A sideline is always carried out in Germany when the owner used earns the lion’s share of his income from another source of income, for example employment as an employee. In addition, the time invested for the small business must not exceed the time of the primary source of income, so that it can actually still be considered a small business and thus benefit from the tax advantages.
Trade is not used as the primary source of income
Borrowing is still possible, even if a trade is not used as the primary source of income and is therefore only considered as a secondary trade. Because even with a secondary trade or a business that is managed as a small business owner, costs are incurred that cannot always be directly covered by the sales achieved. In addition, in the initial phase it is not uncommon for larger investments to be made that cannot be fully covered from the current salary of an employee.
In this case, a loan for a secondary business has to be taken out from a bank, and this loan is often only possible when the borrower can actually show another income. So if you already have at least an average income as an employee, you can also use this to increase your creditworthiness to take out a loan for a secondary business. In the start-up phase of the secondary business, a business plan may also have to be submitted to the bank if the loan is relatively high. While this is not a common procedure for an ancillary business, it is not uncommon for banks with an average or low acceptance rate.
Generate additional income from the secondary trade
The use of debt capital is a common means of covering costs and making investments possible in the economy. As a result, a loan for an ancillary business is not uncommon, although the credit line is generally much smaller than that of traditional companies. This is also due to the fact that usually no employees are employed in a secondary trade, which is why wages and salary payments become obsolete.
In order for the borrowing to actually pay off, the profitability rate of the secondary business should be higher than the interest burden, because this is the only way to guarantee that the capital used is actually used positively for business purposes. How long the capital used then pays off or a break-even point is reached depends largely on the success of the company and the market. The efforts that are carried out for the secondary trade are of course also a decisive factor, especially because the time investments are limited by law.
At least in the case of smaller sums
The loan for the secondary trade can, at least in the case of smaller sums, also be taken out as a classic installment loan or consumer loan, since it is free to use. From the borrower’s perspective, striving for a low interest burden should be a matter of course, because limited capital should be used well in the start-up phase and the associated costs should be kept as low as possible.