State Grants Guarantees for SME Bonds and Promotes Non-Bank Refinancing
The Economic Stabilisation Fund (WSF) now also secures bonds with a volume of EUR 5 million or more with guarantees. This offers larger SMEs in particular a worthwhile alternative to traditional bank financing and the KfW programmes. The company can avert impending liquidity shortages unbureaucratically and independently of banks.
To better meet the needs of the capital market-oriented economy, the WSF offers "Guarantees for Bonds", an additional instrument with largely standardised conditions. So far, guarantees were only granted for bonds with a volume of more than EUR 100 million.
Free Use of Funds
The advantage of this bond lies in its unbureaucratic handling, the free use of funds and the possibility of combining it with other funding measures. The extensive standardisation enables the Federal Ministry of Economic Affairs to make a rapid decision. In view of increasing processing figures and exhaustible budget funds, companies should nevertheless make the decision on placement at short notice. Especially since the bond must be issued by 31 December 2020.
The issuer can use the raised capital both for investment and for working capital financing. Thus, liquidity shortages, especially but not only due to corona, can be bridged. The bond guarantee is also not subject to any form of exclusivity. A combination with other support measures is certainly possible.
No Bank Auditing
An audit of the company by the main bank is not necessary. In practical terms, this means that companies that were denied access to previous corona aid will now be able to borrow on a state-guaranteed basis.
A disadvantage is the guarantee fee and the limitation to institutional investors. A guarantee fee must be paid for the guarantee. The amount of the fee depends on the remuneration that the issuing company would have to pay on the capital market without the guarantee of the WSF.
In addition, guarantees are only given for bonds that are exclusively aimed at subscription by institutional investors. However, this restriction is put into perspective in view of the expected high demand for state-guaranteed investment opportunities.
All in all, this offer of assistance represents a good opportunity for small and medium-sized enterprises to master the way out of the crisis by their own efforts. If you are interested in the subject and the structure of such alternative financing, please contact me by e-mail or call me: Maximilian.email@example.com, phone: 089-35065-1241.
Dr Maximilian Degenhart
Lawyer, Compliance Officer (TÜV)