Articles
20/04/2020

GERMANY | FINANCE, RESTRUCTURING & INSOLVENCY | Overview of all support measures of the federal government and each individual federal state

This article provides an overview of existing and planned federal and state financial support measures. The article also contains direct links to the relevant authorities and banks and is updated regularly.

As part of the update of 27 March 2020, additions to the Economic Stabilisation Fund (WSF) and the Federal Emergency Aid Programme, additions to the new KfW Special Pro-grammes and new support measures of the federal states were added under section 1.1. Newly inserted state measures are: The Emergency Aid Programme of the State of Baden-Wuerttemberg, the Emergency Aid Programme and Liquidity Assistance for SMEs of the State of Hesse, the Emergency Aid Programme of the State of North Rhine-Westphalia, and the Emergency Aid Programme of the State of Rhineland-Palatinate.

If you need assistance or advice on your specific eligibility for funding or the possibility of a state participation in your company, please send us an by e-mail notice to maximilian.degenhart@bblaw.com.

1. Current situation

Basically, the corona shield consists of a four-note sequence of partly corresponding measures: “Loans / Guarantees – Tax deferrals – Suspension of the obligation to file for insolvency – Short-time work compensation“.

1.1 Loans and guarantees

At federal level, liquidity assistance is planned which the federal government will handle via the state-owned KfW Bank. In practical terms, enterprises receive loans and guarantees through their Hausbank (in the KfW context referred to as the regular bank, otherwise main bank), which KfW then secures for the regular banks. The state assumes a larger part of the default risks, in extreme cases even up to 90 percent. This, in turn, means that an additional (rest) risk remains with the regular bank, i.e. the usual commercial banks. The regular bank can thus not simply pass on its new risk position to the state-owned KfW but must take additional risks on its books. This requires a positive lending decision by the regular bank, i.e. a process that would also have to be followed in regular lending without corona.

Hence, we are dealing with two relevant decisions: one is the lending decision of the regular bank, the other is the assumption of liability by KfW. The principal contact for enterprises seeking credit is and remains their regular bank. The massive support from KfW should certainly improve the loan conditions and shorten the decision-making time.

But still a loan remains a loan. In other words, KfW support is in effect “fresh money” for investments and working capital for the enterprises. Debt restructuring is currently not on the agenda. As a result, only enterprises fundamentally healthy in economic terms are likely to continue to benefit from KfW funding, as the regular bank cannot avoid making an independent, i.e. “regular” lending decision.

The actions taken by the Federal Government through the Economic Stabilisation Fund provide on the one hand for new measures to improve the liquidity of affected enterprises and on the other hand for the adjustment of the existing funding possibilities under the KfW loans and guarantees of the guarantee banks.

a) Economic Stabilisation Fund

On 25 March 2020, as part of the Corona Social Protection Package, the Bundestag (Lower House of German Parliament) adopted a comprehensive package of measures, the Econom-ic Stabilisation Fund (WSF), to support the real economy in the amount of EUR 600 billion, which was approved by the Bundesrat (Upper House of German Parliament) on 27 March 2020.
The law is submitted to the German Federal President for signature and then promulgated in the Federal Law Gazette. It will enter widely into force one day later.

The WSF provides in detail for:

  • Creation of a guarantee framework of EUR 400 billion to make it easier for enterprises to obtain refinancing on the capital market
  • EUR 100 billion of recapitalisation measures to strengthen the capital base and en-sure the solvency of enterprises.
    • State participation in systemically relevant enterprises to restore liquidity
  • Loans of up to EUR 100 billion to refinance the KfW special programmes
  • Prerequisite for the eligibility to make use of the above mentioned measures:
    • Balance sheet total of more than EUR 43 million
    • Sales revenues of more than EUR 50 million
    • a yearly average of more than 249 employees
    • 2 of the 3 criteria mentioned above must be fulfilled. Smaller enterprises should only be included if they represent critical infrastructure.
    • The enterprise must not have previously been in financial difficulties (reference date: 31 December 2019).
  • In addition, the Federal Cabinet has launched the “Corona Emergency Aid Pro-gramme for Micro-Enterprises and Solo Self-Employed Persons”.
    • The Emergency Aid Programme has a volume of EUR 50 billion.
    • Prerequisite: Economic difficulties as a result of the corona crisis. The enterprise must not have been in financial difficulties before March 2020 (reference date: 11 March 2020). Existential threat or liquidity shortage caused by corona are to be insured.
      o Financial emergency aid for micro-enterprises from all economic sectors as well as for self-employed persons and members of the independent profes-sions with up to 10 employees.

      • Up to EUR 9,000 single payment for 3 months for up to 5 employees (full-time equivalents).
      • Up to EUR 15,000 single payment for 3 months for up to 10 employees (full-time equivalents)
    • If the landlord reduces the rent by at least 20 percent, any unused allowance can also be used for a further two months.
    • Goal: Aid to secure the economic existence of the applicants and to bridge acute liquidity shortages, inter alia through ongoing operating costs such as rents, loans for premises, leasing instalments, etc.
    • Application: preferably in electronic form.

b) The individual KfW programmes:

aa) The new KfW special programmes:

  • The new KfW special programmes are valid since 23 March 2020. Applications can be submitted to the regular banks with immediate effect.
  • The KFW special programmes are addressed to SMEs and large companies.
  • The characteristic feature is the further improvement in terms of loan conditions.
  • In detail:
    • For SMEs, working capital can now be financed with 90 percent release from liability ( vis-a-vis banks and savings banks). For larger companies the exemp-
      tion from liability is 80 percent. Before the corona crisis, indemnifications were at most 50 percent, or were not granted at all for operating resources.
    • Interest rate improvements: Between 1 and 1.46 percent p.a. for small and medium-sized enterprises, and between 2 and 2.12 percent p.a. for larger companies (previously risk-based interest rate system according to credit rating collateral classes).
    • Facilitated application: For loans of up to EUR 3 million per enterprise, KfW waives its own risk assessment. Risk assessment is only carried out by the regular bank in order to accelerate the processes. Loans up to EUR 10 million are only subject to a simplified review (“Fast Track Procedure”). The evidence to be submitted is kept very simple.
  • Syndicated financing:
    • Addressees of syndicated financing are medium-sized enterprises and large companies.
    • KfW participates in major financing operations of other financing partners on their terms.
    • KfW assumes up to 80 percent of the project risks.

bb) Adaptation of the existing funding possibilities:

KfW Entrepreneur Loan

  • The risk assumption (indemnification) for the on-lending financing partners (usually the regular banks) is increased to up to 80 percent for working capital loans of up to EUR 200 million. A higher level of risk assumption can make it easier for financing partners to be willing to grant loans.
  • Extension of the indemnification also to large companies with an annual turnover of up to EUR 2 billion (previously: EUR 500 million)

KfW Loan for Growth

  • The previous limitation of the KfW loan to investments in innovation and digiti-sation will be abandoned. Temporarily, the loan also extends to general corporate financing including working capital by way of syndicated financing.
  • The sales limit for companies eligible to apply is raised from EUR 2 billion to EUR 5 billion
  • The proportionate risk assumption will be increased to up to 70 percent. This facilitates the access of medium-sized and larger enterprises to individually structured, tailor-made syndicated financing.

ERP Start-up Loan

  • Increase of risk assumption up to 80 percent for the on-lending financing partners (usually the regular banks) for working capital loans up to EUR 200 million. A higher level of risk assumption can make it easier for financing partners to be willing to grant loans.
  • In future, large companies with an annual turnover of up to EUR 2 billion will also be able to benefit from the indemnification (previously: EUR 500 million).

As already indicated, it should be noted that applications for liquidity support from KfW are not submitted directly via KfW, but via the company’s respective regular bank.
With regard to the application process, all KfW funding is facilitated: For loans of up to EUR 3 million per enterprise KfW waives its own risk assessment. Risk assessment is only carried out by the regular bank in order to accelerate the processes. Loans up to EUR 10 million are only subject to a simplified review (“Fast Track Procedure”). The evidence to be submitted is kept very simple.

The following applies to all KfW funding: The enterprise must not have been in financial difficulties before the corona crisis broke out (reference date 31 December 2019).

Guarantees

The procurement of liquidity is also made possible by facilitation of guarantees:

  • On the one hand, the maximum guarantee amount is increased from the original EUR 1.25 million to EUR 2.5 million. Furthermore, the risk share of the Federal Government in the guarantee banks increases by 10 percent.
  • In future, the guarantee banks will be able to make guarantee decisions up to an amount of EUR 250,000 by express procedure to accelerate the procurement of liquidity (independent decision within three days).
  • The previous limitation under the large guarantee scheme (parallel federal/state guarantees) to companies in structurally weak regions no longer applies. In future, companies outside the structurally weak regions will also be able to benefit from this. With a guarantee ratio of up to 80 percent, the Federal Government makes it possible to cover working capital financing and investments requiring a guar-antee of EUR 50 million or more.

1.2 Tax deferrals

The intended fiscal policy measures consist of tax deferrals, reductions in advance tax payments and the suspension of enforcement measures to improve the liquidity of companies. All in all, companies will be granted the possibility of tax reductions in the billions. The prerequisite is that the taxable entity is directly affected by the effects of the corona epidemic. Advance tax payments would be reduced if the taxable income or turnover in the current year is expected to be lower.
Companies wishing to take advantage of this option should contact their competent tax authority. In many cases the competent tax authorities have already provided online application forms.

1.3 Actions adopted by the Federal States

If necessary, the main banks can also make use of the guarantee instruments. All federal states have now adapted the guarantee framework of their guarantee banks and are adapting to the new situation.

The average time taken to process applications will be extremely reduced where possible and should be around 1 to 2 weeks, with some federal states promising even faster responses.

The loan amount up to which the guarantee banks will provide coverage is approximately EUR 2.5 million.

Up to an amount of EUR 250,000, however, simplified procedures without additional committee involvement should ensure even faster disbursement (Express Guarantee).

Beyond this, all the federal states have initiated or are planning their own measures:

Bavaria

– Action

Emergency aid programme Bavaria

The Bavarian state government has set up an emergency aid programme aimed at companies that have been particularly damaged by the corona crisis.

  • Eligible parties: Commercial enterprises and agricultural enterprises (excluding primary production) and members of the independent professions with up to 250 employees based in Bavaria
  • Amount of emergency aid: The emergency aid is scaled accord-ing to the size of the operation and amounts to between EUR 5,000 and 30,000.

Application: The applications are processed by the respective district governments and, for the city of Munich, by the Munich city administration. If you have any questions regarding the Emergency Aid Programme, we will be pleased to advise you.
Bayernfonds: Medium-sized companies that have been healthy up to now and play a key role in the economy. Provided that the corona crisis leads to massive losses for these companies and thus to a strong consumption of equity, state participation in systemically important companies shall become possible.
We will be pleased to advise you on applications to the Bayernfonds.

  • Eligible parties: Together with industry and potential financing partners, we are currently investigating which companies this could be.

Universal loan of the LfA

  • Eligible parties:
    Commercial companies with an annual turnover (consolidated turnover) of up to and including 500 mil-lion euros and members of the independent professions

Amount of aid: Maximum loan amount: EUR 10 million per project
Main bank procedure

Emergency loan of the LfA

  • Eligible parties: Small and medium-sized enterprises in the commercial sector.
    Submission of a consolidation concept is generally waived if the regular bank confirms a reason for consolidation to the LfA when submitting the application.
  • Amount of aid: max. EUR 2 million

Baden-Wuerttemberg

– Action

Hardship fund (emergency aid)

  • Eligible parties: enterprises, Self-employed and medium-sized companies with up to 50 employees
  • Amount of aid: up to EUR 15.000

Investment fund

  • In preparation; investment fund with up to EUR 1 billion

Liquidity loan of the L-Bank

  • Entitled parties: For freelancers and companies with up to 500 employees
  • Amount of aid: Regular loan amount between EUR 10,000 and 5 million
  • Existing L-Bank promotional loans are subject to a 12-month suspension of repayment upon informal application

Business start-up financing

  • Eligible parties: For start-ups and young enterprises (enterprises may be active on the market for a maximum of 5 years), also for short-term liquidity requirements
  • Amount of aid: EUR 5,000 up to 5 million

Growth financing

  • Eligible parties: Established companies that have been active on the market for at least 5 years, also for short-term liquidity requirements
  • Amount of aid: EUR 10,000 up to 5 million

Financing of further education/training 4.0

  • Use of loans: For further professional qualification of employees (also to avoid short-time work) to adapt to new operational or digitalisation processes in the context of further training/retraining measures.
  • Amount of aid: Usually EUR 20,000 per employee to be qualified.

Innovation financing 4.0

  • Use of loans: Financing of innovative projects to develop new or improved products or processes, digitalisation projects or to develop or introduce a new innovative business model.
  • Amount of aid: EUR 10,000 to 5 million, for larger companies up to EUR 25 million

Agriculture – Securing Liquidity

  • Eligible parties: Enterprises engaged in primary agricultural production (agriculture, horticulture, fruit growing, viticulture) to cover exceptional costs Declines in earnings of at least 30 percent are required in the branch of business concerned.
  • Amount of aid: EUR 5,000 up to 10 million

Berlin

– Action 

Rescue Aid Corona

  • Eligible parties: Small and medium-sized enterprises (SMEs) according to the EU definition of SMEs with permanent establishment in Berlin, whose business start-up phase (3 years) has ended.
  • Amount of aid: Granting of rescue and restructuring loans up to EUR 0,5 million; in exceptional cases up to EUR 2,5 million

Emergency aid (subsidy for small enterprises)

  • Eligible parties: Small and micro-enterprises with a maximum of five employees as well as freelancers and solo self-employed persons.
  • Förderungshöhe: max. EUR 5.000 Applications may be submitted several times, again after six months for individuals and after three months for multi-person operations

Brandenburg

– Action

Emergency Aid Programme of Investiti-onsbank des Landes Brandenburg

  • Eligible parties:
    Commercial enterprises and self-employed members of the independent professions (up to 100 employees) with business or workplace in the state of Brandenburg
  • Amount of aid: between EUR 9,000 and 60,000

Bremen

– Action

Corona Emergency Aid Programme

  • Eligible parties: Micro-enterprises with less than 10 employees and less than EUR 2 million annual turnover and freelancers in Bremen and Bremerhaven
  • Amount of aid: Emergency aid of up to EUR 5,000 under the simplified procedure and up to EUR 20,000 for special requirements.

Hamburg

– Action

Hamburg Corona Emergency Aid (HCS)

  • Eligible parties: Small and medium-sized enterprises and freelancers based in Hamburg
  • Amount of aid:
    • Solo self-employed persons EUR 2,500
    • Enterprises EUR 5,000 up to a maximum of 25,000
  • Application: Submission of application to Hamburgische Investitions- und Förderbank (IFB). Submission of application possible shortly.

Hamburg-Kredit Liquidität (HKL)

  • Eligible parties: Small and medium-sized enterprises based in Hamburg
  • Amount of aid: Rescue loans for working capital up to EUR 250,000

Application: Submission of application to Hamburgische Investitions- und Förderbank (IFB). Submission of application possible shortly.

IFB Promotional Loans for Culture and Sport

  • Eligible parties: Cutural institutions and sports clubs
  • Amount of aid: Rescue loans up to EUR 150,000

Application: Submission of application to Hamburgische Investitions- und Förderbank (IFB). Submission of application possible shortly.
Further information can be found on the website of Hamburgische Investitions- und

Hamburg Loan Foundation and Succession (GuN)

  • Eligible parties: Small and medium-sized enterprises (SMEs) of the commercial sector in Hamburg and freelancers and other service providers who have been active on the market for max. 5 years
  • Amount of aid: Loans up to EUR 750,000 per project

Hamburg Growth Loan

  • Eligible parties: Small and medium-sized commercial enterprises (SMEs) in Hamburg and freelancers as well as persons who rent or lease commercial property as part of a commercial activity and have been on the market for at least 5 years.
  • Amount of aid: Working capital loans up to EUR 500,000

Hessen

– Types of actions 

Emergency Aid Programme

  • Eligible parties: Small businesses with up to 50 employees, self-employed, freelancers and artists.
  • Amount of aid:
    • up to 5 employees: EUR 10,000 for three months
    • up to 10 employees: EUR 20,000 for three months
    • up to 50 employees: EUR 30,000 for three months

Application: Applications can be submitted online from 30 March to Regierungspräsidium Kassel (Kassel Regional Council).

Liquidity assistance for SMEs

  • Eligible parties: SMEs
  • Amount of aid: Loan amount between EUR 5,000 and 200,000

Capital for small enterprises (KfK)

  • Eligible parties: Small commercial enterprises (including commercially active social enterprises) and freelancers with up to 25 employees and an annual turnover of EUR 5 million.
  • Amount of aid: Loans between EUR 25,000 and 150,000, to which the main bank adds at least 50 percent. No standard bank collateral is required for these promotional loans.

Start-up and growth financing Hesse (GuW)

  • Eligible parties: SMEs with up to 250 employees and EUR 50 million turnover
  • Amount of aid: Working capital loans up to EUR 1 million

Mecklenburg-Western Pomerania

– Action

Emergency aid

  • Eligible parties: Commercial enterprises from all economic sectors as well as solo self-employed persons and members of the independent professions including cultural professionals with up to 49 employees.
  • Amount of liquidity assistance: up to 5 employees up to EUR 9,000.00; up to 10 employees up to EUR 15,000.00; up to 24 employees up to EUR 25,000.00; up to 49 employees up to EUR 40,000.00.
    Application: Application (by post) to Landesförderinstitut Mecklenburg-Vorpommern

Liquidity assistance for operating expenditure of SMEs

  • Eligible parties: SMEs
  • Amount of aid: Repayable subsidy up to EUR 200,000

Application: Lending through Gesellschaft für Struktur- und Arbeitsmarktentwicklung (GSA)

Lower Saxony

– Action

Liquidity assistance loan

  • Eligible parties: SMEs
  • Amount of liquidity assistance: up to EUR 50,000
  • Application: Directly via NBank without involvement of a main bank

State subsidy for small businesses

  • Eligible parties: Small businesses with up to 49 employees
  • Amount of liquidity assistance: up to EUR 20,000
  • Application: Directly via NBank without involvement of a main bank

North Rhine-Westphalia

– Action

NRW Emergency aid

  • Eligible parties: Commercial and non-profit enterprises, self-employed persons and members of the independent professions, including artists, with up to 50 employees
  • Amount of aid for three months:
    • EUR 9,000 for eligible solo self-employed persons and eligible applicants with up to 5 employees
    • EUR 15,000 for eligible parties with up to 10 employees
    • EUR 25,000 for eligible parties with up to 50 employees

NRW.BANK.Universalkredit

  • Eligible parties:
    • Founders of new businesses,
    • Medium-sized enterprises (do-mestic and foreign commercial enterprises which are majority-owned by private individuals and whose annual turnover – including affiliated companies – does not exceed EUR 500 million), and
    • Members of the independent professions.

For companies that have run into liquidi-ty problems due to the corona crisis, the indemnity offer of 50 percent risk assumption has been extended by 80 percent risk assumption for working capital financing up to 5 years. The minimum amount for indemnifications does not apply.

  • Amount of aid: A minimum/maximum amount has not been set

Investment capital for small enterprises

  • Eligible parties: Small businesses and start-ups
  • Amount of investment: Investment capital of up to EUR 75,000 from the Micro-Mezzanine Fund Germany

Emergency aid for creative artists

  • Eligible parties: Professionally employed and independent artists.
  • Amount of aid: One-off payment of up to EUR 2,000.

Rhineland-Palatinate

– Action

Emergency Aid Programme

  • Eligible parties: Enterprises with up to 30 employees
  • Amount of aid:
    • Self-employed persons and enterprises with up to 5 employees: Up to EUR 10,000 immediate loans from the state if required.
    • Enterprises with 6 up to 10 employees:Up to EUR 10,000 immediate loans from the state if required.
    • Up to EUR 10,000 immediate loans from the state plus a subsidy amounting to 30 percent of the loan amount. The total emergency aid amounts to up to EUR 39,000.

Entrepreneur Loan RLP

  • Eligible parties: SMEs and freelancers who have been on the market for at least 5 years
  • Amount of aid: Investment financing up to EUR 2 million and working capital financing up to EUR 500,000

ERP Start-up Loan RLP

  • Eligible parties: Founders of new start-ups, SMEs in their first 5 business years, freelancers and natural persons taking over a business
  • Amount of aid: Investment financing up to EUR 2 million and working capital financing up to EUR 500,000

Education and training loan RLP

  • Eligible parties: SMEs, MidCap companies and free-lancers who provide training or further education
  • Amount of aid: Investment financing up to EUR 2 million and working capital financing up to EUR 500,000

Working capital loan RLP

  • Eligible parties: SMEs, midcap companies and free-lancers who provide training or further education with additional work-ing capital requirements
  • Amount of aid: Working capital financing up to EUR 5 million

Saarland

– Types of actions

Emergency Aid Programme

  • Eligible parties: Commercial enterprises and self-employed members of the independent professions with an annual average of up to 10 employees subject to social insurance contributions
  • Amount of aid:
    • 0 to 1 employee: emergency aid of up to EUR 3,000
    • up to 5 employees: emergency aid of up to EUR 6,000
    • up to 10 employees: emergency aid of up to EUR 10,000
  • Contact: Saarland Ministry of Economics

Liquidity assistance loan “Emergency Loan Saarland”

  • In progress; details not yet known.
  • Application: Applications are submitted directly to Saarländische Investitionskreditbank (SIKB), involving your main bank. Available end of March.

Saxony

– Action

Emergency Aid Programme “Saxony helps immediately”

  • Eligible parties: Individual entrepreneurs (solo self-employed persons), micro-enterprises and freelancers in Saxony, with an annual turnover or annual balance sheet total of up to EUR 1 million
  • Amount of the liquidity assistance loan: From EUR 5,000 to 50,000, in exceptional cases up to EUR 100,000, with a term of up to ten years. Structured as an interest-free subordinated loan.
    If you have any questions, we will be pleased to advise you.

Saxony-Anhalt

Emergency aid programme in progress, no details known yet.

Schleswig-Holstein

– Action

IB.SH SME loan

  • Eligible parties:
    • Natural persons and enterprises
    • Persons without unresolved negative characteristics in SCHUFA
    • Companies whose Creditreform index does not exceed 349 when the application is submitted
    • Companies with a positive economic equity
  • Amount of aid: EUR 25,000 to EUR 750,000 per project
  • Application: Applications can be submitted via the main bank, an advisor or directly to IB.SH (Investitionsbank Schleswig-Holstein).

Thuringia

– Action

Corona Emergency Aid Programme

  • Eligible parties: Commercial enterprises with up to 50 employees including individual enterprises as well as the business-related independent professions and the creative industries
  • Amount of aid: up to EUR 30,000

1.4 Outlook

The Federal and State Governments are making every effort to mitigate the economic repercussions of coronavirus. With the creation of the Economic Stabilisation Fund, the Federal Government is turning away from the previously valid “black zero” credo and is financing this by way of a supplementary budget through new borrowing of EUR 156 billion in order to stabilise the economy.
The state of North Rhine-Westphalia is also putting together a EUR 25 bn rescue package and is prepared to take on new debt in return. The Free State of Bavaria announced to increase its corona aid package to EUR 20 billion. This makes it obvious: the Federal and State Governments make every effort to ensure that no one is left behind.

Conclusion

The multitude of support measures available to date – and constantly growing – resembles a jungle for companies in need of help. For this reason, this Communication will be regularly updated in order to provide the potentially affected companies with the best possible overview of available assistance measures.

One thing is clear: Whether the company seeking help is looking for funding itself or calls in expert consultants: the application for financial aid should be made quickly. The measures described above are intended to help companies which have been economically sound up to now but which are in difficulty as a result of the corona crisis.
Eligibility for funding, thus, depends crucially on a convincing presentation of the viability of the business model to date and the negative effects of the current crisis on the company’s situation. In this respect, the company should draw on specialist expertise in order to be able to submit a promising application as quickly as possible. Although the German government plans to suspend the obligation to file for insolvency for affected companies for the time being, it is important to counteract impending liquidity shortages as early as possible in order to maintain the economic performance of the company.

 

 

BEITEN BURKHARDT’s practice groups in the areas of labour & employment law, bank-ing/financing/restructuring and tax law have set up a task force to assist companies in applying for the necessary measures and to keep them operational even in the event of quarantine measures. The author of this article is always available as a contact for affected companies.

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