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Federal Government strengthens the recapitalisation of small and medium-sized enterprises during the coronavirus crisis
In cooperation with the Länder, the Federal Government is significantly expanding the existing financing offers provided by the SME venture capital companies (Mittelständische Beteiligungsgesellschaften – MBGs). This gives SMEs better opportunities to recapitalise their business during the coronavirus crisis. In expanding the possibilities for access to financing, the Federal Government’s goal is to strengthen the equity base of SMEs. The Federal Ministry for Economic Affairs and Energy and the Federal Ministry of Finance have therefore decided to make it much easier for SME venture capital companies to acquire equity holdings. To this end, the Federal Government’s counter-guarantee declarations have been adjusted and improved.
Federal Minister for Economic Affairs and Energy Peter Altmaier said: "We will not leave our companies and their employees alone in this severe crisis. This is why we are again expanding the range of our government support.The newly agreed measures are specifically designed to strengthen the equity base of our SMEs. This assistance is very important for small and medium-sized enterprises, and has been established in addition to the comprehensive liquidity assistance that has already been agreed by the Federal Government during recent months".
Federal Minister of Finance Olaf Scholz stated: "We are launching these measures to support small and medium-sized enterprises in particular, as they constitute the backbone of our economy. We are strengthening the equity capital of small and medium-sized enterprises. Our new assistance programme is a smart instrument that provides help exactly where it is needed in this crisis. The support will benefit up to 1000 companies and their employees. This is another important step to ensure that we emerge well from this crisis".
Small and medium-sized companies generally have a good equity base and most of them also had a strong capital cushion before the coronavirus crisis. However, the sharp decline in sales caused by the coronavirus pandemic has affected many of these companies and is also increasingly impacting their equity situation. For this reason, Minister Altmaier and Minister Scholz are launching a joint recapitalisation initiative to primarily support companies which, despite having a successful business model, have come into financial difficulties due to the pandemic, but which have good prospects of being economically self-reliant once the pandemic has been overcome.
MBGs offer equity capital as a useful supplement to the classic bank loan. Equity financing (usually in the form of a silent partnership) often helps to increase the economic equity ratio and to improve the balance sheet ratio of start-ups and small and medium-sized enterprises. Overall, there is now a broad support scheme in place for small and medium-sized enterprises, which consists of the equity-enhancing effect of the short-time work allowance, the Bridging Assistance, the November/December Assistance and the assistance made available for small and medium-sized enterprises under Pillar II of the Start-up Programme.
Measures taken to strengthen SME venture capital companies (MBGs) in detail:
In order to ensure that as many small and medium-sized enterprises as possible can benefit from the improvements made to the assistance programme and to compensate them for the loss of equity due to the coronavirus crisis, the following temporary measures will be implemented with immediate effect:
a. The current standard ceiling for silent partnerships will be extended from €1 million to €2.5 million; companies are no longer required to obtain approval from the Federal Government in cases where the current standard amount is exceeded.
b. The use of the funds made available through equity capital is flexible and the equity capital provided can be used to meet any financing needs, for example to finance working capital.
c. The increased volume of counter-guarantees granted to the guarantee banks by the Federal Government and the Länder reduce the MBGs own risk, enabling them to actively support SMEs and to provide them with equity capital even in difficult times.
d. It will be expressly permitted to combine this assistance with other aid programmes, especially the KfW Quick Loan.
Interested parties can obtain information from the websites of the SME venture capital companies in the individual Länder. An overview can be found at www.vdb-info.de/mitglieder (in German).