Shattered companies are to be given a reprieve

Companies that have had bad months will be happy. On Tuesday afternoon, banks and federal authorities met for an exchange. In principle, it remains the same: The eight-year Covid loans, which were generously granted to thousands of companies in the first wave, should normally be amortized from March 31, 2022.

In the case of troubled businesses, however, the banks want to be accommodating, as two sources confirm. The focus is on companies from the catering, hotel, fitness studios and event industries. The bankers association wants to revise its recommendations for dealing with Covid loans for its members in the next few weeks.

Reference should be made explicitly to the suspension of repayments for such companies. How long this should last is not specified. However, postponement of less than six months hardly makes any sense. After six months, the affected companies would have to start paying off their loans from the end of September.

The program had already been extended: originally, the companies were supposed to start repayments at the end of March 2021, but the banks postponed this point for a year.

Sectors such as the catering or fitness studios had recently put pressure on to postpone the start of amortization in general – sometimes only to a point in time when the pandemic would be over. It has been argued that there have been no reserves to repay loans in the past few months. Gastrosuisse said this week that 70 percent of the establishments are currently working deficit. With the certificate requirement, the situation has worsened. Such numbers are to be used with caution. The general reluctance of the public in view of the Omikron variant is also likely to be behind the decline in sales.

The situation would be assessed differently if the Federal Council were to declare closings or even a new lockdown, say participants in the conversation with the federal government. Then the question of a general shift would arise again. At the same time, it should be noted that many SMEs can look back on a very good year. It would therefore be difficult to understand from the taxpayer’s point of view if the majority of companies did not have to start with the amortization.

So far, 4.5 billion repaid

Covid loans could be applied for in the first wave from the end of March to the end of July 2020. The maximum amount was 10 percent of sales. The aim of the program was to provide liquidity temporarily. The federal government assumed the entire default risk for loans of up to CHF 500,000. For loans over 500,000 francs, he pays 85 percent. Individual repayment agreements have been made with these larger companies.

The first banks had already announced goodwill before yesterday’s meeting. A form has been activated at UBS that allows a company to apply for an extension of six months without any red tape. It sounds similar at Credit Suisse: There is the option of suspending the first amortization payment from March 31 and paying it at the same time with the last half-yearly tranche from September 30, 2027. The Zürcher Kantonalbank (ZKB) announced that the door was being kept open for discussions so that particularly affected companies could discuss their situation. The three banks together had issued almost half of all Covid loans.

So now all banks are to be sworn by the bankers’ association on additional goodwill. However, a company must also apply for this; there is no automatic delay. According to UBS, if a company is unable to pay even after an extended period, it will receive a reminder, and notice of termination will follow after 60 days at the earliest. Then at that time the claim is transferred to a guarantee cooperative, which then negotiates individual repayment modalities with the debtor.

A total of 138,000 companies took part in the loan program and applied for around CHF 17 billion. Over the past two years, 20,600 companies have already repaid the loans, which corresponds to 4.5 billion.

The federal government originally set up provisions of 2.3 billion, which corresponds to 13.6 percent of the loan volume granted. So far, the banks have made use of the state guarantee in 3800 cases with a sum of 300 million.

Abuse at 1 percent so far

In view of the deliberately superficial examination of the requests at the time – money should flow to the companies quickly – it is not surprising that various criminal charges against debtors had to be filed. 1251 advertisements with a credit volume of 166 million francs are running, 291 with a total offense of 26 million have been completed. The advertisements and abuses thus amount to around 1 percent of all applications, which is not negligible, but also does not indicate widespread abuse.

After all, according to a survey by the Institut für Finanzdienstleistungen Zug, almost every third small and medium-sized enterprise (SME) took out such a loan, and in the case of hotels and restaurants it was even more than every second company.

The fact that the March 31 deadline has been retained for the majority of firms is good news for taxpayers. At the same time, given the uncertain situation, it is justifiable for the banks to give particularly troubled companies a few more months before they are supposed to start repaying.

The State Secretariat for Economic Affairs calculates how high the burden is for a company if the maximum amount of 10 percent of annual sales was drawn in March 2020. With an eight-year credit period, the company has to pay 0.4 percent of annual sales every quarter. Those who cannot do this in less turbulent times are likely to have more serious problems than a liquidity bottleneck.