There is a wide range of state aid and subsidies for starting a business, varying depending on the sector, the legal form (self-employed people and the different types of company: mainly SMEs incorporated as an S.L.), the location of the company (the town and Autonomous Community where it has its formal or registered address), the employment situation the entrepreneur is starting from, and the focus of the aid (financing, hiring, innovation, commerce…).
Investment aid is aimed at companies that have already been set up and have some track record in the market, so we will leave it aside.
In this post we want to show you how this aid works, where you can look for it and what the main types of aid for starting a business in Spain are, after first introducing the concept of aid for starting a business and how it differs from other kinds of benefits or institutional or public transfers.
What is aid for starting a business?
Before describing the concept and workings of aid for starting a business, you need to know what business aid is, regardless of its purpose.
What is aid?
Public aid for businesses is the free provision of public funds in favor of individuals or private (or mixed) entities by reason of the status, situation or circumstance in which they find themselves or which they bear.
And what about aid for setting up a business?
Aid for setting up a business is the free provision of public funds in favor of individuals or private entities that want to begin a business or professional activity within the territory where it applies, in order to encourage the creation of new businesses and promote the growth of the economy.
What is the difference between aid for starting a business and subsidies?
There really isn’t any, since a subsidy, whatever name or designation it is given, is considered to be any free transfer of assets in favor of individuals or legal entities intended to promote a particular activity or behavior of public or social interest, even if it is private in nature.
How does aid for starting a business work?
As general conditions for granting subsidies and aid, we can say that aid for starting a business:
- Cannot be applied for or claimed after the fact, that is, it cannot be requested on the basis of something that has already happened in order to resolve or promote it once it is done. For example, you cannot apply for aid to start a business if the business has already existed for 1 year.
- The beneficiary is generally obliged to submit to verification procedures and to provide the information requested, in accordance with the governing regulations.
- Aid for starting businesses can in no case exceed the amount of the situation, status or event that prompted the application for that aid, or of the activity the beneficiary is to carry out, even where the aid is set and named in the Budget Act.
Aid for starting a business: principles for granting subsidies, incentives and entrepreneurship aid
The granting of subsidies and aid for starting businesses will follow the principles of:
- Objectivity and equality: To guarantee this, public calls for applications must set out the objective criteria for assessing applications for business start-up aid, which serve as the basis for awarding it, and must also state the amount of the aid where applicable, so as to inform all interested parties.
These criteria are usually ordered from most to least important to justify the awarding of the aid, according to a score set out in a scoring scale (which cannot be altered except by an express amendment to the call, and this will require opening a new period for submitting applications for the aid) that will apply to the call. - Publicity and open competition: to be effective, subsidies and aid for starting businesses will be awarded through a public call published in the relevant Official Gazette
However, there are (expressly provided for) cases in which the governing regulation, depending on the nature of the aid or subsidy or the type of beneficiaries, allows it to be granted without open competition, that is, without it being aid that is open for a set period and publicly (to everyone who wants to apply for it) through the relevant Official Gazette, although these tend to be very specific cases that we will not cover in this post as they are not at all common.
Rules of the calls for applications for aid for starting a business
The rules of public calls for subsidies and public aid for starting businesses must be published in the BOE or in the Official Gazette or Bulletin of the relevant Autonomous Community in each case, and must contain, as a minimum, the following points:
- The event that motivates the aid, which in this case is the creation or launch of a business.
- The amount of the aid or subsidies for starting a business and its budget allocation, that is, what the subsidy or aid is offered for and must be used for.
- Minimum requirements for the aid for starting a business to be granted.
- Information and documentation that applicants must provide
- Deadline for submitting applications for aid for starting businesses (it cannot be less than 15 days).
- In some cases, the public institution issuing the call for entrepreneurship aid applications may attach to the call rules a financing plan or a forecast of expenses and income, where it is considered necessary, although this information is purely informative.
In any case, the processing of award procedures will follow whatever the rules of each call establish, but must also be carried out in accordance with the various regulations governing entrepreneurship aid and subsidies and with the rules of the common administrative procedure for applying for aid.
Objective assessment criteria and applicable scoring scale for entrepreneurship aid
- Meeting the deadlines or dates by which the application and the resolution of the call must be carried out and decided.
- Setting up a business with an activity and legal form that are valid under the requirements set out in the call rules and the conditions and obligations attached to each aid (adopting the subsidized behaviors).
- Deadline by which the beneficiary must show that the public funds were used for the purpose for which they were granted. That is, proving that the things for which the entrepreneurship aid was granted were actually carried out or adopted, and what they cost.
Procedure for awarding aid for starting a business
The procedure for awarding aid and subsidies for setting up a business will begin at the request of interested parties (applications must meet the requirements set out in the legislation applicable to the administrative procedure, as appropriate in each case), that is, on the interest and application of potential beneficiaries, unless the regulations governing them provide that they must be started ex officio (by public call, except in cases of named aid and subsidies granted for this purpose, which I will explain later in this post).
Once the beneficiaries have submitted the documentation (if the aid is started at the request of interested parties) and the requirements for resolving the aid for starting a business have been met, the relevant public body will decide, within the period set in the rules, whether the subsidy is finally granted and, if so, what amount is granted (where it is variable), or whether the aid is finally not granted, in which case the reasons why the application was rejected are set out (sticking strictly to the objective assessment criteria and scoring scale contained in the rules, which must be documented in the file).
The notification of whether or not the aid is granted in each case is called the resolution, and its main purpose is to bring the administrative procedure to an end.
How are applications and documentation submitted to request entrepreneurship aid?
The documentation required in the application procedure for subsidies and aid for starting a business must be original or, failing that, an authentic or plain copy of it, and the applicant may later request its return after verification by the managing body.
What types of subsidies and aid for starting a business are there?
First of all, it is important to look for aid for each specific case, knowing all the elements needed to apply for it, since each type of aid requires a series of requirements that you may not meet. It is also possible that the aid does not fit exactly what you need (financing, hiring…).
There are subsidies for new businesses at the regional level and also at the state level. Some of the types of subsidies and aid available across the whole territory, because they are common to all the Autonomous Communities, are the following:
- Named aid and subsidies are those included in the budget and those arising from modified credits agreed during the budget year for beneficiaries who have been favored.
- Generic aid and subsidies are those stipulated or recorded in the expenditure statements of the Budget Act for a variety or plurality of beneficiaries or for a purpose without specification by the beneficiaries.
- Specific subsidies or aid are those granted without open competition (without encouraging public participation), that is, they are aimed at an individual beneficiary for reasons of recognized public interest, charged to the credits set out in the expenditure statements of the Budget Act for generic subsidies.
Where can you find subsidies and aid for starting a business?
A few years ago, looking for an entrepreneurship subsidy or aid was more than complicated, since until the crisis there had not always been strong promotion of entrepreneurship in our country; it was also an arduous and tedious task to an unimaginable degree, since gathering information on the various aid for starting businesses from the different bodies and departments in charge of managing and resolving that aid was almost a titanic effort.
Fortunately, this has changed quite a lot and nowadays all kinds of subsidies can be found easily, whether aid for starting a business or for hiring, innovating or investing…, thanks to search engines specialized in aid and subsidies, both public and private.
Generally, these search engines are quite simple to use, since they let you filter (by category according to the function of the aid, its purpose or role, the type of beneficiary, the type of deadline and its geographic scope of application, as the most common options among others) among the hundreds of public subsidy programs so you can quickly and easily find the type of aid that best fits your needs.
What are the main subsidies and aid for starting a business in Spain?
Subsidies and aid for women entrepreneurs
This group of aid and subsidies is aimed at making it easier for women entrepreneurs to launch their businesses. Of all the existing aid of this kind, the following stand out:
- Microcredits granted by the Ministry of Equality: The terms of this type of financing are very attractive because, among other advantages, projects classified as viable do not need to provide a guarantee. All women willing to start a business who meet the basic requirements and who have difficulty accessing financing (or who have no guarantee) can apply for this aid.
- The Instituto de la Mujer (Women’s Institute) also offers numerous kinds of aid to women who want to start a business, such as free technical and financial advice on the project.
Subsidies and aid for starting an innovative business
Spain is a country whose production structure is clearly deficient, technically and technologically, compared with other countries around us. In fact, our economy is characterized by producing goods and services with a low level of technology in almost all sectors. For this reason, it is no surprise that there is a desire to encourage the creation of technology companies.
The Ministry of Economy and Competitiveness currently offers very interesting support for any entrepreneur, consisting of a tax reduction of between 35% and 60% for projects focused on research and technological development.
More subsidies and aid for starting technology-based companies
- CDTI’s NEOTEC aid program (Center for Industrial Technological Development): This is an aid program that aims to support the creation and consolidation of new technology-based companies in Spain.
The aid from the Neotec Program is used to finance the launch of new business projects that require the use of technologies or knowledge developed from research activity, and in which the business strategy is based on technological development. - CDTI’s INNVIERTE aid program: The Innvierte Program is part of the Spanish Science, Technology and Innovation Strategy 2013-2020 and is aimed at promoting business innovation and technical and technological progress by supporting venture capital in the R&D&I field in order to boost its growth and impact.
It consists of the capitalization of technology-based and innovative SMEs established in Spanish territory through joint public and private investment (investors with knowledge of the market in which the business will operate, with contacts, a client portfolio and productive assets), with the private investment being the majority in this type of transaction.
The maximum duration of the agreements signed under this program is 12 years, with investment periods of between 4 and 6 years.
This strategy also aims to promote business innovation by supporting venture capital investment in technology-based or innovative companies.
Subsidies and aid for starting a business from the Autonomous Communities
Each Autonomous Community manages aid and subsidies for the creation and modernization of innovative companies. These are subsidies ranging between 15% and 40% of the investment allocated to the project, and they are aimed mainly at innovative companies. To find out which programs are available, you will need to contact the regional department in charge of this area in the Autonomous Community where the business is based, or use one of the directories/search engines for business subsidies and aid that we detailed earlier, since the rules, conditions of award, requirements, deadlines, amounts, etc. will differ depending on each region.
Subsidies and aid for starting businesses: Business Angels
In recent years, because of the crisis, many people have launched their own businesses as a way out of the economic situation that, in many cases, this recessionary cycle has left behind.
This has led to a search for new ways of starting businesses and obtaining financing outside the traditional credit institutions: alternatives that are cheaper, offer greater advantages and also add value to the company.
This has driven the growing emergence of Business Angels who invest in micro-niches and small projects as a form of venture capital that differs from the usual investments in the financial markets.
Much of the reason for the appearance of this type of investor in our economy has been driven largely by the fact that the Entrepreneurs Act includes significant aid and deductions for this type of investor and, logically, has opened up a great business opportunity for them. Some of the subsidies, incentives and aid of this kind are, for example, a 20% deduction on the income tax return of up to €50,000. In addition, some Autonomous Communities add an extra tax saving in the regional portion.
And private investors or business angels (they can also be private funds) are an excellent option for financing and creating technology entrepreneurship projects.
As well as providing capital to the business, a Business Angel also provides experience in its management and development. The combination of these factors is called “smart money”.
And starting a company requires more than money, since you will also need customers (bringing in client portfolios), contacts (suppliers and potential customers), knowledge (management and technical) and many other very important factors for the creation and growth of any business.
In this web directory you may be able to find investors and business angels suited to your business quickly and easily.
ICO ENISA: business creation for Entrepreneurs and Young Entrepreneurs
ICO ENISA is a program for business creation by entrepreneurs and young entrepreneurs, which takes the form of a credit line with great advantages (participating loan), since it requires no guarantees, has fairly comfortable payment flexibility, and its aim is to finance projects and SMEs promoted by entrepreneurs, so they can make the investments needed in their early stages and carry out their business project.
It can be applied for by entrepreneurs from any sector except real estate and finance, and it is aimed especially at SMEs incorporated as commercial companies in the 2 years prior to the application for this aid for starting a business.
It can be applied for from anywhere in Spain and the criteria for awarding it are as follows:
- The business format or model must be innovative or novel or, failing that, offer clear competitive advantages and differences.
- The level of own funds required to apply for this loan must be at least equal to the amount of the loan requested, in the case of the entrepreneurs line. In the case of the young entrepreneurs line, the maximum age of those who hold the majority of the business’s share capital cannot exceed 40, and the partners’ minimum contributions via capital/own funds must be at least half of the loan (around 50% of it).
- A balanced financial structure must also be maintained, along with a high level of professionalism in running the business, the technical and economic viability of the business project (that the business is profitable), and audited financial statements or, failing that, the filing of its annual accounts with the Mercantile Registry for the last closed financial year in the case of companies already incorporated.
ICO Companies and Entrepreneurs 2017
In itself it is not aid either, since it is not a non-repayable grant, but I think it is important to include it because all businesses sooner or later tend to need financing and liquidity.
It is a flexible credit line (although it usually requires guarantees) with better commercial terms than usual (fixed and variable rates depending on the managing credit institution) that lets you apply for financing through the Companies and Entrepreneurs Line of the Official Credit Institute in the form of a loan or leasing to invest in productive assets or to improve the liquidity of new companies. It allows you to finance:
- Covering liquidity needs: working capital needs for current expenses, payroll, suppliers, etc.
- Financing productive investments within Spain:
- Acquisition of new or second-hand productive fixed assets. Also passenger cars up to a maximum of €30,000 (+ VAT) and industrial vehicles in their entirety.
- Acquisition of companies.
- VAT or IGIC (where applicable).
- Up to 50% of the working capital costs and expenses linked to the investment.
- Renovation of homes and common areas by individuals and homeowners’ associations.
This financing can be applied for by any person and legal form (self-employed people, companies, mixed entities…) anywhere in Spanish territory.
The only requirements to apply for this aid for setting up businesses are the following:
- The investment made by the entities must take place in Spain, regardless of where the registered or tax address is located (formal or statutory, which may be outside Spain) and of whether the majority of the capital is domestic or foreign.
- If the financing is requested by individuals and/or homeowners’ associations, it may only be used exclusively for the renovation of their homes.
Lump-sum payment of unemployment benefit or capitalization of unemployment benefit
In itself it is not aid but rather an incentive, but it has had a notable influence on the creation of businesses during the crisis and is largely a trigger for self-employment in our country.
The lump-sum payment of unemployment benefit is a measure intended to encourage and facilitate self-employment initiatives, by paying the present value of the full amount of the contributory-level unemployment benefit to beneficiaries who intend to carry out a business activity.
In other words, all of your unemployment benefit can be capitalized into a single payment, if it is used for an investment project covered by the rules of this incentive for starting businesses.
The destination of the amount paid depends on the legal form the company will take, since:
- If the unemployed person joins a worker-owned company or a cooperative as a partner (already existing or newly created), the benefit is paid in a single payment for the amount corresponding to the mandatory contribution generally established in each cooperative, or to the acquisition of shares or holdings in the share capital of a worker-owned company.
With the amount of benefit that remains after the contribution by the new partner who capitalizes their unemployment benefit, the Managing Entity may pay the amount quarterly to subsidize the worker’s Social Security contributions. - If starting an activity as a self-employed person, the unemployment benefit is paid in a single payment for the amount corresponding to the investment needed to carry out the activity, including the amount of the taxes required to start the activity, but capped at a maximum of 60 percent of the unemployment benefit still to be received; that is, 100% of the benefit is not received (this does not apply to workers with a disability or incapacity of more than 33% who intend to start a self-employed activity).
The remainder of the benefit that has not been obtained as a lump sum will be paid monthly by the Managing Entity to subsidize the worker’s Social Security contributions to the Special Regime for Self-Employed Workers, as happens when joining a worker-owned company or cooperative.
In fact, if the person registered in the self-employed regime ends up not making the investment, they may apply for and obtain exclusively the full amount of the benefit still to be received to subsidize Social Security contributions.
As you can see, state and regional (Autonomous Community) aid puts many advantages and savings opportunities within your reach for starting businesses, both online and in the traditional way, but in almost all cases it is heavily targeted at very specific sectors and technology-based companies as part of the national competitiveness strategy.
Startups are the type of company that most of these subsidies and aid for starting businesses are aimed at, so if you are thinking of applying for some to set up your online business based in Spain, now is your time.
Don’t wait any longer and get informed; there are plenty of possibilities and advantages you don’t know about yet.
If you are going to start a new business, you may also find this article on email marketing for starting to attract your first customers through newsletters interesting.
Once you are clear about the aid available, the next step is the procedures with the Tax Agency and Social Security to formally set up your company.