EU funding for your startup: what comes with the money

A grant is non-repayable funding, most often from EU funds and sometimes from the state budget: a company receives money for a specific project and does not repay it as long as it keeps the conditions it came with. Those conditions come from the state aid rules, from the law and from the grant agreement, and some of them last for years after the final payment. Most grant problems do not come from a bad project but from a rule nobody on the team read in time.

This article is for a founder who is weighing a grant or has already won one. It is not a list of open calls and does not explain how to write an application. Where something depends on the specific call, it says so.

1. What a grant is, legally

In short: when the EU or the state gives money to a company, it counts as state aid, and state aid is allowed only under strict rules. That is why a grant comes with conditions.

A grant, in Bulgarian "безвъзмездна финансова помощ", is a public resource given to a specific recipient for a specific purpose. The recipient is called the beneficiary. When public money goes to a company that operates on a market, it is as a rule state aid within the meaning of Art. 107 of the Treaty on the Functioning of the EU. State aid can only be granted under set rules: as small-amount aid (de minimis), under the General Block Exemption Regulation, or under a scheme approved by the European Commission. That is why almost every condition you will meet comes from one of these frameworks.

Grants for startups come from a few kinds of source: programmes the European Commission and its agencies manage directly, such as Horizon Europe and the European Innovation Council; Bulgarian programmes for 2021-2027 co-financed by the EU shared-management funds, such as the programmes for competitiveness and innovation and for research, innovation and digitalisation; and measures under the Recovery and Resilience Plan. Loans, guarantees and equity investments made with public money are not grants: they are repaid or cost a stake in the company. Hiring subsidies under the Employment Promotion Act are a separate regime linked to employment law.

Amounts, aid intensities and deadlines are set by each call and change. That is why there are no programme figures here. What decides is the conditions for applying and implementation of the specific call and the grant agreement.

The Bulgarian rules in this article (the Act on the Management of EU Shared-Management Funds and the acts under it) apply to the Bulgarian programmes. Programmes the Commission manages directly have their own model grant agreement, and the rules on costs, payments and audits are in it.

2. Before you apply: four checks

Small or medium-sized enterprise status

Most startup calls are for small and medium-sized enterprises (SMEs) only. A small enterprise has fewer than 50 staff and annual turnover or an annual balance sheet of up to EUR 10 million. The point is that you do not count only your own company. For example: if your company owns more than half of another company, or another company owns more than half of yours, the staff and turnover of both are added together, and you may no longer be a small enterprise. If the stake is between 25% and 50%, the matching percentage of its figures is added. The same can apply when one person controls two companies in a similar line of business. The exact rules:

• Linked enterprises. If one company holds the majority of the votes in another, can appoint the majority of its management, or controls it by contract, articles or an agreement with other shareholders, their figures are added in full.
• Partner enterprises. If one company holds 25% or more of the capital or votes in another without controlling it, a proportionate share of its figures is added to yours.
• The investor exception. Venture capital funds, business angels with a total investment in the company below EUR 1.25 million, universities and institutional investors can hold 25% or more without making the company a partner, provided they are not linked to it. If they do not take part in management, they are presumed to have no dominant influence.

A new company with no approved accounts yet uses a good-faith estimate for the year. As a rule, status is lost only if the staff and financial thresholds are exceeded in two consecutive years, but a change in ownership can change the picture at once. That matters for an investment round (see section 8).

The de minimis ceiling and the "single undertaking"

De minimis is small-amount aid that is not approved in advance by the Commission. The ceiling is EUR 300,000 per single undertaking over a period of three years. The aid counts as granted at the moment you obtain the legal right to it under the national rules, not when the money reaches your account.

The ceiling applies to the group, not only to your company: the aid received by companies that control one another, for example a parent and its subsidiary, is added up under one ceiling.

More precisely, a "single undertaking" covers all companies between which at least one of these links exists: a majority of the votes, the right to appoint or remove the majority of the management, dominant influence by contract or articles, or control of the majority of the votes under an agreement with other shareholders. A link through another company also counts. If you or your co-founders hold stakes in other companies, check how the call's declaration treats them.

If new aid would take you over the ceiling, the whole of the new aid cannot be granted under this regime, not just the amount above the ceiling. The minimal aid you have received can be checked in the Ministry of Finance register of minimal aid.

Undertaking in difficulty

In short: a company with large accumulated losses or in insolvency generally cannot receive aid under this regulation.

The General Block Exemption Regulation does not apply to undertakings in difficulty, except for certain schemes, among them start-up aid schemes. For a limited liability company, the main case is accumulated losses that have wiped out more than half of the subscribed capital, the capital entered in the commercial register. That rule does not apply to an SME that has existed for less than three years. A company in insolvency proceedings, or one that meets the conditions for opening them, is also in difficulty. The check is made on the latest accounts, before you sign the declaration.

The incentive effect: don't start before you apply

The rule is simple: do not sign purchase contracts for the project or start the work before you file the application. Studies and permits are the exception.

Legally this is called the incentive effect: aid under the General Block Exemption Regulation is granted only if the written application was filed before work on the project started. The start is the first of these events: the start of construction works, or the first legally binding commitment to order equipment or any other commitment that makes the investment irreversible. Preparatory steps such as permits and feasibility studies do not count. Separately, Bulgarian law excludes costs for projects that were physically completed or fully carried out before the application form was filed. In practice: a contract signed or an invoice issued for the project activity before you apply can make the cost ineligible.

3. What you declare, and why it is serious

When you apply, you usually declare the minimal aid you have received, your SME status, that you are not in difficulty, and other circumstances the call requires. These declarations are the basis on which the aid is granted.

The Criminal Code has a specific offence for this. Under Art. 248a(2), a person who submits false information, or withholds information in breach of a duty to provide it, in order to obtain funds from EU funds or the national co-financing for them, is punishable. Where the act is committed by a person who manages or represents a legal entity, the penalty under paragraph 3 is imprisonment from one to six years and a fine of roughly EUR 1,023 to EUR 5,113. Where the funds are obtained as a result, paragraph 5 provides for imprisonment from two to eight years.

The offence requires false or withheld information for the purpose of obtaining the funds. An error found and corrected in time is not the same thing, but false data is also a ground for a financial correction (section 7). That is why declarations are signed after checking, not copied from a previous call.

4. How the money moves

You pay first

Most often a grant works like this: you pay the costs first, then report them and get back the approved share. The law also allows other forms, such as a fixed amount per unit or a lump sum, and the call says which one applies to you.

• An advance exists only if the call conditions provide for one. It is paid within two weeks of the request, unless the conditions set a longer period, and against security under the rules of the act governing payments.
• Interim and final payments come after the managing authority, the body that runs the programme, checks that the costs are eligible. It pays within 80 days of the request. If it asks for more documents or explanations, the period stops, but for no more than one month in total.
• Only verified eligible costs are reimbursed. If a cost is not accepted, the difference stays with you.

The practical point is cash flow: the project must be able to pay its costs before the grant reimburses them, and your own co-financing is paid either way.

Which costs are eligible

A cost is eligible if, at the same time, it: is for an activity in the approved project; falls within the categories and limits in the call conditions; is for goods actually delivered, services actually performed or work actually done; was incurred lawfully; is recorded in separate analytical accounts or a separate accounting system; has an audit trail with the documents kept; and complies with the state aid rules. Costs of preparing the application are often expressly ineligible, so check the call before you plan them.

VAT

In short: if you are VAT-registered and can reclaim the VAT, the grant does not pay it.

Under the 2021-2027 programmes funded by the EU shared-management funds, recoverable VAT is not an eligible cost. If you are VAT-registered with a right to input tax credit for the project purchases, the grant usually covers only the amount net of VAT. Non-recoverable VAT can be eligible. How the beneficiary determines which VAT is recoverable and how it proves it is set out in the Minister of Finance's instruction on VAT as an eligible cost and in the call conditions.

5. How you spend: contractors, related parties and double funding

Choosing a contractor

A startup is usually not a contracting authority under the Public Procurement Act. It then buys under the special rules of the act on the EU shared-management funds. A selection procedure with a public invitation is mandatory where the grant is more than half of the total value of the project and the estimated value, including your co-financing and excluding VAT, is:

• roughly EUR 15,339 or more for supplies or services;
• roughly EUR 25,565 or more for construction.

The managing authority can require a public invitation even where the grant is half of the project or less. Buying or renting land and buildings does not go through a public invitation.

The invitation is published on the Single Information Portal. The deadline for offers is at least 7 days from publication, and for construction at least 10 days under the decree that governs the procedure. The invitation cannot contain conditions that unreasonably restrict participation, or name a specific brand or model without the words "or equivalent". The contract goes to the most economically advantageous offer under the published criteria.

How offers are examined and the contract is concluded is governed by Council of Ministers Decree No. 4 of 11 January 2024. Decree No. 160 of 2016 applies only to procedures announced before the new decree took effect. If you read guidance that cites Decree 160/2016 for a new project, check which act governs your procedure.

Related parties

Under Decree No. 4 of 2024, a contract cannot be concluded with a candidate that is a related person of the beneficiary or of a member of its management or supervisory body. An offer from a co-founder's company or from a manager's family member is not a way around the rule, it is a breach of it.

Double funding and the paper trail

An activity can receive support from more than one source, but the same cost cannot be declared twice, for example the same salaries under two programmes. Every cost needs an audit trail: contract, acceptance, invoice, payment and booking to a separate analytical account. The supporting documents are kept for five years from 31 December of the year of the managing authority's last payment.

The beneficiary must also acknowledge the EU support, for example with a short description of the project on its website and a poster or a plaque depending on the size of the project. Failing to carry out the visibility measures is also a ground for a correction. What the contract with your supplier on the project should contain is in our article on supplier contracts.

6. After the grant: how long you keep the investment

If the project includes investment in infrastructure or productive investment, EU law requires the contribution to be repaid if, within five years of the final payment, or within the period under the state aid rules where one applies, any of the following happens:

• the productive activity stops or is relocated outside the region where the support was received;
• ownership of infrastructure changes in a way that gives a company or a public body an undue advantage;
• a substantial change occurs in the nature, objectives or implementation conditions of the project that undermines its original objectives.

A Member State may shorten the period to three years for maintaining investments or jobs created by SMEs. That is an option, not an automatic rule, so the period for your project is the one in the agreement. Repayment is proportionate to the period in which the condition was not met. The rule does not apply where the productive activity stops because of a non-fraudulent insolvency.

These rules speak about the activity and the investment, not expressly about a sale of shares. A change in the company's ownership can still affect the grant agreement through its own change-of-control clauses, and relocating the activity in a holding restructuring can fall under the first case.

7. Irregularities and financial corrections

In short: if you break a rule of the grant, the state can reduce the aid or ask for part or all of the money back. The law calls the breach an irregularity, and the reduction or repayment a financial correction.

More precisely, an irregularity is a breach of applicable law, by an act or omission of an economic operator, that has or would have the effect of prejudicing the EU budget by charging an unjustified item of expenditure to it. A financial correction is the way the aid granted is cancelled in whole or in part because of an irregularity.

The grounds in the law include: a conflict of interest; breach of the state aid rules; breach of the durability requirement; no audit trail or no analytical accounting; failure to carry out the visibility measures; failure to meet the approved indicators; and breach of the rules on choosing a contractor. The irregularities in choosing a contractor, and the percentages for them, are listed in a Council of Ministers ordinance.

How the correction is set:

• The amount equals the real financial consequences of the breach. Where those cannot be quantified, a percentage of the affected costs is applied.
• A correction can cover the whole project, one activity, one contract or one cost, but the total cannot exceed the aid actually granted.
• The decision is issued by the head of the managing authority and must give reasons. Before that, you must be given the chance to object in writing within a period of no less than two weeks, and the decision is issued within one month of your objections.
• The decision can be challenged in court under the Administrative Procedure Code within 14 days of being notified. A challenge does not suspend enforcement, and the court rules within two months.

If the correction is set after the payment, the amount is repaid voluntarily within 14 days. After that, it is offset against the next payment on the project with default interest, or collected from the security. After the final payment, unpaid corrections and amounts paid in error become a public receivable: the state collects them like unpaid tax, including by enforcement, under the Tax and Social Security Procedure Code. The limitation period, after which the amount can no longer be collected, is five years from 1 January of the year after the one in which they were due, and the absolute period is ten years, with exceptions set out in the code.

The letter inviting your objections is the moment when working with a lawyer makes the most sense, because the time limits are short and the evidence has to be gathered now. How to choose one is in our article on choosing a lawyer.

8. An investor or a sale while the grant runs

An investment round or a sale during the project or the durability period affects three separate things:

• SME status. A new investor that becomes a partner or linked enterprise adds its figures to yours. A venture capital fund usually does not do this (section 2), but a corporate investor with control can.
• Durability. Relocating the activity or substantially changing the project in a restructuring can trigger repayment.
• The grant agreement. Its clauses on change of ownership or control and on transferring the project results apply separately from the general rules.

The investor will ask about this in due diligence. How to prepare for that review is in our capital raising playbook. If you are considering moving the shares into a foreign holding company, see our article on corporate structure and check the grant conditions before you sign. Who owns the rights in what the project develops is covered in our article on intellectual property.

9. Accounting and tax, in short

As a rule, a grant is not recognised as income all at once, but gradually, together with the costs or depreciation it funds. The tax side, including how repaid aid is booked, is in our article on startup taxes. For a specific correction, how it is reflected in the accounts is your accountant's call.

10. How it usually goes wrong

These situations are not predictions, but a way to see the rules at work:

• A purchase without a public invitation. Equipment above the threshold bought directly, where the grant is more than half of the project, breaches the rules on choosing a contractor and is a ground for a correction under the ordinance.
• The de minimis ceiling exceeded through a linked company. The aid of the companies in your group, for example a parent and its subsidiary, is added up. If new aid would cross the ceiling, none of it can be granted as de minimis.
• Cash flow. You pay the costs first, and the payment period can stop while questions about the report are answered. A project that relies on quick reimbursement to pay salaries is exposed.
• Lost SME status. A deal after which a large company controls yours can change your status, and the grant agreement can attach its own consequences to that.
• A change during the durability period. Stopping or relocating the activity, or substantially changing the project, triggers proportionate repayment.
• A success fee in the report. A cost outside the call's eligible categories is not reimbursed, whatever the invoice says.

11. Checklist by stage

Considering whether to apply

• Work out your SME status together with linked and partner enterprises.
• Check the minimal aid received over the last three years, including by linked companies.
• Check the latest accounts for a loss of more than half of the capital.

Filing the application

• Do not sign contracts or pay for project activities before filing.
• Check every declaration against the real figures.
• Read what the call accepts as an eligible cost and how it treats VAT.

Signing the agreement

• Note the durability period and the change-of-ownership clauses.
• Plan the purchases above the public-invitation thresholds.
• Plan cash flow without counting on an advance that is not provided for.

Running the project

• Separate analytical accounts and a full trail for every cost.
• No contract with a related party.
• The visibility measures from the start.

An investment or a sale with a grant in place

• Review the grant agreement and the durability period before signing the deal.

This article is general information as of November 2026, not individual legal advice. NOMELIA is a legal media outlet, not a law firm or a consultancy. The General Block Exemption Regulation (Regulation (EU) No 651/2014) applies until 31 December 2026; the Commission is preparing a new text, and the rules after that date need to be checked. The public-invitation thresholds and the Criminal Code fine are expressed in leva in the current texts; the euro amounts are converted at the fixed rate of EUR 1 = BGN 1.95583 and rounded.

The first step can be checked in an afternoon: before you decide whether to apply, check the minimal aid you have received in the Ministry of Finance register and work out your SME status together with the companies linked to you.

This article is part of our overview of the Bulgarian laws every startup should know.

The full picture, stage by stage: starting a startup in Bulgaria - a step-by-step legal guide.