Corona – Financial aid for companies, self-employed and freelancers in Germany
A summary of the assistance provided by the German and NRW governments to ensure liquidity in companies and businesses during the Corona crisis in Germany. (last update: 25.03.2020)
Table of Contents
Pandemics as challenges for society and the economy
Justinian plague, Black Death, Spanish flu: over the millennia, epidemics were a constant companion of man. For these invisible pathogens it made no difference whether we crowded together with refugees close to each other behind the impregnable Long Walls of Athens at the beginning of the Peloponnesian War or whether we traded smallpox-infested blankets from Spanish conquistadors almost 2,000 years later in the Aztec Empire. Everywhere and at all times the consequences were catastrophic: in Athens, for example, almost a third of all citizens of this proud polis died, while in America the majority of the indigenous population was killed. In the Middle Ages, the plague of 1346 AD not only destroyed millions of lives, but also social and family cohesion.
Thanks to advances in health care and medicine, we have been spared such disasters for over a century now. The horrors of the past have given way to pale memories. “Pest oder Cholera” – as they say in Germany – exist only as a proverb in Germany.
Against that background we have been surprised by the current Covid 19 pandemic. It poses unprecedented challenges to our liberal and globalized society. Since the absolute protection of every single citizen’s life requires massive interventions in public and private life, the consequences for the economy are incalculable. In order to mitigate the consequences for entrepreneurs and the self-employed, federal and state governments are continuously developing and passing tools and measures. An overview:
I. Grants for companies, self-employed persons and artists
1. Short-time compensation
Short-time work compensation has already proven to be an effective instrument for temporarily reducing running costs during the global financial crisis of 2008/2009 .
a) What is the short-time compensation?
Short-time work is an exception to the principle that the employer bears the entrepreneurial risk.
Generally, if the employee has offered his or her work personally, the employer must continue to pay the full amount of the employee’s remuneration in accordance with § 615 BGB .
If there is an inevitable, unavoidable and temporary collapse in the order and profit situation, the employer can no longer use this labor productively. In this case the employer has the option to apply for the so-called short-time work compensation. The employee then receives no or only reduced remuneration from the employer, while the Federal Employment Agency compensates for part of the loss of earnings.
Since the employee stays employed, unnecessary unemployment can therefore be avoided.
Den Unternehmern wird ermöglicht, Mitarbeiter weiter in einem Anstellungsverhältnis belassen zu können, obwohl deren Arbeitsleistung aufgrund eines temporären Effektes aktuell nicht benötigt wird.
The advantage for the company is that the manpower and know-how of the employees is immediately available again as soon as the economic situation improves.
Although the employee has to accept a loss of pay, that system does provide security as to the overall employment situation.
b) How high is short-time compensation?
In order to achieve the above-mentioned objective, the Agency for Labor in Germany is partly responsible for the payment of wages to the workforce.
The amount of the short-time compensation is based on the employee’s loss of earnings in the respective calendar month. The compensation will amount to either 60% or 67% of the flat-rate net salary.
The so-called flat-rate net salary is calculated from the difference between the actual salary and the target salary.
The target salary is the gross wage that the employee would have earned in the entitlement period (calendar month) without the loss of work. It also includes allowances and other benefits in addition to the monthly wage, but not remunerated overtime.
The actual pay, on the other hand, is the gross salary actually earned in the month of entitlement plus all wage components to which the employee is entitled.
It is also increased by salary which the employee earns simultaneously from another employment (e.g. a minijob).
The higher the actual salary is, the smaller the difference to the target salary. The amount of this difference forms the basis for calculating reduced hours compensation as flat-rate net salary.
The increased benefit rate of 67% of the flat-rate net salary is paid to all employees with at least one child in their household. The number of children is not important. Entitlement to the increased benefit rate is proven by the fact that the employee’s income tax card shows at least a 0.5 child exempt amount.
If this condition is not met, the employee receives the general benefit rate of 60% of the flat-rate net salary.
In short, the state pays between 60% and 67% of the salary if the employee does not receive any payment from the employer. The maximum possible period of entitlement is twelve months.
c) What other benefits are covered by the short-time working allowance?
The short-time allowance does not exempt employers from the obligation to pay social security contributions.
However, as part of the immediate measures to deal with the Corona crisis, the German Federal Government has now decided that the Employment Agency will reimburse employers for the social security contributions they have to pay.
d) Application requirements
Only employers are entitled to apply for short-time work for their company. The competent authority and contact person for such applications is the local employment agency. A corresponding application can now also be made online, provided the employer is registered with the employment agency.
Further information can be found here (in German – advise: use the translate-function of your browser):
It is important that the employer concludes an agreement on the introduction of short-time work with the works council (if applicable) or with each individual employee before the application is submitted and that this is documented in writing. This agreement must be submitted with the application to the Agentur für Arbeit..
A precondition for receiving short-time working compensation is that the normal working hours are temporarily reduced substantially. This can be the case, for example, if deliveries are not made due to the corona virus and working hours have to be reduced as a result, or if government protective measures ensure that the company is temporarily closed down.
In addition, the Federal Government has considerably relaxed the conditions for approval:
- This means that only 10 % of the employees in a company need be affected by the loss of working hours.
- It is also no longer necessary to first reduce negative balances on working time accounts if any such accounts are kept.
- In addition, temporary employment agencies have been allowed to apply for short-time work for their temporary employees as well.
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2. Emergency aid measures for small entrepreneurs, solo self-employed persons and artists
a) Federal subsidies
The German federal government has adopted a package of measures amounting to up to 50 billion euros.
This programme is intended to provide unbureaucratic emergency aid for micro-enterprises from all economic sectors as well as self-employed persons and for members of the liberal professions, who would normally not receive a loan.
This emergency financial aid is granted in the form of direct subsidies and applies exclusively to companies with a maximum of 10 (full-time) employees (or up to 50 employees in NRW).
Companies with up to 5 (full-time) employees receive a one-off payment of up to 9,000 EUR for the next three months.
Companies with up to 10 (full-time) employees receive a one-off payment of up to 15,000 EUR for the next three months .
The grant does not have to be repaid. It serves to secure the economic existence of the applicants and to bridge acute liquidity shortages. Therefore, the concrete amount of the one-off payment will be based on the costs of the respective company in each individual case. In particular, current operating costs such as rents, loans or leasing installments will be taken into account.
The direct state grant is only intended for companies that are actually currently in economic difficulties. These economic difficulties must also have been caused by the Corona crisis. This causality exists if the company was healthy before March 2020.
In order to ensure rapid payments to companies, it is sufficient for companies to ensure the causality of the corona pandemic for the liquidity problems of their company when they apply for the aid. A review will only take place after this crisis.
The government reserves the right to recover unduly paid subsidies in case of misuse.
It has not yet been announced which authority will be responsible for processing the subsidies. According to Federal Economics Minister Altmaier, this will be worked out in the course of this week. (Status: 25.03.2020)
b) Subsidies by the state of NRW
aa) Subsidies for small enterprises
The state of North Rhine-Westphalia extends the subsidies introduced by the federal government for companies based in NRW.
In NRW, therefore, companies that have between 10 and 50 (full-time) employees are now also eligible. These companies will receive a one-off payment of up to 25,000 EUR for the next three months from state funds.
Further information and the appropriate application forms can be found on the website of the State of NRW:
bb) Subsidies for artists
The state of NRW will also make a one-off payment to freelance artists who are no longer able to perform as a result of the Corona pandemic. The state has provided a total of 5 million euros for this purpose. These artists will receive a payment of up to 2,000 EUR as immediate aid to secure their livelihood.
Emergency aid can be applied for by means of a simple form from the competent district governments and does not have to be repaid later. Further information and the application form can be found at
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3. Special loan programme KfW
For companies, the self-employed and freelancers, the German Federal Government has set up several special loan programs of the Kreditanstalt für Wiederaufbau (KfW).
The only companies excluded from KfW support are those that were already experiencing financial difficulties before 31.12.2019.
For companies that only entered the crisis as a result of the corona pandemic, various options are available, depending on the age of the company and its specific financing situation.
a) ERP-Start-up Loan Universal/ ERP Start-up Loan Start-up money
The “ERP-Gründerkredit Universell” (=Start-up Loan Universal) program is aimed at young companies that were founded less than five years ago. The size of the company is not important.
Investment and working capital loans (e.g. office rent) of up to EUR 1 billion per group of companies will be provided for each young company.
The specific loan amount for the individual applicant company is determined up to this absolute maximum limit according to the following alternatives:
- 25 % of annual turnover from 2019,
- or the current liquidity requirements for the next 18 months (for small and medium-sized enterprises) or 12 months (for large enterprises)),
- or twice the wage costs of the company in 2019.
KfW considers small and medium-sized enterprises to be those with an annual turnover of up to EUR 50 million or fewer than 250 employees.
KfW assumes 90% of the default risk for these companies. This indemnification is backed by extensive guarantees from the Federal Government, whose interest rate fluctuates between 1% and 1.46%..
Large enterprises, i.e. those employing more than 250 people, whose annual turnover is more than EUR 50 million or whose balance sheet total is more than EUR 43 million, benefit from an 80% risk assumption by KfW. The interest rate for the federal guarantees varies between 2% and 2.12.
If you want to take advantage of the ERP start-up loan, you can contact your bank as usual. They will arrange and coordinate the application process with KfW.
Further information is also provided by KfW: [Link]
In addition, there is also the possibility for young companies to obtain financing through the KfW programme “ERP-Gründerkredit Startgeld”.
This enables full financing without equity up to an amount of 100,000 euros and is also explicitly aimed at self-employed persons in temporary secondary employment.
Information on the entry fee program is provided here.
b) Entrepreneur loan by the KfW
KfW has extended its Entrepreneur Loan for companies of all sizes that have been active on the market for more than five years.
Its framework conditions were adapted to the “ERP-Gründerkredit Universell” (ERP Start-up Loan Universal) described above. This means that the same requirements regarding the maximum loan amount, risk assumption and interest rate level apply to established companies as they do to young companies.
The application for such business loans is also arranged by your bank.
Further information can be found here:
As an alternative to loans by the KfW, it is also possible to have a loan from the house bank secured by the guarantees of private development banks, the so-called guarantee banks.
This requires that the company was healthy before the Corona pandemic and had a viable business model. For this reason, the guarantee banks require an up-to-date and plausible liquidity plan for the examination of the application for a possible guarantee.
The guarantee framework has just been massively expanded by the federal states and the federal government due to the corona pandemic.
Up to an amount of EUR 2.5 million, applications are processed directly by the guarantee banks. For larger amounts, the funding agencies of the federal states are responsible.
Detailed information and free online advice can be found on the central financing platform of the guarantee banks:
Companies based in North Rhine-Westphalia can also alternatively turn directly to Bürgschaftsbank NRW for the collateralization of loans of up to EUR 2.5 million. If the loan amount exceeds 2.5 million euros, the competent authority is the Landesbürgschaftsprogramm. The guarantee rate of that NRW program will be increased from 80 percent to 90 percent in the near future as soon as the necessary European framework conditions come into force.
The Bürgschaftsbank enables a 72-hour express guarantee (up to 250,000 euros), while the aim with the state guarantee program is to process the guarantee within one week. You will find further information and contact persons on the respective websites.
d) Support for small enterprises and start-ups in NRW
Small companies and start-ups have the opportunity to apply for equity capital of up to 75,000 euros directly from the micromezzanine fund at the Kapitalbeteiligungsgesellschaft (KBG) based in Neuss.
The company does not require securities for this. In addition to an immediate strengthening of liquidity, the company also benefits from an increase in its rating and creditworthiness.
Further information can be found here: