Further Protection Measures for the German Mittelstand

Most of German businesses are part of the so called “German Mittelstand”, i.e. qualify as privately and family owned small or medium sized enterprises. To protect these enterprises from the effects of the ongoing COVID-19 pandemic, the German Federal Government has already established several measurements, in particular such to provide companies with liquidity. In this context, the German Federal Government, together with KfW, a German state-owned development bank, established special programs intended to provide companies with easier access to loans for investments, operating equipment, etc. by assuming up to 90% of the risk for small and medium sized enterprises. However, only a few weeks into these programs, many enterprises complained that their house banks were unable or unwilling to take the remaining risk.

Now, the German Federal Government has therefore announced a new and additional program, the “KfW-Schnellkredit für den Mittelstand” which aims at providing small and medium enterprises with loans that are 100% secured by the Federal Republic and, thus, do not require house banks to take any additional risks. It is intended that there will be no risk assessments of the applying enterprises. The only condition to qualify for such loans should be that the applying entity achieved a profit in 2019 or at least in the average of the last three years. Under this new program, enterprises with more than ten employees and existing on the market at least since 1 January 2019 shall be able to apply for loans in an amount of up to three months of the turnover the respective entity achieved in 2019. The loan would be granted at an interest rate of 3% p.a. and with a ten year term. The maximal principal amount of such loan is further caped at EUR 500,000 for entities with up to 50 employees and at EUR 800,000 for entities with more than 50 employees. While KfW originally mentioned that only enterprises with less than 250 employees will be able to apply for a loan under this new program, this requirement seems to have been waived in the meantime. However, the program has not yet been finalized and, thus, it remains to be seen which requirements will be established. It is currently envisaged that applications under the “KfW-Schnellkredit für den Mittelstand” will be possible beginning on Thursday, 9 April 2020.

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