Turkey’s expansion of state-backed finance for young businesses is more than an entrepreneurship initiative. It is an attempt to strengthen the local suppliers, software developers, research companies and manufacturing ventures on which foreign investors increasingly depend. Announced in September 2025 as support of up to TL2 million, the KOSGEB programme offered deferred, interest-free financing for selected business-development expenditure. Subsequent official documents, however, show why investors must look beyond headline figures: the operative ceiling for the third 2025 call was TL1.5 million, plus TL150,000 for certain founders, before the programme was restructured and enlarged in 2026.
What the 2025 Programme Actually Offered
Industry and Technology Minister Mehmet Fatih Kacır announced the third 2025 application period on September 30, saying entrepreneurs in manufacturing, information technology and scientific research could receive support for personnel, software, machinery, equipment, moulds and purchased services. Applications were accepted from October 1 to October 31.
According to Kacır, KOSGEB had already approved TL1.62 billion for 1,127 projects during the first two application periods of 2025. The underlying investment represented by those projects was TL2.7 billion. KOSGEB later reported that 3,164 applications were submitted in the first period and 3,361 in the second.
Those figures imply that only about 17 percent of applicants obtained support. The average approved amount was approximately TL1.44 million per project. This was therefore a competitive allocation process, not an automatic benefit for every newly established company satisfying basic conditions.
There was also a material difference between the political announcement and the detailed call documentation. Anadolu Agency reported Kacır’s statement that as much as TL2 million would be available. KOSGEB’s own notice for the third 2025 period specified a TL1.5 million ceiling at an 80 percent support rate, with an additional TL150,000 for entrepreneurs who were young, female, disabled, veterans or first-degree relatives of fallen service members.
The financing was repayable, but KOSGEB charged no interest or commission, and repayment was scheduled to begin after the 36-month programme period. In a high-inflation, high-interest environment, that deferral gave the support an economic value considerably greater than its nominal amount.
For investors, the discrepancy between a headline ceiling and the operative call limit is not a minor technicality. Cash-flow models should be built around the current programme rules, eligible invoices, payment schedule and approval decision, rather than a ministerial summary. The support should also be treated as contingent financing until the application has been assessed and formally accepted.
A Selective Industrial and Technology Policy
The business-development component was deliberately concentrated in activities that the government associates with productivity and technological capacity. Eligible businesses had to operate under specified NACE classifications covering manufacturing, telecommunications, computer programming and related consultancy, information infrastructure, data processing and hosting, or scientific research and development.
KOSGEB said applications were evaluated by committees comprising agency personnel, academics and independent sector representatives. During the 2025 third call, the highest-scoring 1,000 projects nationally, together with the six leading projects in each province, advanced to jury evaluation. Final awards went to the top 500 nationally and the three highest-ranked projects in each province, based on combined committee and jury scores.
This design has two consequences. First, correct sector classification is essential but insufficient. Applicants must also show commercial viability, employment impact, a credible expenditure plan and a defensible contribution to the programme’s priorities. Second, province-level ranking can affect the probability of success, making location selection relevant to both operating economics and incentive access.
The programme also imposed corporate conditions. KOSGEB’s published guidance generally required the applicant business to be no more than three years old for business-development support and to be registered actively in the KOSGEB database with an up-to-date enterprise declaration. The entrepreneur was normally required to own at least 50 percent of the company and possess sole authority to represent it throughout the support period, although later rules provided exceptions for businesses holding a recognised technology-enterprise badge.
These provisions matter for international joint ventures. A foreign investor that takes majority control at incorporation may unintentionally make a locally founded venture incompatible with the programme’s entrepreneur-ownership test. Conversely, leaving operational control with a qualifying founder solely to preserve eligibility can create governance, consolidation and minority-protection risks. Incorporation and corporate structuring therefore need to be designed alongside the incentive analysis, not after the shareholding agreement has been signed.
Why the Financing Matters in Turkey’s Credit Environment
The programme emerged during a prolonged period of restrictive financial conditions. The OECD’s 2025 Economic Survey recorded that the Central Bank of the Republic of Türkiye raised its policy rate from 8.5 percent in mid-2023 to 50 percent by March 2024. Although rate cuts began later, commercial borrowing remained expensive and subject to quantitative growth restrictions.
The OECD’s 2026 SME financing review found that 31.4 percent of Turkish businesses were credit-constrained in 2024, while one in four micro, small and medium-sized enterprises avoided applying for loans because interest rates were unfavourable. The OECD also reported that banks represented 77.3 percent of financial-system assets in 2024, illustrating the continued importance of bank credit where venture capital or market finance is unavailable.
Against that background, interest-free KOSGEB financing with a long repayment holiday can help a young manufacturer buy equipment or allow a software company to recruit technical staff before revenue reaches scale. It can also improve the resilience of domestic suppliers serving multinational companies.
Inflation, however, cuts both ways. The Turkish Statistical Institute reported that consumer prices increased by 30.89 percent during 2025, after a 44.38 percent rise in 2024. Deferred repayment reduces the real burden of a fixed lira liability, but inflation can also make an approved machinery or payroll budget obsolete before procurement is completed. Companies may need substantial equity or working capital to cover price increases, value-added tax, noneligible expenses and the portion outside the support rate.
A Large SME Base, but a Persistent Productivity Gap
The importance of KOSGEB’s intervention is clearer in the structure of Turkey’s business economy. TurkStat reported that 3.93 million enterprises qualified as SMEs in 2024. They represented 99.6 percent of enterprises and 68.5 percent of employment, but only 41.2 percent of value added at factor cost.
The OECD noted that the SME share of Turkish gross value added was below the approximate 51 percent average in the European Union. That gap points to a central policy problem: Turkey does not lack small businesses, but many remain small, undercapitalised and less productive than larger enterprises.
This distinction is relevant to foreign direct investment. Multinationals do not benefit merely from a high number of potential suppliers. They need companies capable of meeting technical specifications, certification requirements, delivery schedules, cybersecurity standards and international financial reporting expectations. Expenditure on machinery, software, testing, certification, design and intellectual-property services can therefore strengthen the domestic ecosystem around an international investment.
The trade data show similar potential. TurkStat said micro-enterprises accounted for 75.6 percent of all exporting enterprises in 2024, although they generated only 18.8 percent of export value. A successful business-development programme could help some of those firms move from occasional exporting into structured participation in regional value chains.
For foreign companies sourcing from Turkey, this creates opportunities in supplier development and import-export facilitation. It also creates due-diligence requirements. A supplier’s grant or repayable support should not be mistaken for evidence of adequate capacity, quality control or financial stability.
The Programme Has Continued to Evolve
KOSGEB revised the programme again in 2026. Its latest published structure increased the standard business-development ceiling to TL2.25 million at an 80 percent support rate. An additional TL250,000 became available where the entrepreneur was young, female, disabled, a veteran or a first-degree relative of a fallen service member. The revised project period was 24 months, with repayment beginning 12 months after that period ended, without interest or commission.
KOSGEB reported that 4,476 projects had received support decisions totalling TL6.4 billion since the redesigned programme was introduced in 2024. The agency also created a separate financing-cost mechanism for qualifying young and female entrepreneurs, covering half the interest or profit-share cost on working-capital financing of up to TL1 million.
The increase partly compensates for the erosion of nominal limits by inflation, but it also illustrates regulatory movement. Eligibility ages, ceilings, project periods and assessment procedures can change between calls. Investors considering a new subsidiary, acquisition or joint venture must therefore check the version of the rules applying on the actual submission date.
Turkey’s broader investment figures reinforce the relevance of the targeted sectors. The Presidency’s Investment and Finance Office reported that the country attracted $13.1 billion in FDI in 2025, up 12.2 percent from the previous year. Manufacturing accounted for 31 percent of the total and information and communication for 14 percent, closely overlapping with the activities prioritised by KOSGEB.
Foreign ownership does not by itself disqualify a Turkish company from the country’s general investment-incentive system. The Ministry of Trade states that companies established in Turkey by foreign individuals or foreign legal entities are treated as Turkish companies for those incentives under the Foreign Direct Investment Law. KOSGEB entrepreneurship support, however, has its own founder, ownership, age and sector requirements. Equal treatment under the general incentive regime should not be interpreted as automatic eligibility for every KOSGEB call.
What This Means for Foreign Investors
The programme can support an FDI project in several ways: through a qualifying Turkish joint venture, a technology spinout, a local founder-led supplier or an acquisition target that received assistance before the transaction. In each case, the investor must first map the proposed activity to the correct NACE code and confirm the company’s age, SME status, ownership structure and KOSGEB registration.
Market-entry analysis should compare KOSGEB support with larger investment certificates, research and development programmes, regional incentives and export assistance. The same expenditure generally cannot be financed twice, so an incentive plan must allocate machinery, payroll, software and certification costs across programmes without creating an overlap.
Company incorporation and corporate structuring are especially important where the entrepreneur must retain at least 50 percent ownership or sole representation authority. Legal and tax compliance must then cover procurement documentation, payroll and social-security records, related-party transactions, value-added tax treatment, Turkish translations and continuing reporting obligations.
Government-relations and regulatory-liaison work can help clarify ambiguous classifications or changing call rules, but it cannot replace a competitive application. The commercial plan, employment assumptions and expenditure schedule must withstand expert evaluation. Import-export planning is also necessary when supported machinery is sourced abroad or when the project depends on customs procedures, product conformity and foreign-currency payments.
Finally, project management continues after approval. Investors must coordinate purchasing, hiring, invoicing, payment requests, milestones and audit records over the programme period. KOSGEB support can lower the cost of building a Turkish operation or supplier network, but its value depends on disciplined execution and a capital plan capable of absorbing delays, inflation and expenses that public support does not cover.