Germany: Which government subsidy actions can companies fall back on that suffer due to COVID-19?
A short overview from a German lawyer in difficult times.
The COVID-19 pandemic is hitting the economy hard everywhere, including Germany. The German government has decided on extensive measures to support the German economy in this situation. As a specialist lawyer for administrative law, I receive many inquiries, also from foreign companies with activities in Germany. Here is an overview in English of the possibilities now available (written on March 16th of 2020 — any info can change within hours, so look for updates):
I. Short-time work allowance
The Federal government has passed a draft law to facilitate access to short-time work benefits. The code is expected to enter into force in the first half of April (or, as I expect it now, sooner). Specifically, this means that social contributions are 100 percent reimbursed. So far, employers have had to pay 80 percent of these. Companies can also use short-time work benefits if only 10 percent of the employees are affected by the loss of work — instead of a third as before. Typically, the payment of short-time work benefits is also limited to 12 months — now, it can be extended to 24 months. The short-time work allowance is applied for at the regionally responsible employment agency (Bundesagentur für Arbeit).
II. Simplified access and extension of state liquidity aid
The Federal government has decided on a package of actions to support companies in coping with the Corona crisis. The Staatliche Förderbank KfW has a crucial task here. It is intended to facilitate the short-term supply of companies with liquidity. To this end, KfW will use the existing credit programs listed below on the way to bank routing and in the context of syndicated financing and improve the access conditions and conditions for companies there. In this context, Federal Finance Minister Olaf Scholz emphasized that the loans to be granted by KfW are not capped. In this regard, there is no upper limit for the loan amounts to be issued.
Necessary to understand: These are loans, not “lost grants.” They must be repaid. The house banks also have to bear risk. It remains to be seen whether all companies will receive loans from their house banks. Unfortunately, the German media are currently reporting a lot of wrong things about this, and there are still no special programs in which “lost subsidies” are granted. The next few days will show whether these will come. However, on a good note, also start-ups may benefit from the programs.
The following promotional instruments are available for companies and freelancers to cover short-term liquidity requirements:
• KfW-Unternehmer and ERP-Gründerkredite can be applied for from KfW via banks and Sparkasse. Information on this is available on the KfW website and at all banks and Sparkasse. The KfW hotline for commercial loans is +49 (0) 800 539 9001.
► For companies that have not yet existed for five years:
ERP-Gründerkredit Startgeld (resource funding) for small companies and freelancers up to 50 employees and annual turnover or annual balance sheet total of max. 10 million euros. (Original) maximum amount: 30,000 euros for equipment.
ERP-Gründerkredit Universell (operating resources) for medium-sized companies and freelancers who have not yet existed for five years and whose maximum group turnover does not exceed 500 million euros. (Original) maximum amount: 25 million euros.
► For companies that exist for more than five years:
KfW-Unternehmerkredit (working capital financing) for medium-sized companies and freelancers who have been on the market for at least five years and whose maximum group turnover does not exceed EUR 500 million. (Original) maximum amount: 25 million euros or 5 million euros for exemption from liability.
KfW-Kredit für Wachstum für Investitionen und Betriebsmittel in the areas of innovation and digitization for domestic and foreign companies with sales of up to 2 billion euros; more available access to credit because KfW bears part of the risk.
• Besides, KfW will prepare a program and introduce it as soon as possible. The risk assumption for investment funds (liability waivers) is significantly improved and amounts to up to 80% for operating resources, and even up to 90% for investments. These should also be available to companies that are temporarily experiencing financial difficulties (crisis-appropriate increase in risk tolerance) due to the crisis. KfW will also offer consortium structures for these companies. The launch of these special programs is subject to approval by the European Commission.
• In addition to the ERP and KfW offerings, the state funding institutes also offer low-interest working capital financing or corresponding working capital components in the promotional loans. For details, please contact the funding institutes of the federal states:
► Baden-Württemberg: L-Bank (Liquiditätskredit)
► Bavaria: LfA Förderbank Bayern (Akutkredit)
► Berlin: Investitionsbank Berlin (IBB) (Liquiditätshilfen)
► Brandenburg: Investitionsbank des Landes Brandenburg (ILB) (Kredit Mittelstand)
► Bremen: Bremer Aufbaubank (Unternehmerkredit)
► Hamburg: Hamburgische Investitions- und Förderbank (IFB) (Kredit-Wachstum)
► Hesse: Wirtschafts- und Infrastrukturbank Hessen (WiBank) (Gründungs- und Wachstumsfinanzierung Hessen)
► Lower Saxony: NBank (Gründerkredit)
► Mecklenburg-Western Pomerania: Bürgschaftsbank MV GmbH (BMV Darlehen)
► North Rhine-Westphalia: NRW.Bank (Universalkredit)
► Rhineland-Palatinate: Investitions- und Strukturbank Rheinland-Pfalz (ISB) (Betriebsmittelkredit)
► Saarland: Saarländische Investitionskreditbank AG (Gründungs- und Wachstumsfinanzierungsprogramm)
► Saxony-Anhalt: Investitionsbank Sachsen-Anhalt (IB) (Mittelstandsdarlehen)
► Saxony: Sächsische Aufbaubank (Liquiditätshilfemaßnahmen)
► Schleswig-Holstein: Investitionsbank Schleswig-Holstein (IB.SH) (Betriebsmitteldarlehen)
► Thuringia: Thüringer Aufbaubank (Konsolidierungsfonds)
Further information is also available from the funding database of the Federal Ministry of Economics. It is possible to use the search function to get an overview of funding programs of the federal government, the states (Bundesländer), and the European Union based on a topic, an area, or the zip code. Under the keyword “Corona,” the access to the promotional loans from the federal states (Bundesländer) listed above.
• Guarantees for working capital loans can be provided for economically healthy companies. The warranty banks process these up to an amount of EUR 1.25 million, and the states (Bundesländer) and their funding institutions are also responsible. From the guaranteed amount of 20 million euros, the Federal government participates in the structurally weak regions in the guarantee obligation in a ratio of fifty to fifty. Guarantees can cover a maximum of 80 percent of the credit risk, which means that the respective house bank must assume at least 20 percent of its liability.
III. Temporary exemptions from the ban on Sundays and public holidays
Vehicles that transport medical care items and dry goods items were granted an exemption from the Sunday and holiday driving ban by § 46 para 2 of the Road Traffic Regulations (StVO) to guarantee the availability of the full range of goods. The exemption also applies to empty runs of these vehicles that are directly related to the transports.
IV. Continuation of federal export guarantees
The Federal government currently continues to provide export credit guarantees (Hermes covers) for exports to China or in coronavirus risk areas. The contact persons for further questions are the federal mandataries from Euler Hermes AG in Hamburg.
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