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Nexia Ebner Stolz


Financing in the Corona crisis

Pro­duc­tion down­time, stay-at-home or­ders, event and con­tact bans. The coro­na­vi­rus has cripp­led the eco­nomy - a se­vere re­ces­sion is ex­pec­ted in the se­cond quar­ter of 2020.

Af­ter a shut­down las­ting se­veral weeks, count­less com­pa­nies th­roug­hout Ger­many are ex­pe­ri­en­cing se­rious fi­nan­cial dif­fi­cul­ties and are strugg­ling to sur­vive. The pan­de­mic af­fects al­most all sec­tors of the Ger­man eco­nomy and pres­ents com­pa­nies of all si­zes with im­mense chal­len­ges. The Fe­deral Go­vern­ment wants to al­le­viate the hardship of com­pa­nies with com­pre­hen­sive fi­nan­cial aid.

Definition criteria of SMEs and large-scale enterprises

With re­gard to fi­nan­cial sup­port a dis­tinc­tion has to be made bet­ween SMEs and large-scale en­ter­pri­ses. The clas­si­fi­ca­tion into which size ca­te­gory a com­pany falls is to be made in ac­cor­dance with the de­fi­ni­tion cri­te­ria of the EU Com­mis­sion.

Small en­ter­pri­ses are en­ter­pri­ses with less than 50 em­ployees and an an­nual tur­no­ver or ba­lance sheet to­tal of ma­xi­mum EUR 10 mil­lion, ba­sed on the last an­nual fi­nan­cial state­ment. By de­fi­ni­tion, me­dium-si­zed com­pa­nies have less than 250 em­ployees and an an­nual tur­no­ver not ex­cee­ding EUR 50 mil­lion or a ba­lance sheet to­tal not ex­cee­ding EUR 43 mil­lion. If these cri­te­ria are ex­cee­ded, the com­pany is to be clas­si­fied as a large-scale en­ter­prise. For ex­am­ple, an en­ter­prise is only to be trea­ted as an SME if it ex­ceeds or falls be­low th­res­holds in two conse­cu­tive fi­nan­cial years.

If at least 25 % of the en­ter­prise’s ca­pi­tal is con­trol­led by pu­blic aut­ho­ri­ties or bo­dies go­ver­ned by pu­blic law, it is ex­clu­ded from the de­fi­ni­tion of an SME.

The Corona financial support at a glance

On 27 March 2020, the Bun­des­rat (Fe­deral Coun­cil of Ger­many) pas­sed a sup­port pa­ckage that was in­tro­du­ced into the le­gis­la­tive pro­ce­dure un­der an ur­gent pro­ce­dure, which in­clu­des emer­gency sup­port for small com­pa­nies and a reis­sue of the pro­tec­tion fund for large com­pa­nies, the so-cal­led eco­no­mic sta­bi­liza­tion fund. In ad­di­tion, a KfW Emer­gency Pro­gram exists with a risk as­sump­tion by the Fe­deral Go­vern­ment of up to 90 %, which will be ex­ten­ded on 6 April 2020 to in­clude a pro­gram for KfW in­stant lo­ans for SMEs with a risk as­sump­tion of up to 100 %. The aim is to give com­pa­nies af­fec­ted by the Corona cri­sis quick and easy ac­cess to lo­ans from their prin­ci­pal banks. If com­pa­nies lack the ne­cessary col­la­te­ral to take out a bridge loan, gua­ran­tee banks can as­sume up to 80 % of the risk. In ad­di­tion, other sup­port pro­grams are in place in the in­di­vi­dual fe­deral sta­tes.

Better financing opportunities: KfW Coronaaid

In or­der to im­prove their li­qui­dity and co­ver cur­rent ope­ra­ting costs, com­pa­nies that were not in dif­fi­culty on 31 De­cem­ber 2019 can ap­ply for a KfW loan th­rough their prin­ci­pal bank. This op­tion is avail­able to small and me­dium-si­zed en­ter­pri­ses as well as large-scale en­ter­pri­ses.

The lo­ans can only be drawn if tem­porary fi­nan­cial dif­fi­cul­ties due to the corona cri­sis exist. Thus, KfW lo­ans can­not be used for debt re­fun­ding or pro­lon­ga­tion of exis­ting fi­nan­cing.

KfW Entrepreneur Loan for Established Companies

Es­ta­blis­hed com­pa­nies that have been ac­tive on the mar­ket for more than five years can ap­ply for the KfW En­tre­pre­neur Loan. The KfW En­tre­pre­neur Loan can be used for in­vest­ments, working ca­pi­tal (e.g. li­quid funds, per­son­nel costs, rents), ac­qui­si­ti­ons and lea­sing costs, whe­reby in the case of lea­sing the to­tal costs mi­nus the re­si­dual costs are eli­gi­ble. KfW as­su­mes a large part of the lia­bi­lity risk in these lo­ans: for small and me­dium-si­zed en­ter­pri­ses the cre­dit risk as­sump­tion is up to 90 %, for large en­ter­pri­ses up to 80 %. This is in­ten­ded to in­crease the wil­ling­ness of the house banks to grant lo­ans.

Com­pany groups can bor­row up to EUR 1 bil­lion from the KfW, sub­ject to cer­tain loan li­mits. As a re­sult of the Corona cri­sis, the cri­te­ria for eli­gi­bi­lity to ap­ply for lo­ans have been ex­ten­ded so that com­pa­nies now can ap­ply for lo­ans up to KfW cre­dit ra­ting class 6 (which roughly cor­re­sponds to Moody's B1) wi­thout ad­di­tio­nal col­la­te­ral. Ac­ce­le­ra­ted ap­pli­ca­tion pro­ce­du­res are in place de­pen­ding on the loan vo­lu­mes: For lo­ans of less than EUR 3 mil­lion there is no risk as­sess­ment. For lo­ans bet­ween EUR 3 and 10 mil­lion there is a fast-track pro­ce­dure in which re­la­tively few do­cu­ments have to be sub­mit­ted.

ERP start-up loan for young companies

Young com­pa­nies that have been on the mar­ket for less than five years need to be looked at more clo­sely: If the com­pany has been in busi­ness for at least th­ree years or can pre­sent two an­nual fi­nan­cial state­ments, the Fe­deral Go­vern­ment as­su­mes up to 90 % of the risk in the case of SMEs and up to 80 % in the case of large-scale com­pa­nies with the "ERP-Start-Up Loan Uni­ver­sal”, equal to the ru­les for the KfW En­tre­pre­neur Loan. The other cri­te­ria, such as the re­stric­tions on the ma­xi­mum loan amount per com­pany group, the ex­ten­sion of eli­gi­bi­lity to KfW cre­dit ra­ting ca­te­gory 6 and the cut­ting back of do­cu­men­ta­tion re­qui­re­ments in the ap­pli­ca­tion and re­view pro­cess, are iden­ti­cal to the re­qui­re­ments for the KfW En­tre­pre­neur Loan as well.

Newly foun­ded com­pa­nies that have been on the mar­ket for less than th­ree years can also take ad­van­tage of the "ERP-Start-Up Loan Uni­ver­sal” In this case, howe­ver, the KfW does not re­lease the com­pany from its lia­bi­lity, so the house bank be­ars the ent­ire cre­dit risk. Al­ter­na­tively, start-ups and com­pany suc­ces­sors can take ad­van­tage of the “ERP Start-Up Loan - Start-up Mo­ney”, which al­lows a ma­xi­mum loan vo­lume of EUR 100,000 down to EUR 30,000 to be used as working ca­pi­tal. KfW fa­ci­li­ta­tes ac­cess to the ERP Start-up Loan Start-up Mo­ney" by as­su­ming 80 % of the risk.

KfW (Instant Loan) for Medium-sized companies

As of 6 April 2020, small and me­dium-si­zed en­ter­pri­ses with more than ten em­ployees ad­di­tio­nally have the pos­si­bi­lity to ap­ply for KfW in­stant lo­ans for purcha­ses and run­ning costs. What ma­kes this spe­cial is that the KfW co­vers these lo­ans with a 100 % gua­ran­tee from the Fe­deral Go­vern­ment. With the KfW in­stant lo­ans the Fe­deral Go­vern­ment has re­spon­ded to de­mands by va­rious busi­ness as­so­cia­ti­ons. In re­cent weeks, many com­pa­nies have re­por­ted pro­blems in ob­tai­ning loan com­mit­ments from their house banks for KfW En­tre­pre­neur Lo­ans or ERP Start-up Lo­ans - Uni­ver­sal. Due to ne­ga­tive fu­ture pro­spects and the as­so­cia­ted lack of cre­dit­wort­hi­ness of the ap­pli­cants, some of the house banks had not been wil­ling to as­sume the re­mai­ning 10 % risk and had re­fu­sed to make loan com­mit­ments for the KfW Corona aid al­re­ady in place. The full as­sump­tion of risk by the Fe­deral Go­vern­ment is in­ten­ded to re­medy this pro­blem.

With the newly laun­ched KfW in­stant lo­ans, com­pa­nies with 11 to 50 em­ployees can ap­ply for a loan of up to EUR 500,000.

Com­pa­nies with more than 50 and up to 249 em­ployees can take out an in­stant loan of up to EUR 800,000. The loan amount is cap­ped at up to th­ree months' sa­les for 2019 and will only be gran­ted to com­pa­nies that have been in the mar­ket at least since Ja­nu­ary 2019 and have most re­cently ge­ne­ra­ted pro­fits (eit­her in 2019 or on aver­age over the past th­ree years). The cur­rent in­te­rest rate for the in­stant loan is set to 3 % with a term of ten years. Since KfW as­su­mes all risks, there is no need for a risk as­sess­ment by the prin­ci­pal bank.

KfW Special Program

A KfW spe­cial pro­gram has been set up for me­dium-si­zed and large-scale en­ter­pri­ses, which enab­les KfW to par­ti­ci­pate di­rectly in syn­di­ca­ted fi­nan­cing for in­vest­ments and working ca­pi­tal. KfW as­su­mes up to 80 % of the cre­dit risk (ma­xi­mum 50 % of to­tal debt). KfW's share of the risk un­der the syn­di­ca­ted fi­nan­cing must amount to at least EUR 25 mil­lion - with 80 % risk as­sump­tion the mi­ni­mum loan vo­lume thus amounts to EUR 31.25 mil­lion. The KfW risk share may not ex­ceed eit­her 25 % of the an­nual tur­no­ver of 2019 or twice the wage costs of 2019 or the cur­rent fi­nan­cing re­qui­re­ments for the next twelve months.


An al­ter­na­tive to the KfW lo­ans is of­fe­red by gua­ran­tees, which can be as­su­med by the gua­ran­tee banks for fi­nan­cing pro­jects up to EUR 2.5 mil­lion - the gua­ran­tee le­vel was dou­bled due to the Corona cri­sis; pre­viously it was set to EUR 1.25 mil­lion. The gua­ran­tee ra­tio amounts to 80 %. En­qui­ries can be made free of charge to the gua­ran­tee banks. A de­ci­sion on amounts of up to EUR 250,000 is even made wi­thin th­ree days.

For large fi­nan­cing pro­jects with a gua­ran­tee amount of EUR 50 mil­lion or more, the “large gua­ran­tee pro­gram” (Großbürg­schafts­pro­gramm) was ope­ned up to en­ter­pri­ses out­side struc­tu­rally weak re­gi­ons. Once all other fi­nan­cing pos­si­bi­li­ties have been ex­haus­ted, the Fe­deral Go­vern­ment can in­vest in the syn­di­ca­ted fi­nan­cing wi­thin the frame­work of a Fe­deral/State gua­ran­tee at a ra­tio of 50:50; the gua­ran­tee ra­tio amounts up to 80 %.

Economic Stabilization Fund

With the Eco­no­mic Sta­bi­liza­tion Fund ad­op­ted on 27 March 2020, the Fe­deral Go­vern­ment has set up a res­cue pa­ckage for large-scale com­pa­nies. The aim is to keep com­pa­nies that were com­pe­ti­tive and had a via­ble busi­ness mo­del be­fore the corona pan­de­mic li­quid. The Eco­no­mic Sta­bi­liza­tion Fund enab­les the Fe­deral Go­vern­ment to pro­vide for gua­ran­tees of up to EUR 400 bil­lion for debt in­stru­ments and lia­bi­li­ties which com­pa­nies is­sue for re­fi­nan­cing on the ca­pi­tal mar­ket. In ad­di­tion, the Fe­deral Go­vern­ment in­tends to di­rectly par­ti­ci­pate in the re­ca­pi­ta­liza­tion of en­ter­pri­ses with up to EUR 100 bil­lion, e.g. by ac­qui­ring equity ca­pi­tal, pro­fit par­ti­ci­pa­tion rights or bonds. Such di­rect par­ti­ci­pa­ti­ons in com­pa­nies are only ju­sti­fied if the Fe­deral Go­vern­ment has a vi­tal in­te­rest in sta­bi­li­zing these com­pa­nies. In or­der to en­sure that state funds are used for the in­ten­ded pur­pose in the com­pa­nies, state par­ti­ci­pa­tion can be lin­ked to spe­ci­fic con­di­ti­ons, e.g. with re­gard to the dis­tri­bu­tion po­licy or the re­mu­nera­tion of board mem­bers.

Corona Emergency Assistance Program: grants for the solo self-employed and small enterprises

The Ger­man go­vern­ment has laun­ched a Corona emer­gency aid pro­gram for small and mi­cro en­ter­pri­ses, the solo self-em­ployed and fre­elan­cers. Af­ter it quickly be­came clear that shop and re­stau­rant clo­sures would pose an acute th­reat to the exis­tence of small busi­nes­ses in par­ti­cu­lar, di­rect grants were de­ci­ded upon, which can be ap­plied for at the fe­deral sta­tes or at the bo­dies de­si­gna­ted by the fe­deral sta­tes.

For up to five em­ployees, the fe­deral sup­port amounts to a one-off pay­ment of up to EUR 9,000 for th­ree months. For up to ten em­ployees it amounts to a ma­xi­mum of EUR 15,000. It should be no­ted that the grant is sub­ject to ta­xa­tion. This also af­fects the as­sess­ment of health in­surance contri­bu­ti­ons.

Pre­re­qui­site for the grant is that the com­pany had not been in eco­no­mic dif­fi­cul­ties be­fore March 2020 and that the da­mage was cau­sed by the corona cri­sis, i.e. af­ter 11 March 2020. Ap­pli­cants must de­mons­trate the ex­tent to which their eco­no­mic ac­tivity has been si­gni­fi­cantly af­fec­ted by the corona pan­de­mic and their eco­no­mic exis­tence is th­rea­te­ned as a re­sult. An­yone who de­li­be­ra­tely or grossly ne­gli­gently ma­kes false state­ments is guilty of sub­sidy fraud and must ex­pect cri­mi­nal pro­se­cu­tion.

The grants are in­ten­ded to co­ver cur­rent ope­ra­ting costs and their amount is ba­sed on the ac­tual li­qui­dity shor­tage of the in­di­vi­dual com­pany: the de­cisive fac­tor is the ex­pec­ted tur­no­ver as well as the ope­ra­ting ma­te­rial and fi­nan­cial ex­pen­ses for th­ree months from the date of ap­pli­ca­tion. The pu­blic funds are in­ten­ded to pay for com­mer­cial rents, lo­ans for busi­ness pre­mi­ses and lea­sing ex­pen­ses.

Not co­vered by the emer­gency aid are costs of pri­vate li­ving, such as rent for pri­vate ac­com­mo­da­tion and health in­surance contri­bu­ti­ons. To enable small busi­nes­ses and the self-em­ployed to also con­ti­nue to pay these costs, the Fe­deral Go­vern­ment has sim­pli­fied the ac­cess to un­em­ploy­ment be­ne­fit II (Ar­beits­lo­sen­geld II) for a pe­riod of six months.

Support program of the federal states

In ad­di­tion to the fe­deral pro­gram, nu­me­rous fe­deral sta­tes have set up their own sup­port pro­grams which ex­tend the cir­cle of those en­tit­led to ap­ply to com­pa­nies with (in some ca­ses si­gni­fi­cantly) more than ten em­ployees or are ad­dres­sed to par­ti­cu­larly vul­ne­ra­ble sec­tors. The emer­gency aid pro­gram of the fe­deral go­vern­ment can be com­bi­ned with the cor­re­spon­ding emer­gency aid of the fe­deral state in which the com­pany is lo­ca­ted. Howe­ver, this must not re­sult in any over­com­pen­sa­tion of on­go­ing ope­ra­ting costs. If a la­ter re­view/au­dit, e.g. in the con­text of a tax de­cla­ra­tion, re­ve­als that the ma­te­rial and fi­nan­cial ex­pen­ses or the ac­tual loss of tur­no­ver was lo­wer than sta­ted and ap­pro­ved in the ap­pli­ca­tion, the ad­di­tio­nal grant re­cei­ved must be re­paid. If sub­sidy fraud is sus­pec­ted, cri­mi­nal pro­se­cu­tion must be ex­pec­ted here as well. 

Decisive criterion: Who is actually eligible for funding?

Only com­pa­nies that have tem­pora­rily ex­pe­ri­en­ced fi­nan­cial dif­fi­cul­ties due to the corona cri­sis can take ad­van­tage of the va­rious go­vern­ment sup­port pro­grams. Back­ground is that the state sup­port mea­su­res must meet the re­qui­re­ments of the Tem­porary Frame­work for State aid mea­su­res to sup­port the eco­nomy in the cur­rent CO­VID-19 out­break, which the EU Com­mis­sion ad­op­ted on 19 March 2020. More spe­ci­fi­cally this me­ans, that a com­pany is only eli­gi­ble for sup­port if it was not al­re­ady clas­si­fied as a "com­pany in dif­fi­culty" on 31 De­cem­ber 2019 wi­thin the mea­ning of Eu­ro­pean state aid law and the fi­nan­cial dif­fi­cul­ties are a di­rect con­se­quence of the corona pan­de­mic. At the end of 2019, the com­pany the­re­fore still had to have a po­si­tive in­sol­vency pro­gno­sis and mustn’t have had any dis­or­de­red pay­ment ar­rears. This should be do­cu­men­ted ac­cor­din­gly for ve­ri­fi­ca­tion pur­po­ses. Com­pa­nies that were al­re­ady in fi­nan­cial dif­fi­cul­ties be­fore the out­break of the cri­sis are thus af­fec­ted twice by the cri­sis: they have to struggle with a loss of sa­les and may be ex­clu­ded from ac­cess to go­vern­ment sup­port mea­su­res.

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