Loan or subsidy to start your business

If you are planning to start your own business and you are not rich enough to cover all costs for your business start,  you may consider obtaining governmental loan or subsidies. What is the difference? This is about merit and demerit of subsidies comparing with loans. 

Merits of subsidies

1 No.1 merit is, you do not have to payback.

2 (this is my personal opinion) You can improve your business plan during your application procedure.

As you know, all applications are examined and selected from a viewpoint of logicality, solidity, feasibility, convincingness etc.. Applicants have to make selectors convince that their business plan is worth to pay subsidy, which comes from tax money. 

Moreover, you can utilize the business plan you developed for the application in various occasions, such as meeting with bank, potential business partners, customers and so on.  You may say that you have to develop a business plan to ask for a loan as well. But I (personally) think the applications for subsidies are better for the first step because those for loans are too much focused on financing.

Demerits of subsidies 

1 You can get your subsidy when the project is completed.

This means you have to pay all costs for yourself once and later you will receive subsidy money. If you are in a kind of hurry, subsidies may not satisfy your urgent needs.  

Bad news is, recently, it takes much longer to complete all process due to a kind of "subsidy babble" caused by the disease which starts form C. Sometimes, it may take over 18 months to obtain the subsidy. (apply, 1-2 months to be selected, 12 months for the project, file the project report, 2-3 months for the examination of the report, final notification of the amount of the subsidy, sending invoice, 1-2 month to bank transfer). Please be aware of your business cash flow.

2 The amount of the subsidy you claimed is not promised.

Due to the subsidizer's strict regulation, your expense you claimed may be rejected after you completed the project.  If  that happens, you will be so shocked, I understand. But that happens sometimes. If you get a loan, they will pay you the amount of money they promised and you do not have to worry about it.