG-I entitlement plus a flat social security supplement of 300 Euro monthly.

The entry allowance (Einstiegsgeld) is a discretionary benefit for ALG-II recipients and is individually assessed. Both programmes are non-repayable – but financially limited and not scalable.

EXIST Start-Up Stipend for University Founders

The EXIST start-up stipend of the Federal Ministry of Economic Affairs finances the pre-founding phase for university founders. Monthly stipends range between 1,000 and 3,000 Euro depending on qualification, plus material costs up to 30,000 Euro.

The catch: the programme covers the founding phase, not scaling. As soon as a company works with its own personnel and documentable R&D activities, the Research Allowance becomes the strategically more relevant instrument – because it grows with the R&D budget.

Master Craftsman Start-Up Bonus and Skilled Trades Support

The master craftsman start-up bonus is a state instrument for craft business founding and succession. In NRW, for example, it amounts to up to 7,500 Euro as a one-time grant. For craft-adjacent technology companies in manufacturing or energy, the Research Allowance additionally applies – provided genuine experimental development exists, not mere routine implementation.

Further Government Funding Programmes Without Repayment – from EU, Federal and State Level

Non-repayable grants in Germany can be strategically combined, as long as the same costs are not double-funded. VC, loans, state grants and the Research Allowance are not mutually exclusive – what matters is a clean cost matrix.

Support for Business Know-How – Grants for Advisory Costs

The BAFA programme "Foerderung unternehmerischen Know-hows " subsidises external advisory services for start-ups, young companies and companies in difficulty. The minimum reimbursement is 1,600 Euro, the grant amounts to 50-80 % of advisory costs depending on the region.

For CFOs: advisory grants do not cover developer salaries. The Research Allowance deploys its use where advisory programmes end.

Regional Grants and Innovation Vouchers from Federal States

Innovation vouchers of the federal states finance feasibility studies, prototypes and external development services. Concrete examples:

Bavaria: innovation voucher up to 50,000 Euro for SMEs
Baden-Wuerttemberg: innovation voucher A (5,000 Euro) and B (20,000 Euro)
NRW: startup funding via the ERDF programme with project-related grants

Since the Growth Opportunities Act (March 2024), expenditures on depreciable movable capital assets are additionally eligible for the Research Allowance – relevant for prototype construction, test facilities and laboratory equipment.

From 2026, an overhead cost flat rate of 20 % on the remaining eligible expenditures is added for projects starting after 31.12.2025 (Tax Investment Stimulus Program).

Government Support for Specific Target Groups – Women, Small Business and Startups

For self-employed women, state programmes exist such as the "Gruenderinnenstipendium" in Bavaria or the "Frauen unternehmen" programme at federal level. For small businesses, IHKs and economic development agencies offer regional grants.

The frequent question: who gets 5,000 Euro in government grants? The answer is programme-specific. There is no blanket 5,000 Euro entitlement. Some state founder stipends, certain innovation vouchers or the EXIST programme can reach this level – but always tied to specific requirements.

Requirements and Conditions for Non-Repayable Grants

Every non-repayable grant is earmarked. In the event of non-compliant use, a retrospective repayment obligation arises – the grant then effectively becomes a conditionally repayable grant. This is not an exception but a standard clause in virtually all funding notices.

Earmarking and Proper Use of Funds

Companies must demonstrably deploy funds for the approved purpose. Typical requirements:

Documentation obligation for all funded expenditures
Retention periods of 10 years (for EU co-financed programmes)
No combination of the same cost item with a second funding programme
Proof of fund utilisation in the utilisation report

For the Research Allowance, earmarking is reflected in project and cost documentation: role profiles, working time shares, technical work packages and external service contracts must be cleanly archived.

From January 2026, the increased rate of 35 percent applies for SMEs (introduced by the Growth Opportunities Act, March 2024). The assessment basis was raised to 12 million Euro per fiscal year by the Tax Investment Stimulus Program (July 2025). For SMEs, up to 4.2 million Euro Research Allowance per year is thus achievable.

De Minimis Thresholds and Minimum Funding Amounts

Many traditional grants have a de minimis threshold of 2,000 Euro as minimum reimbursement – below this, the administrative effort rarely pays off. The Research Allowance does not work with this threshold but is practically only worth applying from an R&D wage expenditure of approximately 30,000 Euro.

How to Find and Apply for Suitable Funding Without Repayment

The search for suitable funding does not start with the database but with the cost structure. Which expenditures dominate: personnel, external development, advisory or investments? The answer determines which programmes are strategically appropriate.

Using Funding Databases and Advisory Services

Three entry points for the structured search:

Federal Funding Database: over 2,000 programmes filterable by target group, region and funding type
IHK and HWK: free initial advice on regional and federal programmes
BSFZ platform: certification body for the Research Allowance – this is where the application process begins

The process for the Research Allowance in three steps:

Delineate the R&D project: document technical uncertainty, degree of novelty and systematic approach
Structure costs: allocate wages including employer contributions, contract research at 70 %, eligible capital assets
File application: after BSFZ certification, apply at the tax office; allowance is credited against tax liability, surplus is paid out

Avoiding Common Errors in Funding Applications

The most common errors at a glance:

Declaring routine development as R&D: standard adaptations, retrofits and pure implementations do not qualify
Claiming external services at 100 %: for contract research, the 70 % rule applies as assessment basis
Not documenting personnel shares: missing time records or role profiles lead to reductions
Preparing the application too late: the BSFZ certification should not first be applied for in December

Case study TRUMPF: The mechanical engineering company TRUMPF invests over 400 million Euro annually in R&D. As a large enterprise, the base rate of 25 % applies – for SMEs in comparable development fields (laser technology, manufacturing automation), the 35 % SME rate is a significant lever for prototype development and test facilities.

Case study BioNTech: BioNTech intensively used external contract research in early phases. For biotech SMEs commissioning 400,000 Euro to a CRO, the 2026 Research Allowance amounts to 98,000 Euro (70 % x 400,000 Euro x 35 %) – a lever many teams underestimate for externally commissioned laboratory work.

For founders, self-employed and SMEs: non-repayable grants in Germany exist in many forms – from person-based transitional support to the scalable Research Allowance. Those who know their company's cost structure and strategically combine programmes access funding sources without dilution and without repayment obligations. Independent research allowance consulting helps identify the right combination and set up the application correctly.

FAQ

Which Funding Does Not Need to Be Repaid?

Non-repayable funding includes direct grants such as the start-up grant, the EXIST stipend, state innovation vouchers and the Research Allowance. None create a repayment obligation as long as funds are used in compliance with the rules. Misuse or false declarations can trigger retrospective clawbacks.

Which Non-Repayable Grants Exist for Self-Employed?

Relevant for self-employed: start-up grant from the Federal Employment Agency, entry allowance, EXIST start-up stipend for university founders, BAFA advisory grants and regional innovation vouchers. Technology-oriented self-employed and SMEs can additionally apply for the Research Allowance, provided demonstrable R&D activities exist.

What Is a Repayable Grant?

A repayable grant is funding that must be repaid under certain conditions – for instance upon economic success above a defined threshold, misuse of funds or funding rule violations. It structurally stands between a traditional grant and a subsidised loan.

Who Gets 5,000 Euro in Government Grants?

There is no blanket 5,000 Euro entitlement. This amount can be reached through the EXIST start-up stipend, certain innovation vouchers (e.g. Baden-Wuerttemberg Type A: 5,000 Euro) or regional founder grants. Requirements are programme-specific and depend on industry, location and development stage.

Articles by Kirill Rubinstein

Kirill Rubinstein Founder of Be-Funded

Kirill is the founder of Be-Funded, a consultancy helping German businesses secure R&D funding. With 20+ years of experience in the German funding landscape, he guides startups and SMEs through programs like ZIM and Forschungszulage.

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