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German government has pledged liquidity to companies via KfW (German state-owned development bank)
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Current view is that the proposed criteria for loans exclude early-stage startups (e.g. doesn't take into consideration growth vs loss-making)
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German startup association is hosting a follow up Q&A on this topic on March 24th
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For companies older than five years:
- The ERP-Gründerkredit-Universell (“founder loan”): Conditions will be amended in parallel to the adjustments regarding the KfW-Unternehmerkredit as laid out above — e., the limit for the turnover of the eligible companies will be raised to €2 billion, and higher risk assumptions of up to 80% for operating loans of up to €200 million are planned as well.
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For companies older than five years:
- The KfW-Unternehmerkredit (“corporate loan”): extending 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 are meant to increase banks’ willingness to extend credit.
- The KfW Wachstumskredit (“loan for growth”): The program aimed at larger companies, will be adjusted by raising the current turnover threshold of €2 billion to €5 billion. The risk assumption by KfW will be increased to up to 70% (from 50%).
- For companies with a turnover of more than €5 billion, support will continue to be provided on a case-by-case basis.
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Application process:
- Step 1: Companies need to apply for loans via their relationship banks and relationship banks provide financing to the companies.
- Step 2: The relationship banks need to apply for a partial — up to 80% or up to 70% (only) — refinancing or coverage from KfW without KfW entering into direct relations to the company. The KfW loans are administered by PwC as the competent mandatary of the Federal Republic of Germany.
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Besides the KfW programs, the German federal states offer a variety of subsidized loans via their so-called support banks (Förderbanken) for smaller and midsize companies, in particular companies with a turnover of up to € 500 million. Similar challenges as for the KfW financing apply under these programs.