Under German law you can have part-time self-employed work alongside your normal job.
They need to give you the money somehow, if they don't want to employ you, that is (as far as I know) the only way.
In fact, if you have a full-time employer, this employer will in most work contracts reserve the "right" to your full work capacity, and will insist on a sign-off for other jobs besides the "full-time" one.
I know a bunch of people in full-time employment, who are self-employed on the side for few hours a week.
Also, some employers would let you reduce to 80% or 50% for a few months, if they're nice :)
Maybe it would make sense to open up the application for everybody, but to connect the grants to the self-employment status (i.e. the applicant get some timeframe to register the self-employment and if necessary talk to the employer).
I just think the rules lead to a strong restriction of the applicant pool and also the possible grant-worthy projects. But this might be intended...
And how long you are self-employed doesn't matter for the payment.
This would have implications on the relationship to the full-time employer, and also from a tax perspective (which is quite a hassle here in Germany, IMHO...).