The German Ministry of Finance sat down with the German Ministry of Economics and put their heads together to figure out how to save the thousands of businesses affected by the Corona virus, quickly and with minimum red tape (should we be offended?). This is what they came up: find out if your business is eligible and how to apply for these programs.
Paying your employees when you don’t have anything for them to do
First, they relaxed the criteria for Kurzarbeitergeld – you use this to pay your employees temporarily if you have no work for them to do for a few months.
How to apply
KFW Loans with simpler terms and conditions
The Kreditanstalt für Wiederaufbau (KFW) already offers loans to businesses and freelancers, but now they’ve relaxed their criteria somewhat. These are loans and not grants, but the conditions are favourable and well, maybe you don’t have a choice right now.
If your company has been around for 5 years or longer, there are two programmes.
The Entrepreneur Loan assumes up to 80% of your financing partner’s risk for loans of up to 200 million. The financing partner is usually your house bank, and it’s thought that a higher assumption of risk will make the bank more amenable to granting the loan. For particularly large companies (turnover up to 2 billion), they also offer liability waivers.
The Loan For Growth extends corporate financing using syndicate financing. The sales limit for eligible companies has been increased to 5 billion Partial risk assumption has now been increased to 70%.
If your company is younger than 5 years old, there’s an ERP startup loan, which assumes up to 80% of risk for capital loans of 200 million or less. Liability waivers: large companies with up to EUR 2 billion of sales per annum.
A Special KFW Programme which is yet to be revealed
For SMEs and large companies, there is one other programme, the details of which are not yet clear. Risk assumption will be up to 80% for capital and possibly even up to 90% for investments. This is. what’s called a “crisis-adequate increase in risk tolerance”. Syndicated structures will also be possible. For this programme, they are waiting on European Commission approval.
How to apply
KfW has all the same info on their website in English, but you have to go through your regular bank to apply. It does a credit check and will probably require the usual documents, e.g. budget. If you need more concrete information, there’s a hotline you can call: 0800 539 9001. You can also book a Red Tape Translation telephone interpreter to be on this call with you. We’ve reduced the price from 49 EUR per hour to 35 EUR during the COVID pandemic.
You can apply online for Liquiditätshilfen Berlin through the IBB website. These are loans with a term of up to 5 years for an amount of up to 1 million EUR to help companies in difficulty restructure or be rescued. Rescue loans of up to 500,000 EUR can be interest-free.
Note that if you’re eligible for these loans, you won’t be eligible for the grant of up to 15,000 EUR that’s already active in Bavaria and proposed by the mayor of Berlin for solo freelancers and self-employed with up to 250 employees. More on that one here.
The IBB recommends the following procedure:
- Have a conversation with your bank to access the programmes provided by KFW
- Secure a guarantee (see below)
- Apply for Kurzarbeitergeld for your employees
- Talk to your tax office about deferring tax payments (see below)
- Apply for Liquiditätshilfen BERLIN
Is my company eligible for Liquiditätshilfen Berlin?
You have to have completed your 3-year startup phase. You have to be operating in Berlin. You have to be an SME as per EU standards. Coal and steel companies and companies subject to special regulations for financial institutions are not eligible.
How to apply
It’s a digital process (hooray!). Here’s a checklist of supporting documents in German. If you’d like help with the application, which has to be submitted in German, you’re welcome to book a coaching and we’ll take you through it.
The Verband Deutscher Bürgschaftsbanken (Association of German guarantee banks) grant guarantees (as the name suggests) to SMEs of up to 1.25 million Euros on short, medium or long-term loans. This is where to turn to if you’d like to request a guarantee on a bank loan.
The Finanzämter (tax authorities) will be in a position to grant tax deferrals (Steuerstundungen) for VAT, income tax and corporate tax. It is not yet clear if wage tax can also be deferred. If you predict plausibly that your income is going to be significantly reduced, you can defer advance payments too. The Finanzamt is going to waive its right to enforcement procedures for tax arrears until 31.12.2020, if it’s clear that the tax debt was directly a result of the Corona virus. They will also refrain from charging late fees under the same circumstances.
How to apply for tax deferrals
If you have a tax advisor, they can make the application for you. If you’re doing it yourself, we are working on a template and will upload it soon, though it will be aimed at freelancers and might need some adjustment. You can book Life Admin to customise templates, create correspondence and make phone calls in German to get all of this stuff done.