The COVID-19 pandemic is forcing the majority of Europeans to stay home. Already now, the economic impact of the crisis is leaving startups agitated about how to financially survive during this time. We have collected useful information and links about which actions are being taken (in Germany) to help startups to survive and where you can seek financial support during this crisis. Please take in notice that this post has been written based on the current released information and can change over time. Summary at the end of the post.
MEASUREMENTS BY THE GERMAN GOVERNMENT
The German government is acting against the economic impact of the coronavirus with measures to protect jobs and to support companies. The goal is to equip businesses with enough liquidity that they will be able to make it through the crisis in good shape. Current and planned measurements at this point are:
Short-time compensation (Kurzarbeitergeld) more flexible
April, the rules on reduced hours compensation benefit will be adapted to suit current needs. In companies where the reduction of working hours affects at least 10% of the employees, the company can request a short-time compensation by the Federal Employment Agency. Previously, the reduction of working hours had to affect at least 1/3 of employees to be eligible to receive compensation. Reduced hours compensation benefits will also be available to temporary/agency workers.
You can find more information on how to request the short-time compensation by the Federal Employment Agency here.
Tax-related liquidity assistance
Granting tax referrals will be easier. Postponing the timing of tax payments will support taxpayers’ liquidity, and as soon as it becomes clear that a taxpayer’s income in the current year is expected to be lower than in the previous year, tax prepayments will be reduced in a swift and straightforward manner. Enforcement measures (e.g. attachment of bank accounts) and late-payment penalties will be waived until 31 December 2020 if the debtor of a pending tax payment is directly affected by the coronavirus.
In order to take advantage of the measures, startups should contact their local tax office.
Many businesses are currently suffering from declines in turnover that are not their fault, either because of disruptions to supply chains or significant drops in demand in many sectors of the German economy. At the same time, operating costs often cannot be reduced, or can be reduced only slowly.
Existing liquidity assistance programmes will be expanded to make it easier for companies to access cheap loans. Conditions for the ERP-Gründerkredit-Universell (startup loan for companies that are less than 5 years old) will be loosened by raising the level of risk assumptions (indemnity) for operating loans and extending these instruments to large enterprises with a turnover of up to €2 billion. Higher risk assumptions of up to 80% for operating loans of up to €200 million will increase banks’ willingness to extend credit.
To access the ERP Gründerkredit, startups should contact their local bank.
For more information regarding the ERP Gründerkredit see the KFW Homepage.
What can I do if my company is threatened with insolvency until liquidity assistance is paid out?
To avoid that affected companies must file for insolvency because liquidity assistance does not reach them in time, the regular three-week obligation to file for insolvency is suspended until 30 September 2020.
SOME STATES HAVE TAKEN ADDITIONAL MEASURES OR FACILITATED ACCESS TO LOANS TO SUPPORT LOCAL COMPANIES
Bavaria (Soforthilfe Corona Bayern)
The support program is aimed at Bavarian companies with up to 250 employees. Companies with up to five employees can receive 5,000€, up to ten employees 7,500€, up to 50 employees 15,000€, up to 250 employees 30,000€.
More information and application form: https://www.stmwi.bayern.de/soforthilfe-corona/
Small companies and startups can apply for equity capital of up to 75,000€ directly from the fund “Mikromezzaninfonds” at the Kapitalbeteiligungsgesellschaft (KBG) in Neuss. The company does not have to provide collateral for this.
More information and application form:
Companies affected by the corona crisis can apply for bridging loans via the Investitionsbank Berlin. For this purpose, the Senate has made 100 million euros available.
Application form and more information:
Through the Hamburg Investment and Development Bank (IFB Hamburg) and the Bürgschaftsgemeinschaft Hamburg (BG Hamburg), the City of Hamburg offers several funding instruments to support particularly small and medium-sized enterprises (SMEs).
More information regarding the initiatives: https://www.ifbhh.de/magazin/news/coronavirus-hilfen-fuer-unternehmen
German government organizes hackathon.
Germany’s Social Impact Hubs & the government are jointly organizing a hackathon focused on non-medical solutions needed in such a crisis on March 20-22. Read more and apply here: https://wirvsvirushackathon.org/
GERMAN STARTUP ASSOCIATION
The Bundesverband deutsche Startups e.V. keep startups updated regarding best practices and financing and liquidity support. They are also organizing online Q&A sessions and roundtables for startups.
- The Startup Corona Handbook
- Legal Questions Town Hall: Organized together with KMG to discuss and inform about public loans. Next event on public loans next Tuesday, 24th of March, 8.30am. https://www.startups-helping-startups.com/events/legaltownhallwithkpmg
Measurements by the German government:
• Conditions for the ERP-Gründerkredit-Universell (startup loan for companies that are less than five years old) will be loosened by raising the level of risk assumptions for operating loans. https://www.kfw.de/inlandsfoerderung/Unternehmen/Gr%C3%BCnden-Nachfolgen/F%C3%B6rderprodukte/ERP-Gr%C3%BCnderkredit-Universell-(073_074_075_076)/
• Companies can request to defer tax payments. To take advantage of the measures, startups should contact their local tax office as soon as possible.
• Germany voted in a law expanding its short-time work scheme called “Kurzarbeit”. Under it, companies that implement reduced hours for their workers can receive state support. This gives businesses an alternative to direct layoffs of the employees. More information on how to request the short-time compensation by the Federal Employment Agency: https://www.arbeitsagentur.de/unternehmen/finanziell/kurzarbeitergeld-bei-entgeltausfall
• There are plans to change bankruptcy rules, or at least suspend them for several months, to give companies more leeway on the obligation to file for bankruptcy. We will keep you updated on this as soon as there is any news.
• Some states have taken additional measures or facilitate access to loans to support local companies (read more below).
German Startups Association:
• The Bundesverband deutsche Startups e.V. keeps startups updated regarding best practices and financing and liquidity support. They are also organizing online Q&A sessions and round tables for startups.