The so-called Corona crisis caused by the deadly virus SARS-CoV-2 will have a damaging effect on the global economy. Thus, it is essential, among other crucial support in the field of law, to provide liquidity to those affected by the crisis.

Due to the forced closure of shops and business worldwide supply chains are interrupted, production facilities come to a standstill and demand is declining for an enormous number of products apart from a small number of exceptions. Businesses, whether small or of large scale, now begin to struggle to continue especially if their savings are used up by the running costs that, despite a decrease in income, must be paid. Thus, it is essential, among other crucial support in the field of law, to provide liquidity to those affected by the crisis. And since banking institutions may not be able to cover all the current loan requests, national governments have begun to adopt measures to provide businesses of every size with liquidity to survive this current crisis.

On March 25, 2020 the German parliament passed one of the biggest legislative bills in its history changing several laws and introducing short-term measures to support the struggling German economy. The following immediate measures to strengthen the German economy have been taken by the federal government:

• Liquidity assistance and guarantees;
• Tax measures such as deferrals, waiver of enforcement and amendment of prepayments;
• Flexible short-time allowance and working time arrangements;
• Suspension of obligations to file for insolvency;
• Ensuring the ability of companies to act.

In the following we would like to give a short overview in particular on the liquidity assistance and guarantees implemented by the federal government for German companies:

Corona auxiliary programmes with support of the Kreditanstalt für Wiederaufbau (KFW)

Basically, the application process has been streamlined. For loans up to EUR 3 million per enterprise KFW waives its own risk assessment. Risk assessment is carried out by the main bank only. Loans of up to EUR 10 million are subject to simplified assessment by KFW. However, requirements differ depending on the size of the company, the business sector and the situation.

Entrepreneur Loan

KFW bears the risk for loans for investment and operating resources to the following extent:

• Up to 80 % for large companies
• Up to 90 % for small and medium-sized enterprises (SMEs).

The maximum amount of credit is limited to

• 25 % of the annual turnover in 2019, or
• twice the wage costs of 2019, or
• the current financing needs for the following 18 months for SMEs or 12 months for large enterprises, or
• 50% of the total debt of the company for loans over EUR 25 million.

The lending volume per corporate group is limited to EUR 1 billion. The following interest rates are agreed:

• Between 2 % and 2.12 % p.a. for large companies;
• Between 1 % and 1.46 % p.a. for SMEs.

The measure is intended to support SMEs and large companies that have been active on the market for at least 5 years. Applications shall be addressed to the house bank or the financing partner.

ERP Start-up loan

The same rules also apply for a liquidity programme supporting young companies and businesses that have been on the market for at least 3 years but less than 5 years.

The government also intends to support SMEs and large companies that have been on the market for less than 3 years with loans for investments and working capital. The requirement is that the business’ bank or savings bank bears the full risk. The interest will be the same agreed on the entrepreneur loan.

Additionally, start-ups are also supported with loans up to EUR 30,000 for working capital; KFW bears the risk by up to 80 %. This loan is intended to support business tart-ups, company successors, and self-employed persons in temporary side jobs.

All ERP Start-up loans have to be applied for at the house bank or the financing partner.

Special programme “Direct participation for consortium financing”

KFW may also participate in syndicate financing (financing by several banking institutions, together the “consortium”) to provide businesses with fresh money for investments and working capital.

KFW will take a risk share of at least EUR 25 million and additionally assumes risk to the extent of 80 % of the project to be financed. However, the risk assumption is limited to 50 % of the risks of the total debt.

The direct participation can last for up to 6 years.

The measure is intended to support medium-sized and large companies that, as of December 31, 2019, were not a firm in difficulty according to the EU definition. Applications shall be addressed to the house bank or the financing partner.

Loan for growth – syndicated financing or risk sub-participation by KFW

The loan is granted for investments and working capital. The KFW risk share will be between EUR 7.5 million and EUR 100 million. The loan will be granted only for up to 70 % of project financing.

The loan intends to support commercial companies that have been on the market for more than 5 years and with a turnover of EUR 5 billion. The loan will also cover foreign projects carried out by German companies.

The banking institution or financing partner invites KFW to become a member of the syndicated financing.

Corona auxiliary programmes with support of the Federal Ministry of Economics and Energy (BMWi)

Contracting guarantees

BMWi will assist companies in the Corona crisis as well as companies in the energy efficiency and renewable energy sector with the granting of deficiency guarantees of the federal government and federal guarantees from EUR 10 million. Risk of up to 80 % will be covered.

The guarantees are intended to support private companies in the commercial sector.

Guarantees for amounts from EUR 10 million shall be applied for at PriceWaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft (PwC), Berlin.

Export credit guarantees (Hermes cover)

To support German export business the BMWi provides sureties/guarantees for export credits, for supply, service and financing contracts. The guarantee conditions will depend on the transaction type, the export country, the duration and a business risk assessment.

The guarantees for export credits are intended to support export companies with their registered office in Germany as well as domestic credit institutions and foreign credit institutions provided the handle export transactions of domestic companies. Also, SMEs are considered to be eligible in particular.

Applications shall be sent to Euler Hermes AG, Berlin.

Corona emergency aid for micro-enterprises and solo self-employed persons

BMWi, together with the Federal Ministry of Finance (BMF) will also support very small businesses, in particular micro-enterprises from all sectors of the economy, self employed persons and members of the independent professions with up to 10 employees to the following extent:

• Up to EUR 9,000 one-off payment for 3 months for up to 5 employees (full-time equivalents);
• Up to EUR 15,000 one-off payment for 3 months for up to 10 employees (full-time equivalents).

If the landlord reduces the rent by at least 20 %, the unused subsidy can be used for 2 more months.

The payments will only be granted if the business

• Suffers from economic difficulties as a result of the Corona crisis and
• Has not been in financial difficulties before March 2020.

Applications shall be made electronically if possible. The business owner must prove a threat to his or her existence or liquidity shortages due to the pandemic.

The authorities responsible for the processing of the applications are yet to be announced.

Corona auxiliary programmes of the federal states

We would also like to highlight that the federal states each also introduced several liquidity programmes for businesses located within the borders of the respective federal state.

These federal-state-programmes can be applied for also if state aids from the federal government have been applied.

Since there are so many measures available for businesses in German it may be difficult to find the most appropriate measure. We are happy to advise you on the different liquidity measures available and to find the most suitable one for your business.

We would also like to refer to the other measures the German government has decided on, especially in the fields of tax law, corporate law and labour law. Our advisors will also happy comprehensively assist you in the different fields of Corona measures available.

We have collected the information available on our Corona news portal which includes a constantly updated overview regarding the measures to tackle financial impacts of the Corona crisis.

Please do not hesitate to contact us with any question you may have.