German Federal Government incrementally rolls out loan package for war-affected businesses

The war in Ukraine has had tangible consequences for German businesses, many of which are feeling the pinch from a sharp rise in energy prices and experiencing a commercial impact from the sanctions imposed. On 8 April, Federal Minister for Economic Affairs and Climate Action Robert Habeck and Federal Minister of Finance Christian Lindner presented a comprehensive raft of measures for the companies particularly affected by the war. The first two programmes are now ready to launch:

1. Expansions have already been made to the guarantee schemes from the German Federal Government and states for businesses demonstrably affected by the war in Ukraine. These come via the country’s guarantee banks (Bürgschaftsbanken) and its large-scale guarantee scheme (Großbürgschaftsprogramm). Applications have been open since 29 April. Decisions on whether to grant an application will only be made after receiving approval under state aid regulations. To this end, the German Federal Government is in highly advanced discussions with the European Commission.

2. The KfW loan programme, known as the 2022 KfW UBR Special Programme, where UBR stands for “Ukraine, Russia, Belarus”, to quickly safeguard the liquidity of the companies demonstrably affected by the war in Ukraine. Companies of all sizes and from all sectors can receive access to low-interest loans with extensive liability exemption of their regular banks. A syndicate financing alternative with substantial risk assumption is also being offered. This programme is scheduled to start on 9 May. Here, too, the German Federal Government is in very advanced stages of discussions with the European Commission regarding state aid rules.

Federal Minister for Economic Affairs and Climate Action Robert Habeck says: “After two years of the coronavirus pandemic, Russia’s war has added new strain to business and economic activity. The war against Ukraine and the economic impact that stems from it remind us that we are vulnerable. The strength of liberal democracies, however, is that we strive to find a balance and come up with solutions that will move us forward together. Week after week, we are showing that democracies in particular are capable of acting and delivering in the face of war and crises, and that they have very quickly taken a series of actions to adapt to and counteract these new circumstances. We will continue to resolutely follow this path and gradually break away from Russian imports. At the same time, the German Federal Government is doing everything it can to keep the beating heart of our economy going – even in difficult times – with a targeted package of loans to protect our companies, which we are now implementing at a fast pace.”

Federal Finance Minister Lindner says: “We are hitting Vladimir Putin’s regime with necessary sanctions. However, businesses in Germany are also suffering from the impacts of Russia’s war of aggression. They need liquidity in the short term to cushion this blow. That’s why we wanted to support these companies by introducing a KfW special programme and expanded guarantee schemes. We are providing targeted support to the businesses affected. And at the same time, we are handling taxpayers’ money responsibly. The assistance will be temporary and is intended to act as a safety net, preventing structural breaks without crowding out market forces.”

Stefan Wintels, Chief Executive Officer of KfW, says: "KfW has repeatedly helped to overcome great challenges over its 70-year history. In addition to the coronavirus pandemic, the consequences of the horrific war in Ukraine are now also increasingly being felt throughout our society. We are already using KfW funds to support municipalities with an assistance programme to house refugees. Together with the Federal Government, we are now helping out businesses in Germany that are suffering from the impacts of the war, too.”

The temporary programmes are still subject to approval by the European Commission, for which the German Federal Government is in advanced discussions with the European Commission.

More information about the programmes:

1. Key points concerning the KfW UBR Special Programme:

KfW loan programme with two programme components

• One for loans granted using the standard process via regular banks, with loan amounts of up to EUR 100 million
• One for individual, large-volume syndicate financing

Who does the support go to?

Small, medium-sized and large companies without restrictions on turnover

What does the support go to?

Investment and working capital loans. KfW grants the regular banks:

• 80% exemption from liability for loans to medium-sized companies (up to EUR 500 million in annual turnover)
• 70% exemption from liability for loans to large companies

This increases the banks’ willingness to lend.

What are the requirements for approval?

Applicants must prove that they have been affected by sanctions against Russia and Belarus or from acts of war in Ukraine, resulting in:

• Reduced revenue due to lost sales market
• Verified production losses in Ukraine, Belarus and Russia
• Verified production downtimes due to a lack of raw materials and primary products
• Closure of production facilities in Russia, Ukraine or Belarus
• Particularly adverse impact from the increase in energy costs (energy costs account for at least 3% of 2021’s annual turnover).

What conditions apply?

The loans will be issued under the following conditions:

• Maximum six-year term
• Up to a two-year initial grace period without repayments
• Fixed interest rate for six years

A lower interest rate may be available depending on the creditworthiness of the company, the collateralisation of the loan in the standard procedure and the refinancing conditions on the capital market. The current interest rate is updated on a daily basis and can be found on the KfW homepage (link: https://www.kfw-formularsammlung.de/KonditionenanzeigerINet/KonditionenAnzeiger).

As part of the syndicate financing alternative, individual loan structures are available with terms of up to six years. KfW will replicate the financing partner’s terms and conditions.

Programme term

In accordance with the European Commission’s Temporary Crisis Framework, the KfW Loan Programme is limited until 31 December 2022.

2. Key elements of the large-scale guarantee schemes

Who does the support go to?

Companies requiring a guarantee of more than EUR 20 million in structurally weak regions and more than EUR 50 million outside structurally weak regions

What can be guaranteed?

Working capital and investment loans can be guaranteed. The guarantee ratio is generally 80%, and up to 90% in individual cases where particularly adverse effects are shown.

What are the requirements for approval?

Applicants must prove that they have been affected by sanctions against Russia and Belarus or from acts of war in Ukraine, for example resulting in:

• Reduced revenue due to lost sales market
• Verified production losses in Ukraine, Belarus and Russia
• Verified production downtimes due to a lack of raw materials and primary products
• Closure of production facilities in Russia, Ukraine or Belarus
• Particularly adverse impact from the increase in energy costs (energy costs account for at least 3% of 2021’s annual turnover).

Programme term:

The extended large-scale guarantee scheme will be valid until 31 December 2022 in accordance with the European Commission’s Temporary Crisis Framework.

3. Key points concerning the guarantee banks’ expanded programmes

Who does the support go to?

Small and medium-sized enterprises requiring a guarantee of up to EUR 2.5 million

What can be guaranteed?

Working capital and investment loans can be guaranteed. The maximum guarantee ratio is 80%.

What are the requirements for approval?

Applicants must prove that they have been affected by sanctions against Russia and Belarus or from acts of war in Ukraine, for example resulting in:

• Reduced revenue due to lost sales market
• Verified production losses in Ukraine, Belarus and Russia
• Verified production downtimes due to a lack of raw materials and primary products
• Closure of production facilities in Russia, Ukraine or Belarus
• Particularly adverse impact from the increase in energy costs (energy costs account for at least 3% of 2021’s annual turnover).

Programme term:

The guarantee banks’ expanded programmes are limited until 31 December 2022 in accordance with the European Commission’s Temporary Crisis Framework.