by Arjun Ahluwalia, Ozan Yalti, and Janine De Keersmaecker

As the world moves into six weeks since the wide imposition of lockdowns and travel restrictions, some national governments have acted relatively swiftly to provide relief to small businesses.  We include some of the key measures taken in the US, UK, Germany and Belgium which may be indicative of potential relief measures taken by countries.  We will continue to push updates on these as well as other jurisdictions where our clients are based:

USA:  Last month saw federal intervention through the Small Business Administration’s (SBA) Paycheck Protection Program (implemented through the Coronavirus Aid, Relief, and Economic Security Act (CARES)) which had initially earmarked USD 350 billion in emergency loans to be paid out for each company at 2.5 times each company’s average monthly payroll, released on a first-come, first-served basis.  This was supplemented a few days ago when Congress passed a USD 484 billion economic relief package, adding a further USD 320 billion to the Paycheck Protection Program, with an additional USD 100 billion for healthcare related relief.   Additionally, cash-rich Big Tech companies, which clearly have a vested interest in supporting small businesses which in turn utilize their platform – have shown interest in implementing measures.  Facebook has set up a USD 100 million program to help struggling small businesses through cash and advertising credits, and Amazon has a USD 5 million targeted program, suggesting that other Big Tech companies may start providing small business assistance to startups.  See our recommended reference list below for information on state-level initiatives.

UK:  As of mid-month more than GBP 1.1 billion had been lent to 6,000 small businesses under the UK’s emergency loans scheme.  UK Finance has reported that government backed lending to SME’s had risen by GBP 700 million, with a swift doubling of loan approvals under the Coronavirus Business Interruption Loan Scheme (CBILS).  The scheme guarantees 80% of the loans of up to GBP 5 million to small businesses having revenues below GBP 45 million.

Germany:  In comparison to the UK, Germany’s more generous program has a 100% guarantee on loans provided to small and medium sized businesses under the “KFW Instant Loan” scheme. Germany has implemented a loan assistance program through its state-owned development bank, KFW. Among the various loan types made available by KFW, “KFW Instant Loan” plays the central role for supporting young companies. The instant loan is available to enterprises with more than ten employees that have been active since at least 1 January 2019 and that have maintained good financial standing as at 31 December 2019.  The loan is provided with an interest rate of 3 per cent. per annum and a term of ten years. The loan amount ceiling per company is up to a quarter of its annual turnover in 2019, with a maximum of EUR 800,000 for companies with more than 50 employees and a maximum of EUR 500,000 for companies with less than 50 employees.  The loan approval process does not involve additional credit risk assessment by KfW and consequently this enables loans to be granted relatively quickly.

Belgium: At the Federal level, Belgium has introduced a loan guarantee scheme mobilizing EUR 50 billion support for companies affected by the COVID-19 crisis, applying to “viable” (as defined under Belgian law) SMEs active in Belgium. The intention is to help businesses access short term loans to cover their immediate needs and continue their activities through the crisis. All new additional loans and credit lines with a maximum maturity of 12 months granted between 1 April 2020 and 30 September 2020 will be covered by the scheme. The maximum interest rate is 1.25% (excluding fees) and the fees charged cannot exceed 0.25% for SMEs.  SMEs with existing loans may benefit from a deferral of loan re-payments for a maximum period of 6 months (until 31 October 2020 at the latest) provided the enterprise was not already in default with regard to current credits, tax payments or social security contributions as at 1 February 2020. In addition, there are various aid measures taken at the regional level (in Flanders, Brussels and Wallonia) including lump-sum compensatory allowances for small businesses, subordinated loans and guarantees, as well as a range of tax measures.

As the true effects of the crisis period are being assessed as the lockdown is eased, we expect to see a raft of additional measures to support startups and small businesses.  For up to date information on such measures, we recommend monitoring the following resources by jurisdiction:

• UK:  For a comprehensive list of helpful resources including national and regional initiatives in the UK, monitor the UK Government’s Department of Business page on finance and support to businesses during the pandemic:  https://www.gov.uk/business-finance-support
• Germany:  We recommend monitoring the Federal Finance Ministry’s website https://www.bundesfinanzministerium.de/Content/EN/Standardartikel/Topics/Priority-Issues/Corona/2020-03-25-combating-the-corona-virus.html and KFW’s, state-owned development bank’s, relevant web page https://www.kfw.de/KfW-Group/Newsroom/Latest-News/KfW-Corona-Hilfe-Unternehmen.html
• Belgium: An overview of the aid measures taken at the federal and regional level (see links on webpage) can be found here (unfortunately apart from the Brussels website, the information is not available in English):

https://economie.fgov.be/fr/themes/entreprises/coronavirus/informations-pour-les/coronavirus-reduction-des  For more details on the federal loan guarantee scheme, please see the website of the Belgian National Bank: https://www.nbb.be/en/articles/guarantee-scheme-individuals-and-companies-affected-corona-crisis

• USA:  We recommend monitoring the Forbes list of Covid-19 measures being implemented both at Federal and State level: https://www.forbes.com/sites/advisor/2020/04/10/list-of-coronavirus-covid-19-small-business-loan-and-grant-programs/#4812b7d5cc4b/.  In addition, the US SBA website provides step-by-step guidance on how to access the SBA’s programs:  https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources