Faster loans, harsher conditions

It took a few days until the matter between Berlin and Brussels was settled. It was negotiated for a long time, said Federal Finance Minister Olaf Scholz (SPD) on Monday. But with the decision of the Corona cabinet of the federal government, the way is now clear for faster government support, especially for those medium-sized companies that are in need because of the Corona crisis and urgently need liquidity. From Thursday onwards there will be the possibility of a quick credit program especially for small and medium-sized companies. The state is fully liable for these loans. This relieves the house banks of the credit check and the companies of the submission of otherwise necessary documents.

Full liability is problematic

Full liability is a problem. On the one hand, the EU Commission had raised concerns about state aid. On the other hand, it was previously considered too risky in the coalition. Because full liability for the loans secured by the Staatsbank KfW harbors the risk that the house banks commissioned with the check tend to also grant loans that may later become bad.

However, the banks were supposed to serve as a supervisory authority, and the previous credit program, which is processed through KfW, provided for ten percent of the liability. There was massive criticism from financial institutions and medium-sized businesses immediately after the decision was made two weeks ago – the self-liability of the house banks was seen as an obstacle to rapid aid.

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Credit cover from Brussels

Last Friday, the EU Commission gave in – it now allows full state liability, but only until to the limit of 800. 000). However, there will be no blank checks in the new program for “quick loans” with state liability. “Since the banks are not in the business of these loans, we have set up our own criteria – with data from the past that cannot be traced,” said Scholz.

All companies Those who want to have loans without a bank check must have been active in the year 2019, show corresponding sales and also a profit. According to Scholz, no bankruptcy measures may be underway or applications may be filed against the company. In addition, the interest rate is twice as high as for loans in the normal KfW program – three percent instead of 1.5 percent.

Term of ten years

The term of the loans should be ten years. And the loan amount must not exceed three monthly turnovers. It can also not be higher than that approved by the EU Commission 800. 000 Euro if the company has more than 50 and not more than 500. 000 euros if the company is smaller. Companies with fewer than ten employees do not have access to the program, the emergency aid program with the grants, which the federal government and the states offer together, is intended for them.

Risk of default in the billions

The credit cover should keep the default risk within limits. Scholz made it clear in the press conference with Economics Minister Peter Altmaier (CDU) that the government is anticipating loan defaults: The Finance Minister assumes that overall no more money has to be made available for liability than in the subsidy program for solo self-employed and small businesses, for which the supplementary budget 55 is earmarked for billions of euros. The credit line provided by the federal government is growing by 150 billion euros due to the high demand that the government is now expecting.

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“Just for bridging”

Altmaier made it clear that the coalition also used market economy criteria does not want to suspend in the crisis. While there is still no limit to the total guaranteed credit volume, there will still be no transition to government lending. “Everything we do serves to bridge the gap,” said the Minister for Economic Affairs.

The KfW program that has already been launched will become bank liability, with a lower interest rate and a term of five years still offered. There is also the option to switch from the quick credit program to this program later. But it is not possible to use this program to replace existing loans. It only serves to raise liquidity, not debt restructuring.

Economy is satisfied

The Federal Association of German Industry (BDI) responded with approval. “It is vital for our medium-sized companies to receive loans quickly and without red tape. For this, 100 percent state liability is justifiable for a clearly limited time, “said BDI general manager Joachim Lang.

The vice-chairman of the Left Group in the Bundestag, Fabio de Masi, also welcomed the program . This closes the funding gap for companies between ten and 250 employees.

Still talks with the EU

Meanwhile, an essential part of the multi-billion program between the Federal Government and Brussels remains unresolved. The Economic Stabilization Fund (WSF), by the Federal Cabinet on 23. March decided and announced, is still not confirmed by the EU Commission according to Tagesspiegel information. Here too, EU state aid law is being used. However, the German government is confident that talks with the Commission can be completed quickly. The WSF is intended for larger companies. Here credit appropriations of 200 billion euros are planned, also for state investments, as well as guarantees in the amount of 400 Billion euro.