Quick, straightforward, effective: corona support for SMEs
On 3 April 2020 this text was updated due to current events.
It was a Sunday morning in March, in a Switzerland where nothing is the way it once was: no Sunday brunch at the neighbourhood coffee shop, no grandchildren visiting Grandma, even the church doors remained closed. On this particular Sunday, measures were discussed that will go down in history: representatives of the banks, the authorities and the federal government participated in a telephone conference organised by the SBA to discuss how Swiss SMEs can obtain liquidity quickly and unbureaucratically. The SBA was in the thick of it; mediating, coordinating. Time was of the essence, because the corona crisis has brought various sectors in the economy to a standstill. The economic survival of many entrepreneurs is at stake. They have wholly or partially lost their revenues, but their running costs remain: salaries, rent, suppliers, interest payments. After various virtual crisis meetings in close succession, the largest rescue package the Swiss economy has ever seen was put together. The federal government is providing CHF 20 billion in bridging loans to Swiss companies to help them cope with the effects of the corona crisis. This is an enormous sum – over a quarter of the federal budget for the current year. On 3 April 2020, the Federal Council decided to increase the guarantee volume for the SME loan programme to a total of CHF 40 billion.
Financial support during the crisis
Our members, the banks that interact daily with their corporate customers, are experiencing first-hand what companies are currently going through. “Help is coming”, signalled the Federal Council shortly after it declared the “extraordinary situation”. But the fact that help is coming so quickly and unbureaucratically has come as a surprise to many. Six days passed – including the aforementioned Sunday – from the time of the announcement until implementation. SBA CEO Jörg Gasser and Oliver Buschan, Head Retail Banking & Capital Markets, explain in our podcast “Stimmen des Finanzplatzes”, how it was possible to set up a loan programme of unprecedented scale in such a short time.
Since 26 March 2020, small and medium-sized companies that are suffering from a drop in turnover due to the corona pandemic have been receiving financial support in the form of loans with joint and several guarantees. The programme offers two types of loans, which are guaranteed under the solidarity guarantee ordinance “COVID-19”:
- Covid-19 Loan: Amounts of up to CHF 0.5 million per counterparty are paid out by the banks in a straightforward manner and 100 percent guaranteed by the federal government via loan guarantee organisations. The interest rate is currently 0 percent.
- Covid-19 Loan Plus: Amounts of over CHF 0.5 million to CHF 20 million are 85 percent guaranteed by the federal government via loan guarantee organisations. This is subject to a prior examination of the application by the bank. The maximum amount of the credit facility is CHF 20 million per counterparty.
Promise kept and delivered
In these difficult times, during which everyone – including the financial sector – is working under difficult conditions, the banks are standing by their responsibility to provide credit to the economy. Help should be simple and fast – that was the promise. And the banks have kept their word: one A4 sheet and in many cases less than thirty minutes to process is all that is required. The procedure for loans of up to CHF 0.50 million is simple: fill out the Covid-19 loan agreement, sign it and send it to the participating house bank – that is all business owners have to do. Everything else is done by the bank and the loan guarantee organisations. For loan amounts over CHF 0.50 million, supplementary documents are required in addition to the loan application, as the banks bear part of the risk in such cases and a credit check is necessary.
On the federal government’s website, affected business owners can find all information and documents relating to the loan programme.
Initial test passed
Experience during the first week of the programme shows: help is getting through and the pragmatic solution is meeting with broad acceptance in the business community. Small and medium-sized enterprises can quickly obtain urgently needed liquidity through the credit programme. Since the ordinance came into force, around 64'000 loan applications have been received and almost half of all banks registered in Switzerland participate in the programme. Over CHF 12 billion in loans were paid out to entrepreneurs within the first week.
With this quick, straightforward and effective support, the federal government, the authorities and the banks have proven that they can work together in the interests of the economy even under difficult conditions. Now it is up to our members, the banks: they are checking hundreds of loan agreements every day, answering enquiries from corporate customers, training relationship managers and expanding their capacities to support the SMEs affected by this challenging situation. As an umbrella organisation and platform, the SBA acts as a coordinator and mediator between the parties involved and is helping to ensure that the guarantee programme is used efficiently and across the board. This is to ensure that Swiss SMEs receive rapid and effective support and can return to their former strength as soon as possible.