Financial aid against Corona

Alongside the dramatic effects of infections, deaths and the overload of public health systems on society, the coronavirus outbreak is already having a severe impact on the economy. This prompted the governments of the most affected countries to announce extraordinary measures to sustain businesses in overcoming the emergency.

Financial aid to businesses in Germany (and abroad)

One of the first emergency measures to be adopted by the German government is a set of business loans granted by the Kreditanstalt für den Wiederaufbau (KfW), Germany’s state-owned development bank, through cooperating banks. Technically, the conditions of some of the pre-existing loan schemes of KfW have been considerably eased up in order to be available to a greater audience. These programs are run through standard banks, which means that the respective application must be filed through them, which then cooperate with KfW in granting the loan. And here’s where one of the most decisive measures has been taken in light of the coronavirus emergency: KfW increased the indemnification of financing banks up to 80%. That is: in case of the borrower’s default KfW covers up to 80% of the bank’s loss, thereby making it decidedly less risky for banks to approve the loan.

The loan schemes

KfW has three loan schemes intended for established businesses (“business loan”), for startups (“startup loan”) and for growth (“loan for growth”). Note that both the business and the startup loans are available to companies and individuals, such as free-lance professionals or sole traders.

KfW-Unternehmerkredit (KfW business loan)

If you’ve already been on the market for more than 5 years, this is what you should look for. KfW lends up to 25 million EUR (and 100% of the total investment, i.e. borrowers are not expected to invest any own resources) at extremely favourable interest rates starting from 1% p.a. over a minimum term of 2 years. Costs covered by the loan include: investments in material and immaterial assets (machines, software, infrastructure, means of work, patents, licenses), office spaces, vehicles, operating resources (e.g. personnel costs, marketing measures, liquidity, consultancy etc.).

This programm is available to:

  • in Germany: national or foreign companies or self-employed individuals active on the German market since more than 5 years

  • abroad: foreign subsidiaries of German companies (or joint-ventures with a considerable German participation) for their activity in a foreign market

KfW-Gründerkredit (KfW startup loan)

The startup-version of the loan is basically equivalent to the above-mentioned business loan, with some peculiarities. First and foremost, it’s available to:

  • in Germany:

    • founders (“Existenzgründer”), also in case of takeover of a pre-existing business (“Unternehmensnachfolger”)

    • self-employed

    • SMEs active on the German market since less than 5 years

  • abroad: foreign subsidiaries of German companies (or joint-ventures with a considerable German participation) for their activity in a foreign market

Interest rates for loans in this category depend on various criteria and are finally agreed upon with the relevant bank.

KfW-Kredit für Wachstum (KfW loan for growth)

This is a different kind of loan that, unlike the other two, is thematically focussed on innovation and digitalisation. Several development projects, measures, investments and costs in these areas are covered by the loan, but it cannot be used to cover general and non innovation- or digitalisation-related expenditure (although: even this requirement has been somewhat softened-up given the current emergency).

This program is available to:

  • national and foreign companies with a yearly turnover up to 2 billion EUR

How to get it

All loand must be applied for through one of the participating regular banks (commercial banks, cooperatives, savings banks), which include all most common German banks, such as Deutsche Bank, Sparkasse, Volksbank, Commerzbank etc.
Three days ago Germany’s Finance Minister Olaf Scholz declared that the government is willing to grant unlimited loans to companies and that applications for financial aid will be “approved a priori” - one more reason to give it a try!