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Published March 25, 2020

Corona financial aid: KfW loans reloaded

Some days ago we informed about the fact that Germany’s state-owned development bank KfW had eased up considerably the requirements to apply for loans to help companies overcome the crisis resulting from the spread of COVID-19.

Now the requirements and the conditions applicable to the two loan programs, one intended startups and young companies, one dedicated to companies active since more than 5 years, have been amended yet again to allow for an even easier application.

Broad coverage of personnel costs

The biggest news is that from now on, all the credit lines will cover so-called “Betriebskosten”, i.e. operational costs which include personnel costs, rents, energy supply, marketing, R&D etc. etc.

Particularly the coverage of personnel costs represent a huge relief for companies that are currently struggling to pay their employees while workload and, as a consequence, turnover have dropped dramatically virtually overnight, due to the spread of the epidemics.

In addition to this, the new programs include an indemnification of the participating banks up to 90% of the loan amount: this means if the loan becomes non-performing (i.e. the company is not able to pay back), KfW will indemnify the loan granting bank up to 90% of the amount. This makes it obviously easier for banks to actually grant the loans while facing a negligible risk.

Finally, KfW announced it would give up checking the creditworthiness of applicants entirely to speed up the procedure. This means, only the cooperating banks will check whether applicants meet all conditions and requirements to apply for a loan, while KfW will merely approve.

Further information (only in German) can also be found in a summary released by the Federal Ministry for Economic Affairs and Energy.

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Vittorio De Vecchi