Granting loans with a guarantee of the federal government
With support from the Swiss Confederation, recognised guarantee (Bürgschaftsorganisationen) can provide guarantees for bank loans. This is now being extended and facilitated as a measure to mitigate the consequences of the coronavirus on small and medium-sized enterprises (SME).
Thus, the Swiss Federal Government (Federal Government) makes it easier for SMEs to raise external funds in the maximum amount of CHF 20m or 10 % of a SME’s total revenue in order to allow such SME to quickly obtain liquidity.
The Federal Council adopted an emergency ordinance (Ordinance) in order to mitigate liquidity issues of SMEs which need prompt access to credit facilities to bridge liquidity shortfalls due to the new coronavirus pandemic. Affected companies may apply for a bridge loan with their banks (including PostFinance AG) which will be secured by guarantees of the Federal Government.
2 Loans with guarantees of the Federal Government
Loans of up to CHF 500,000 will be fully covered by state guarantees granted by guarantee organisations, and will be paid out promptly and with a minimum of administrative efforts. Furthermore, no interest will be charged.
For any bridge loan that exceeds the amount of CHF 500,000, 85% will be secured by the Swiss Confederation (at an interest rate of 0.5%) whereas the lending bank will cover the remaining unsecured part.
The maximum duration of these guarantees is five years (with an exception for hardship cases) according to the Ordinance. During this period the following actions are barred: (i) dividend payments, (ii) the granting of loans or refinancing of loans structured as shareholder loans, (iii) the repayment of intragroup loans and (iv) the transfer of funds secured by a Federal guarantee pursuant to the Ordinance to direct or indirect subsidiaries, parent or affiliated companies. Furthermore, any of these loans may be used for liquidity purposes only.
For calculating (i) the coverage of capital and reserves in accordance with article 725 (1) of the Swiss Code of Obligations (CO) and (ii) the over-indebtedness pursuant to article 725 (2) CO, loans secured by guarantees of the Federal Government are not considered as debt capital until 31 March 2022.
3 Conditions and provisions
3.1 Who can apply for such guarantees?
Proprietorships (Einzelunternehmen), partnerships (Personengesellschaften) or legal entities (juristische Personen) having its registered office in Switzerland may apply for credit facilities secured by guarantees of the Swiss Federal Government, if:
- these have been incorporated prior to 1 March 2020;
- no bankruptcy or composition proceeding has been initiated and such company is not in liquidation;
- there is a significant impact of the coronavirus pandemic on the company’s turnover; and
- at the time of submitting the application, it has not yet obtained any liquidity guarantees based on the emergency measures in the areas sports and arts.
For loans exceeding CHF 500,000, an applicant needs to have an Enterprise Identification Number (Unternehmensidentifikationsnummer, UID). This includes, among others, entities registered in the commercial register, entities subject to value added tax, persons who are self-employed, persons registered in a cantonal lawyer/solicitor register and simple partnerships. In addition, the bank of the applicant may conduct a credit check in line with the industry standards, taking into account the joint and several guarantee of the Federal Government.
For any loan according to the Ordinance, the total of the secured amount is limited to 10% of the applying company’s total revenue in 2019 and CHF 20m per company (with an exception for hardship cases).
The application must be submitted to the relevant bank by 31 July 2020 and forwarded by such bank to the guarantee organisation by 14 August 2020.
3.2 Who is ineligible for this kind of guarantees?
These measures are not available for companies with a turnover of more than CHF 500 million in 2019.
3.3 Status quo
At a press conference of experts of the Federal Government on 30 March 2020, it has been announced that until now, in total, 31,853 loan agreements have been entered into which corresponds to a guaranteed amount of CHF 6.6bn (approx. one third of the designated funds in the amount of CHF 20bn).
If a company wishes to attract a loan facility secured by a Federal guarantee, it needs to contact its bank. They will assess whether the company (and the requested credit) meets the relevant criteria. If it does, the company can submit a request with a guarantee organisation to apply for such guarantee.
Should you have any questions or need any assistance, do not hesitate to contact us
Judith RaijmakersPartner Attorney at law
Judith Raijmakers, attorney at law, is a partner in our Zurich and Luxembourg offices. She focuses on finance transactions including acquisition financing, asset financing, real estate and transportation financing, debt (re)structuring and debt issuances.T: +41 43 434 67 24 M: +41 79 870 91 03 E: firstname.lastname@example.org
Stéphanie HagmannAssociate Attorney at law
Stephanie Hagmann, attorney at law, is an associate in our Zurich office. She focusses on finance transactions including acquisition financing, asset financing, debt (re)structuring and debt issuances. Furthermore, she is focusing on corporate law and M&A transactions.T: +41 43 434 67 38 M: +41 79 890 10 11 E: Stephanie.Hagmann@loyensloeff.com