Many self-employed people and small business owners in Germany are prepared to go without paying themselves for months just to avoid taking out a loan. Here we look at where this attitude comes from, why it is risky and what well-thought-out business financing in Germany looks like – from equity (Eigenkapital) and debt capital (Fremdkapital) to state funding programmes and liquidity planning.
Starting a business in Germany – whether registering a Gewerbe (trade), working as a Freiberufler (member of a liberal profession) or founding a GmbH – sooner or later confronts every entrepreneur with the same question: how will I finance all this? Many answer it intuitively, before they even sit down to do the numbers. And intuition most often says one thing: get by without a loan if at all possible, even if that means cutting your own income. For international entrepreneurs who do not yet have a credit history in Germany, this attitude is often reinforced by the feeling that the bank will say no anyway.
How widespread this thinking is can be seen from a survey of around 1,700 business owners in Germany, France, Italy and Spain, carried out in spring 2026 on behalf of the financial service provider Qonto. Almost half of the self-employed and micro-businesses had cut or completely suspended their own salary in the previous twelve months to keep the business afloat. This applies especially to young companies just entering the market.
46 % of the self-employed and micro-businesses in Europe cut or suspended their own pay to preserve liquidity. 71 % among companies that had been on the market for six to twelve months – the most vulnerable phase after launch. 45 % of the companies surveyed had never raised external capital; in Germany the figure was as high as 50 %.
These figures are a good starting point, but no reason either for complacency or for panic. They show the key point: financing decisions are often made “by gut feeling” rather than on the basis of calculation. That is the real risk factor – not the question “loan or no loan”, but the lack of a well-thought-out financing strategy. Below we look at how such a strategy is usually built, which forms of financing exist in Germany and what kind of thinking distinguishes entrepreneurs who get through difficult periods with confidence from those who keep running into cash shortfalls.
Why entrepreneurs in Germany avoid loans
Wariness of debt capital in Germany has deep roots. It is rarely based on pure calculation; more often it is a mix of cultural attitudes, personal experience and an emotional relationship with debt.
The Qonto study provides clear figures: 36 % of the small business owners surveyed in the four countries consider taking on debt capital a sign of poor financial management. In Germany the figure is somewhat lower at 27 %, while France has the highest at 41 %. A third of respondents (33 %) also fear that external lenders and investors would restrict their freedom to make decisions.
“Debt is often associated with shame and seen as a flaw” – this is how the study describes one of the key psychological barriers to debt financing.
– Qonto study on the financial culture of small businesses in Europe, spring 2026 (via Handelsblatt)
Pride in independence is also telling: 77 % of respondents say they are proud of running their business entirely without outside help. In Germany, 62 % of companies that had not raised financing say they simply see no need for a loan – the highest figure among the countries in the study.
This attitude is not wrong in itself. Independence, caution and a conscious approach to obligations are strengths of many successful entrepreneurs. The problem arises when avoiding loans becomes an end in itself and displaces rational calculation. A company that rejects all debt financing on principle may miss growth opportunities, pay for investments from personal funds at the wrong moment – and end up in a real cash shortfall precisely because of this.
| Well-founded reasons for declining a loan | Reasons that are more emotional than rational |
|---|---|
| The investment does not pay off reliably enough to carry fixed repayments | “Debt is wrong”, regardless of the specific project |
| There is enough equity, and it is available on better terms | Fear of talking to the bank or of being rejected |
| The need for money is short-term and small – a loan would be disproportionate | Worry about being seen as a “bad entrepreneur” |
| Debt capital would clearly exceed the company’s debt service capacity (Kapitaldienstfähigkeit) | Fundamental mistrust of banks or authorities |
Entrepreneurial thinking: experienced business owners see debt capital not as a moral question but as a tool. The decisive question is not “is a loan good or bad?” but “does this form of financing suit the specific project, my willingness to take risks and my real ability to repay?” Those who can answer this question soberly generally make better-informed decisions than those who avoid loans on principle – or, conversely, seek them out on principle.
The risks of going without your own salary
Cutting your own pay to preserve liquidity in the short term is one of the most common emergency decisions among the self-employed. At first glance it is simple: no need to go to the bank, provide collateral or write an application. But this apparent simplicity is exactly what makes the strategy risky if it turns from an exception into a permanent solution.
Going without a salary shifts the risk but does not remove it. If the business cannot survive without the owner’s salary, the entrepreneurial risk simply moves from the company account to private life – to savings, personal credit lines, an overdraft (Dispokredit) or the family. The problem with the business idea or the calculations is not solved, only masked.
This is particularly noticeable in young companies: according to the study mentioned, among firms aged six to twelve months the share of owners who cut or suspended their own pay reaches 71 %. This phase is already considered one of the most critical in a company’s life: the first revenue forecasts face their reality check, and the start-up investments have not yet paid off.
Going without your own income permanently can have consequences that are often underestimated in practice:
- Personal debt instead of business debt. Those who do not pay themselves often cover personal expenses from savings, an overdraft or credit cards – usually on considerably worse terms than a regular business loan.
- Gaps in pension provision. Without regular income, pension contributions are often reduced or stopped, which only becomes noticeable years later.
- Social contributions do not go away. Health and long-term care insurance contributions (Kranken- und Pflegeversicherung) for the self-employed are generally charged regardless of the salary actually drawn, and without income they become an additional burden.
- Hidden unprofitability. If the business model only “works” because the owner works for free, the company’s real profitability is lower than the figures suggest.
- Exhaustion and poorer decisions. Constant financial stress noticeably affects business decisions and increases the risk of impulsive, short-term moves.
This does not mean that a temporary, deliberately calculated reduction of your own pay during a difficult period is a mistake: many business launches go through exactly that. What matters is the difference between a conscious, time-limited measure within the financial plan and a permanent state that actually points to a deeper problem with financing or calculations.
Entrepreneurial thinking: a mature entrepreneur distinguishes between “I can go without part of my salary for a short time because I know for how long and why” and “I am not paying myself because I see no other way out”. The first is a financing decision. The second is a warning sign that calls for an honest analysis of calculations, pricing and financing structure.
Equity or debt capital: the pros and cons for your business
Before talking about specific instruments, it is worth understanding the basic distinction underlying every financing decision – between equity (Eigenkapital) and debt capital (Fremdkapital).
Equity is money available to the company without a fixed obligation to repay it: personal savings, contributed assets, retained profits or money from investors who receive a share in the company in return. Debt capital, by contrast, comes from outside and must be repaid on agreed terms regardless of how the business is doing – for example a bank loan, a subsidised loan (Förderdarlehen) or supplier credit.
| Criterion | Equity | Debt capital |
|---|---|---|
| Repayment | No fixed obligation to repay | Fixed repayment with interest regardless of business success |
| Control | With external investors, often voting rights or shares | Full entrepreneurial control is usually retained |
| Cost | No interest, but opportunity costs and possibly profit sharing | Interest costs, which may be tax-deductible |
| Availability | Limited by personal savings or the circle of investors | Depends on creditworthiness, collateral and business model |
| Effect on the balance sheet | Increases the equity ratio and creditworthiness | Increases the debt burden; debt service can become a strain |
| Disciplining effect | No external pressure to plan | Fixed repayments force realistic financial planning |
In practice, the question is rarely “equity or debt” – it is more often about which combination of sources suits which purpose. A proven principle of business financing: the term of the financing should match the term of the project. Ongoing costs should, where possible, not be financed with long-term debt, and long-term investments – in equipment, fittings or building a customer base – should not be covered solely from short-term liquidity, as this can jeopardise day-to-day solvency.
Besides classic equity and debt, there are hybrid forms – subordinated loans (Nachrangdarlehen) or silent partnerships (stille Beteiligung) – that economically sit between the two categories. They are relevant mainly for fast-growing companies and are usually more complex to set up contractually. For most start-ups and small businesses this is initially a secondary topic – it usually becomes relevant as capital requirements grow.
Entrepreneurial thinking: anyone who thinks like an experienced entrepreneur asks themselves the same question before every major expense. Will this money bring regular income or a lasting increase in value – then financing it with debt can be justified, because future income will cover the repayments. Or does it only cover a one-off, uncertain need – then equity or a financial reserve is usually the safer choice.
Which business financing options exist in Germany
In Germany, founders, self-employed people and small companies have a comparatively wide range of financing instruments. Many of them are little known, although they often offer better terms than a classic bank loan. A detailed overview of the programmes is in our article financing options when starting a business.
| Form of financing | Typical use | What to watch out for |
|---|---|---|
| Equity / savings | Start-up costs, the initial period, your own contribution for subsidised loans | Do not use up your personal reserve completely |
| Family & friends | Small amounts, bridging short-term gaps | Best to put the terms and repayment in writing |
| Classic bank loan / business loan | Investments, working capital, growth | Collateral, credit checks; compare interest terms |
| Subsidised KfW loans | Starting a business, investments, working capital | Applied for through your own bank (Hausbank); terms may change |
| State development banks (Landesförderbanken) | Regional programmes, often in addition to KfW | Programmes differ from one federal state to another |
| Guarantee banks (Bürgschaftsbanken) | Security when collateral is lacking | Take on part of the default risk towards the bank |
| Gründungszuschuss / Einstiegsgeld | Moving into self-employment from unemployment or from Bürgergeld | Discretionary benefit, depends on conditions and proof of the project’s viability |
| Grants and subsidies (Fördermittel, Zuschüsse) | Digitalisation, innovation, consulting, regional programmes | Usually non-repayable, but tied to application deadlines and criteria |
| Business angels / venture capital | Scalable models with high growth potential | Giving up shares in the company and voting rights |
| Crowdfunding / crowdinvesting | Product ideas with market interest, testing demand | Success depends largely on marketing and community |
| Leasing / factoring | Acquiring equipment, securing outstanding receivables | Regular costs instead of a one-off investment; consider the effect on liquidity |
This programme is aimed at founders and young companies and is applied for through your own bank (Hausbank). It can cover investments and working capital; KfW takes on a significant part of the credit risk towards the financing bank, which can make it easier to obtain a loan even with limited collateral. KfW regularly adjusts the loan amount, terms and other conditions, so check the current version with KfW or your bank before applying.
The Gründungszuschuss (start-up grant) is intended for people who start self-employment as their main occupation while receiving unemployment benefit, Arbeitslosengeld I. Requirements include sufficient remaining entitlement, a viable business plan and proof of professional suitability. It is a so-called discretionary benefit (Ermessensleistung): there is no legal entitlement, and the Agentur für Arbeit decides on each case individually. For recipients of Bürgergeld (basic income support) there is a comparable but separately regulated instrument – the Einstiegsgeld. More in our article on the Gründungszuschuss in 2026.
Besides the classic sources of financing, it is worth talking to your local IHK (Industrie- und Handelskammer, Chamber of Commerce and Industry) before making any decision. Many IHK start-up centres (IHK-Starterzentren) offer a free initial consultation and structured feedback on your business plan – independent, practical and free help that by no means everyone takes advantage of, especially at the planning stage.
Entrepreneurial thinking: experienced founders usually combine several sources of financing rather than relying on one. A well-thought-out combination of equity, funding programmes and targeted debt financing reduces dependence on a single source and makes the company more resilient to unexpected developments.
Why liquidity planning matters more than revenue
Many young companies fail not because they are unprofitable but because at some point they lack free cash for their current obligations – rent, salaries, supplier invoices, tax prepayments. The difference between profitability and liquidity is one of the most important concepts in business financing, and many founders underestimate it at first.
A company can be profitable on paper and still become insolvent – for example if customers only pay invoices after 60 or 90 days, while rent, salaries and suppliers have to be paid much earlier. Revenue is a snapshot of business activity; cash flow shows whether there is actually enough money in the account when payments fall due.
Revenue is an opinion, cash flow is a fact. An order worth €20,000 is of little use if the invoice is only paid in three months, while rent and salaries are due in two weeks.
– a key principle of financial planning
Reliable liquidity planning – often as a rolling 12–13-week plan or an annual plan broken down by month – lets you spot cash shortages in advance rather than after the fact, by looking at your account balance. In many industries a liquidity reserve is also considered sensible, but its exact size depends heavily on the business model, seasonality and payment terms, and has to be assessed case by case.
All expected receipts – with a realistic rather than an optimistic payment date. All fixed costs (rent, insurance, salaries, subscriptions) – with the exact debit date. Variable costs and the industry’s seasonal fluctuations. Tax obligations, including prepayments and possible back payments. A separate look at the payment terms customers actually use – not just the contractual ones. A reserve for unforeseen expenses or late payments.
Entrepreneurial thinking: entrepreneurs with many years of experience usually check liquidity every week, not just at the end of the quarter together with their management accounts (betriebswirtschaftliche Auswertung, BWA). This habit is one of the most reliable differences between companies that spot a crisis in advance and have time to react, and those that are caught off guard by a cash shortfall.
Typical financing mistakes in young businesses
Some financing mistakes recur surprisingly often across very different industries and legal forms. If you know them in advance, you can avoid many of them without much effort.
1. Underestimating start-up costs. Many financial plans only account for the costs of starting up, not the running costs of the first six to twelve months, when revenue often does not yet cover all expenses.
2. No liquidity reserve. Without a financial cushion, a single late payment from a customer or an unexpected drop in orders can lead to an acute cash shortfall.
3. Mixing personal and business accounts. If personal and business cash flows are not separated, you lose sight of whether the company pays for itself or is constantly being subsidised from personal funds.
4. Looking for debt capital when things are already tight. Banks and funding institutions generally assess applications much more favourably when the company looks financially stable. Those who apply for a loan in an acute situation usually get worse terms and have less chance of success.
5. No written financing plan. Without documented capital requirements, financing structure and repayment schedule, there is no basis for reviewing decisions or justifying them to banks, investors or funding bodies.
6. Focusing on revenue instead of margin and cash flow. Growing revenue is reassuring but says little about whether there is enough money left for costs, taxes and your own salary.
7. No reserve for tax back payments. Income tax prepayments (Einkommensteuer-Vorauszahlungen) and possible back payments are often planned for too late and lead to unplanned cash outflows.
8. Rejecting debt capital on principle. Avoiding loans “on principle”, as described in the first section, can be just as harmful as ill-considered debt: both extremes replace a reasoned decision with a reflex.
Entrepreneurial thinking: most of these mistakes share a common cause – financing is seen as a one-off event around the launch of the business rather than as an ongoing entrepreneurial task. Those who understand financial planning as a continuous process spot problems earlier and have more options when circumstances change.
How to draw up a sustainable business financing plan
A sustainable financing plan is not a one-off document for the first meeting with the bank but a living management tool that ideally accompanies the company throughout its development. A structured approach has proven itself in practice. The specific steps and their order may vary depending on the situation.
- Determine your capital requirements realistically. Besides the start-up costs themselves, take into account the running costs of the initial period – often six to twelve months – and a reserve for the unexpected.
- Determine your equity share. A sufficient share of your own funds generally improves the terms of subsidised loans and shows banks and funding bodies that you are serious.
- Plan a combination of sources, not a single solution. Combining equity, funding programmes and, if necessary, borrowed funds spreads the risk and reduces dependence on a single source.
- Build in liquidity planning from the start. The financing plan and the liquidity plan should be aligned rather than existing as separate documents.
- Assess your debt service capacity realistically. Before taking on debt capital, check whether interest and repayment instalments remain affordable in a conservative rather than an optimistic revenue scenario.
- Check grants and funding programmes before a classic loan. Non-repayable grants and low-interest subsidised loans should be considered before more expensive forms of financing.
- Update the plan regularly. A financing plan loses its value if it is no longer adjusted after the launch. Review it at least once a year, and more often if there are significant changes.
The business plan (Businessplan) acts as the connecting element: it makes the capital requirements understandable, justifies the chosen financing structure and at the same time serves as the basis for conversations with banks, KfW, the Agentur für Arbeit or potential investors. IHK start-up centres, among others, provide independent feedback on it. For the general context of starting your own business, see our article self-employed in Germany in 2026.
Financing is not a one-off event around the launch of a business but a continuous process that accompanies the company’s entire development. Experienced entrepreneurs assess financial risk not by how unpleasant a particular measure feels, but by whether it remains affordable under realistic – not optimistic – assumptions. This sobriety is what distinguishes sustainable growth from short-term survival.
How Vitavia Akademie helps future entrepreneurs
Financial literacy is one of the key skills of a successful entrepreneur – and at the same time something the German education system rarely teaches systematically. This is felt particularly strongly by people starting a business in a country that is new to them, as many internationals in Germany do. This is where Vitavia Akademie comes in – with practice-oriented education programmes on starting a business, business planning, financing strategies and entrepreneurial thinking, for example through start-up coaching and consulting for entrepreneurs.
At the same time, Vitavia Akademie clearly positions itself as an educational project, not as a replacement for individual advice. Tax questions are the responsibility of a Steuerberater (tax adviser), legal questions of a Rechtsanwalt (lawyer), notarial acts of a Notar (notary), and binding official decisions – for example on the Gründungszuschuss or subsidised loans – are made by the competent institutions, such as the Agentur für Arbeit or KfW.
What Vitavia Akademie can offer is orientation: an understanding of how financing generally works, which questions to clarify before talking to the bank, how a liquidity plan is built and what entrepreneurial thinking lies behind companies with sustainable financing. This foundation makes subsequent conversations with a tax adviser, a bank or the IHK considerably more focused.
Frequently asked questions about business financing in Germany
Why do many entrepreneurs avoid loans?
Is a business loan always a bad decision?
When should a company raise external financing?
Which business financing options exist in Germany?
What is the difference between equity and debt capital?
Why is liquidity more important than profit?
Should founders stop paying themselves a salary?
How do entrepreneurs prepare a financing plan?
Which financing mistakes most often threaten young businesses?
How can education reduce a business’s financial risks?
Summary: financial maturity instead of avoiding loans
There is no universal answer to the question of whether a company should take out loans – and that is the main conclusion of this article. Neither a reflexive rejection of all debt financing nor an ill-considered grab at the first loan available leads to lasting entrepreneurial success. The real difference is made by financial maturity: the ability to assess capital requirements realistically, manage liquidity actively and make financing decisions based on figures rather than emotions.
Those who develop these skills no longer have to treat their own salary as the last reserve. Instead, financing becomes what it should be: a tool that allows the business to grow without jeopardising personal financial stability.
If you want to understand how these principles apply to your situation, or you are planning to start a business in Germany, a sensible next step may be a personal consultation or one of Vitavia Akademie’s practical education programmes. Together we can work out which combination of financing sources suits your project – and how to avoid the typical mistakes of new entrepreneurs in advance. You can also get in touch via our contact page.
Book a consultationLegal notice: This article is for general information and educational purposes only and does not constitute individual legal, tax, financial or investment advice. It does not replace a binding opinion from a tax adviser (Steuerberater), a lawyer (Rechtsanwalt) or the competent authority. Information on funding programmes, conditions and requirements (in particular on subsidised KfW loans and the Gründungszuschuss) is based on publicly available information at the time of publication and may change. Every entrepreneur’s situation is different, so before making important decisions, check the current requirements with the relevant official sources and, if necessary, consult a qualified professional. Vitavia Akademie does not replace public authorities or individual legal advice. See also: Impressum and Datenschutz.
Sources
- Handelsblatt: “Studie: Kleinunternehmer kürzen Gehalt, statt Kredit aufzunehmen”, 23.06.2026, based on a study by the financial service provider Qonto (survey of around 1,700 business owners in Germany, France, Italy and Spain, spring 2026)
- KfW Bankengruppe – ERP-Gründerkredit StartGeld (official programme information, kfw.de)
- Bundesagentur für Arbeit – Gründungszuschuss (official information, arbeitsagentur.de)
- IHK – start-up advice and support with drawing up a business plan (official information, ihk.de)
