Last updated: May 5, 2020
Corona-related sales slumps in many industries are leading numerous companies to experience short-term liquidity bottlenecks. To cover these shortages quickly, the federal government adopted the KfW Special Program 2020, which is available for commercial enterprises and members of the independent professions with immediate effect. Loan terms were improved and standardized yet again to make it easier for companies to access favorable loans. By assuming risks of 90 percent for SMEs and 80 percent for large companies, it is aimed at mobilizing the willingness of companies’ principal banks to grant substantial amounts of loans to strengthen liquidity. The KfW Quick Loan Program is intended to accompany the granting of loans to SMEs with more than ten employees by way of 100 percent risk assumption, i.e., full indemnities of the companies’ principal banks. A tabular overview of all funding services and aid provided by the federal government is available here.
The German states have also initiated numerous funding measures. at: An overview of the programs of all states is available here. The emergency aid programs in Bavaria, Hamburg, and North-Rhine Westphalia are described in more detail below in the sections “Funding measures Bavaria,” “Hamburg is acting and helping,” and “NRW Safety net.”
On the basis of the adapted framework for State aid (referred to as Temporary Framework) published by the EU Commission on April 3, 2020, the federal government has introduced comprehensive KfW Quick Loans with 100 percent indemnity.
The requirements for taking out a KfW Quick Loan are:
The interest rate for KfW Quick Loans is set uniformly on the day of the loan commitment, based on the development of the capital market. The term is up to ten years with a maximum of two grace years with subsequent linear repayment.
Certain funding exclusions need to be observed, including in relation to use of loan funds (i.e., may not be used for debt rescheduling, follow-up financing, etc.). In addition, profit and dividend distributions are not permitted during the term of the loan. Loans are approved without further credit risk assessment by the principal bank or KfW, such that the loan may be approved quickly and without any problems. In return, the bank will receive 100 percent indemnity from KfW, collateralized by a guarantee from the federal government. Loans committed under the KfW Quick Loan Program are to be called in one sum and within one month of commitment.
Requirements and structure of these two loan programs have been largely harmonized, so that they now apply both to young SMEs that have been on the market for less than five years and to medium-sized and large companies that have been on the market for more than five years. Investment and working capital loans will generally be funded under the following conditions:
KfW is expanding its financing offering for companies that are experiencing temporary financing difficulties due to the corona crisis with the KfW Special Program 2020 “Direct Participation for Syndicated Financing.”
In addition, the established instrument of ERP Start-up Loan Start-up Funds is available for small companies that have been in existence for less than 5 years:
Target group: small commercial enterprises and professionals up to 50 employees and maximum annual sales or annual balance sheet total of EUR 10 million, which have been in existence for less than 5 years
Maximum amount: maximum EUR 30,000.00 for working capital (total debt capital requirement maximum EUR 100,000.00)
Term: maximum 10 years with 2-year grace period
Collateral: standard bank collateral with 80 percent indemnities for companies’ principal banks
Where required, companies’ principal banks may also make use of the guarantee scheme. These may not be restructuring cases or companies in financial difficulties.
For companies that had sustainable business models until the crisis, guarantees for working capital may be made available. Up to an amount of EUR 2.5 million, these guarantees will be processed by the guarantee banks; beyond this amount, the German states or their development institutions are responsible. From a guarantee amount of EUR 20 million upwards, the federal government will participate in the guarantee commitment in the structurally weak regions at a 50:50 ratio. Outside of these regions, the federal government will participate in the collateralization of working capital financing and investments from a guarantee amount of EUR 50 million. Guarantees may currently cover a maximum of 90 percent of the credit risk, i.e., the companies’ respective principal bank must assume at least 10 percent of exposure.
Inquiries for financing projects up to EUR 2.5 million may also be made quickly and free of charge via the guarantee banks’ financing portal.
Micro-enterprises, self-employed individuals, and professionals will receive a one-off payment for three months, depending on the size of their businesses, of up to EUR 9,000.00 (up to five employees) or up to EUR 15,000.00 (up to ten employees) to ensure their liquidity. This is intended in particular to secure applicants’ economic existence and to bridge acute liquidity bottlenecks due to ongoing operating costs. Furthermore, a draft law of the federal government would grant consumers and micro-enterprises disadvantaged by the effects of the COVID-19 pandemic a right to refuse performance for material continuous obligations until June 30, 2020.
Additional information from the Federal Ministry of Finance and the Federal Ministry for Economic Affairs and Technology is available at the following links:
In light of the large number of support programs made available by the various funding bodies, the question arises for companies whether a) cumulation is permissible at all and b) if so, to what extent.
First of all, it must be taken into account that the individual KfW programs have restrictions on cumulation. For instance, cumulation of a grant under the KfW Quick Loan with other KfW loans or with a grant from the Economic Stabilization Fund ("WSF") is excluded. It is also not possible for KfW to participate simultaneously in financing as a consortium partner in a consortium and as a refinancer of the other consortium partners by means of the pass-through loans discussed above - especially loans from the KfW Special Program. In contrast, the KfW Entrepreneur Loan and the ERP Start-up Loan can be combined with other KfW special programs unless they provide for full exemption from liability.
Although there is no absolute exclusion of cumulation under the program conditions for the KfW Entrepreneur Loan and the ERP Start-up Loan, in order to avoid overcompensation, any cumulation must be assessed on a case-by-case basis in accordance with the applicable State aid rules before an application is submitted. These are in particular the General Block Exemption Regulation (Regulation No. 651/2014 – GBER) and, specifically for the COVID-19 pandemic, the Communication of the European Commission C 2020/1863 of March 19, 2020 in the version of 3 April 2020 (C 2020/2215) and the federal regulations issued under it.
The GBER allows, in principle, cumulation of aid provided that different eligible costs are involved. Only where there is an overlap in eligible costs may the maximum aid intensities and aid ceilings applicable to the aid in question not be exceeded.
In concrete terms, this means that loans under the KfW special programs up to EUR 800,000 with a term of more than six years can be combined with other aid outside the "Federal Regulation on Small Grants 2020; in case of a combination with aid under the same "Federal Regulation on Small Grants 2020", the upper limit of EUR 800,000 per group of companies must be observed.
All other loans may be combined with other aid under the “Federal Guarantee scheme 2020” (Bundesregelung Bürgschaften 2020) for another loan, provided that the total amount of the loan per group of companies does not exceed either 25 percent of the annual turnover in 2019 or twice the company's wage costs or, if duly justified, the company's current liquidity needs for the next 12 (large companies) or 18 months (SMEs). In addition, these loans may be combined with aid under the "Federal Regulation on Small Grants 2020". In the case of aid which is not granted as a grant, the gross grant equivalent must be calculated.
In any case, a company must list applications for subsidies from other bodies or under other programs in a transparent and complete manner in order to avoid reclaims and/or allegations of subsidy fraud.
Regardless of the question of the cumulation of aid, the question of the required notification of aid to the EU Commission is also relevant. In cases where the BMWi has notified an aid scheme (such as the KfW Special Program 2020) and the EU Commission has approved it accordingly - as here under the federal regulations discussed above - no (further) notification of individual aid is required. The situation is different if the conditions of the respective support measure are to be deviated from: This case is not covered by the approval of the EU Commission and would have to be notified separately to the EU Commission.
According to the explanatory memorandum (BT-Drs. 19/18109), the WSF is not to be notified. Every single measure taken on the basis of the WSF would therefore have to be notified to the EU Commission. This is all the more relevant since, unlike the draft law, the text of the law speaks of 'reasonable' conditions and not of 'market-conform' conditions which exclude the existence of aid. In addition, the WSF also provides for the possibility of conditions and obligations by the EU Commission. This must be taken into account when applying for funding, as funding can only be granted after approval by the EU Commission.
In addition to the federal funds, Bavaria will set up a special fund of up to EUR 10 billion to assist with the consequences of the corona crisis. Development bank Förderbank Bayern (LfA) will help companies to overcome the corona crisis by providing loans and assuming risks. A fundamentally viable business model and the willingness of the companies’ principal banks to integrate the LfA funding offers into the overall financing are prerequisites for supporting the companies. Loans under the following programs supported by LfA must be applied for at and will be paid out by the companies’ principal banks.
Moreover, the Bavarian state government established an emergency aid program aimed at companies and freelancers who are experiencing financial difficulties and liquidity bottlenecks that threaten their existence as a result of the corona crisis.
Applications for emergency aid may be submitted by commercial enterprises and self-employed members of the independent professions (up to 250 employees) having a place of business or work in Bavaria. The emergency aid is graduated according to the number of employees as follows:
Additional information on the emergency aid program and the application form are available on the website of the Bavarian Ministry of Economic Affairs at the following link: www.stmwi.bayern.de/soforthilfe-corona/
Companies with annual (consolidated) sales of up to EUR 500 million may apply for loans of up to EUR 10 million per project for investments, the acquisition of warehouse space, and general working capital requirements, including the rescheduling of short-term liabilities. If a loan of up to EUR 4 million cannot be sufficiently collateralized by banks, indemnities for 80 percent are possible for companies with consolidated sales of up to EUR 500 million. Simplified application and processing procedures for risk assessment are also applying to all LfA funding loans with indemnities of up to EUR 500,000.00. Fewer documents will therefore be necessary for these cases, so that balance sheets and the attachments relating to personal and financial circumstances will not have to be submitted.
Medium-sized commercial enterprises and members of the independent professions are eligible to apply. LfA guarantees may generally also be used for working capital. The maximum guarantee rate will uniformly be raised to 80 percent of the loan amount for guarantees for working capital, rescue and reorganization, and consolidation loans. The same simplified application and processing procedures as for indemnities also apply to LfA guarantees up to EUR 500,000.00. LfA guarantees will be assumed up to an amount of EUR 5 million. Additionally, State guarantees may be assumed beyond this amount.
Applications for acute loans of up to EUR 2 million may be filed by medium-sized commercial enterprises. Consolidation concepts will generally not have to be submitted if the company’s principal bank confirms the reason for consolidation to LfA when filing the application.
Additional information on the funding programs is available on the website of the Bavarian Ministry of Economic Affairs and the Bavarian Development Bank (LfA) at the following links:
On March 19, 2020, the Hamburg Senate and Hamburg Investment and Development Bank IFB launched an emergency aid program for SMEs and freelancers. This Hamburg Corona Emergency Aid [Hamburger Corona Soforthilfe, HCS] is available in cases where companies or freelancers as addressees of the municipal corona general decree have directly incurred a situation or a liquidity bottleneck that threatens their existence. Real, direct subsidies of EUR 2,500.00 for self-employed individuals, EUR 5,000.00 (less than 10 employees), EUR 10,000 (10-50 employees), and EUR 25,000.00 (51-250 employees) will be available.
In addition to the HCS program, the Hamburg Senate announced that, jointly with IFB, it will significantly expand existing IFB funding programs and improve the terms so as to individually tailor the KfW funding programs to Hamburg’s needs. Components are in particular the HamburgKredit-Liquidität loan, which may provide SMEs with loan volumes of up to EUR 250,000.00 each. In terms of interest and repayment terms, Hamburg intends to make maximum use of the European legal framework in borrowers’ interests.
The IFB development loan Culture and the IFB development loan Sports are intended to provide urgently needed operating funds of up to EUR 150,000.00 each to cultural institutions and sports clubs.
The emergency aid program of the Hanseatic City of Hamburg further includes
Additional information on HCS is available on the website of the Hamburg Senate at the following link: www.hamburg.de/coronavirus/13737132/2020-03-19-bwvi-eckpunkte-schutzschirm/. Additionally, IFB has published helpful information at www.ifbhh.de/foerderprogramm/hcs on how Hamburg-based companies may prepare for the application process until optimally coordinated application forms are available. In particular: Management analysis and/or annual financial statements for the past three years; description of the extent to which the company/businessperson is affected by the COVID-19 pandemic and estimated liquidity requirements to cover current fixed costs. Application forms are also linked via www.ifbhh.de/foerderprogramm/hcs.
In North Rhine-Westphalia, the state parliament adopted a law on establishing a special fund (NRW Safety Net Act), so that an amount of up to EUR 25 billion is now available in addition to the federal government’s State aid to cushion the direct and indirect consequences of the corona crisis. The legislative package includes the following emergency measures:
Information on the details of the NRW state development programs can be found on the websites of the state government and of NRW.Bank. The application forms for the NRW Emergency Aid Program will be available from March 27, 2020, including on the NRW Ministry of Economic Affairs website at www.wirtschaft.nrw/corona.
Initial experiences of clients show that in the current crisis situation, companies’ principal banks and other commercial banks have so far exhibited little willingness under the KfW Special Program 2020 to assume the loan risks remaining after coverage by the public programs. Consequently, the availability of KfW quick loans for SMEs, which are intended to provide very rapid aid, is to be welcomed. To what extent the KfW Special Program 2020 and the KfW Quick Loans for SMEs will actually provide relief has to be monitored further In particular, however, companies that were already experiencing financial difficulties prior to the corona crisis and are now the first ones to contend with existential bottlenecks will therefore be unlikely to benefit from this liquidity assistance.