The coronavirus crisis has the German economy firmly in its grip. Companies are being forced to curb their production or even shut it down entirely. Commercial businesses as well as food and beverage and recreational establishments are under official orders to close. Organisers are having to cancel their events. Questions immediately arise: How can I keep my company going under these circumstances? How do I generate revenues to pay my bills? What types of government assistance are available for my company? We’ll show you how to ensure your liquidity and stabilise your company.
In order to procure liquidity, the federal government has brought out the “bazooka”: Medium-sized and large companies can make use of a variety of KfW Development Bank programmes, which have been bolstered substantially. Settlement is then usually handled by the company’s bank.
Since 5 April, an additional support programme, the KfW Fast Loan, has been available for SMEs that have more than 10 employees and have been operating on the market since at least 1 January 2019. The loan volume amounts to as much as the equivalent of three months of sales in 2019. It is limited to EUR 800,000 for companies with more than 50 employees and to EUR 500,00 for companies with up to 50 employees. To qualify, the company must not have been experiencing financial difficulties on 31 December 2019, and it must show that its financial circumstances are in order. In addition, the borrower must show that it made a profit in 2019 or over the last three years on average. The loan has a 3% interest rate and a term of 10 years. The issuing bank is indemnified in full by KfW, secured by a federal government guarantee. The bank or KfW will approve the loan without any further risk assessment so that it can be disbursed as quickly as possible. Because of State aid rules, the KfW Fast Loan still requires approval by the European Commission, and according to the federal government, the programme can launch once that approval is in place.
In addition, the federal government has set up a comprehensive programme for micro-companies with up to 10 employees, which have been especially hard hit. The programme provides subsidies of up to EUR 15,000 without any bureaucratic red tape, and they do not need to be repaid later.
The individual state governments have also responded by initiating their own support programmes for their local economies, the details of which differ significantly. The requirements under each programme for disbursing the resulting loan proceeds and direct assistance are very different. We’ll help you to gain access to these resources as quickly and easily as possible. If expert certifications are necessary for this purpose, Schultze & Braun can provide them. Feel free to contact us at any time. .
Alternative financing options such as factoring, goods purchase financing, sale-and-lease-back transactions, or the sale of assets not required for operations can also be used, many of which have been tried and tested in times of economic crisis.
If other finance providers threaten to cancel your financing – if you cannot meet conditions agreed in the financing agreement, for example – the managing director should seek to negotiate a solution as soon as possible and plan for any additional liquidity requirements. In some cases, small companies can benefit from new statutory options, such as a payment moratorium or a temporary right to refuse to perform, in order to avoid becoming illiquid during the coronavirus crisis due to current payment obligations. In addition, lease payments can be suspended until the end of June 2020 – in some cases, without a termination penalty – in order to preserve liquidity.