Abstract

This note discusses how SMEs are affected by the current COVID-19 pandemic, reports on early evidence and estimates about the impact, and provides an inventory of country responses to foster SME resilience.

 Introduction

This note has been prepared by the OECD Centre for Entrepreneurship, SMEs, Regions and Cities (CFE) for discussion by the OECD Working Party on SMEs and Entrepreneurship (WPSMEE). The WPSMEE conducts analysis and provides evidence based guidance for the design and implementation of SME policies. It also serves as an important repository of SME policy responses in times of crisis.

This note discusses how SMEs are affected by the current COVID-19 pandemic, reports on early evidence and estimates about the impact, and provides an inventory of policy responses to foster SME resilience in 60 countries. Given the rapid pace of developments, the overview of country responses is not comprehensive and in some cases includes intended policy responses that are still a work in progress, or simply at the stage of public announcements. This note is the sixth update of SME policy responses since early March 2020. Compared to the previous update, latest forecasts show an increasingly negative impact of the pandemic on global GDP growth. At the same time, whereas surveys since February show that SMEs and entrepreneurs are extremely worried about the impact of COVID-19 on their liquidity position and business survival, the most recent business surveys show some confidence improvements, possibly related to the significant policy efforts to address the SME liquidity gap and the lifting of lockdown measures in a number of countries. In this context, the policy perspective is gradually shifting from liquidity support measures for SME survival, which still remains a priority in most countries, to support for recovery.1

Chapter 2 discusses the background to SME impact and policy responses, including the most recent forecasts on the impact of COVID-19. Chapter 3 has been significantly updated, and discusses the increasing evidence on the impact on SMEs from over 40 surveys among SMEs world-wide and a growing body of economic analysis. Chapter 4 includes the synthesised analysis of country SME policy approaches. Annex 1.A. presents the overview of country SME policy responses, with further detailed information on the measures.2 Annex 1.B. provides an overview of survey results on the impact of COVID-19 on SMEs.

 Background

The coronavirus pandemic is causing large-scale loss of life and severe human suffering globally. It is the largest public health crisis in living memory, which has also generated a major economic crisis, with a halt in production in affected countries, a collapse in consumption and confidence, and stock exchanges responding negatively to heightened uncertainties.3 While world-wide, the number of COVID-19 continues to increase at the time of writing of this report, in a number of OECD countries cases are diminishing, and lockdown and containment measures are gradually being lifted.

Economic forecasts issued over April-June 2020 depict an increasingly negative outlook in terms of the scale of the global economic recession triggered by the pandemic. In its June 2020 Economic Outlook, the OECD projected a 6% drop in global GDP, and a 7.6% fall in case of a second pandemic wave by end 2020, with a double digit decline in some of the most hit countries, followed by a modest recovery of 2.8% in 2021 (OECD, 2020[1]). This follows a forecast in late March, which indicated that the initial direct impact of the shutdowns could be a decline in the level of output of between one-fifth to one-quarter in many economies, with consumers’ expenditure potentially dropping by around one-third (OECD, 2020[2]).

In recent weeks, several other international organisations have issued forecasts on aspects of the economic impact of the coronavirus pandemic. The IMF June 2020 Economic Outlook Update projects a decline in global GDP by 4.9 percent in 2020, 1.9 percentage points below the April forecast, followed by a partial recovery, with growth at 5.4 percent in 2021 (IMF, 2020[3]). The June 2020 World Investment Report (Unctad, 2020[4]) forecasts a decline in global foreign investment by up to 40% in 2020, with a further decrease by 5-10% in 2021. The ILO estimates the impact of COVID-19 to result in a rise in global unemployment of between 5.3 million (“low” scenario) and 24.7 million (“high” scenario), signalling that ‘sustaining business operations will be particularly difficult for Small and Medium Enterprises (SMEs)’ (ILO, 2020[5]). The WTO reported a decline in the volume of global merchandise trade in Q1 2020 by 3% year-on-year, and expects an unpresented decline in Q2 of 18.5%, potentially leading to a drop of 32% over 2020.4

 Impact on SMEs

 Transmission channels

There are several ways the coronavirus pandemic affects the economy, especially SMEs, on both the supply and demand sides. On the supply side, companies experience a reduction in the supply of labour, as workers are unwell or need to look after children or other dependents while schools are closed and movements of people are restricted. Measures to contain the disease by lockdowns and quarantines lead to further and more severe drops in capacity utilisation. Furthermore, supply chains are interrupted leading to shortages of parts and intermediate goods.

On the demand side, a dramatic and sudden loss of demand and revenue for SMEs severely affects their ability to function, and/or causes severe liquidity shortages. Furthermore, consumers experience loss of income, fear of contagion and heightened uncertainty, which in turn reduces spending and consumption. These effects are compounded because workers are laid off and firms are not able to pay salaries. Some sectors, such as tourism and transportation, are particularly affected, also contributing to reduced business and consumer confidence. More generally, SMEs are likely to be more vulnerable to ‘social distancing’ than other companies.5

The impact of the virus could have potential spill-overs into financial markets, with further reduced confidence and a reduction of credit.

These various impacts are affecting both larger and smaller firms. However, the effect on SMEs is especially severe, particularly because of higher levels of vulnerability and lower resilience related to their size.

In all OECD countries, SMEs account for the vast majority of companies, value added and employment. However, in some regions and sectors that have particularly felt the impacts of the situation, the prevalence of SMEs is even higher. For example, in some of the most affected regions, like Northern Italy, the significance of SMEs within the economic structure is even more critically important. Likewise, SMEs are strongly represented in sectors such as tourism and transportation, which are significantly affected by the virus and the measures taken to contain it, as well as fashion and food where short delivery times are of essence.

SMEs often have a more limited number of suppliers. In some cases, this may shelter them from the shock. At the beginning of the pandemic outbreak in China, this appeared to be the case with German SMEs operating more in regional supply chains and therefore less affected by developments in Asia. In other cases, SMEs may rely on suppliers from countries and regions with more COVID-19 cases, increasing their vulnerability. Similarly, obstacles in transportation by sea, road or air affect these SMEs. Some SMEs are particularly vulnerable to the disruption of business networks and supply chains, with connections with larger operators (e.g. MNEs) and the outsourcing of many business services critical to their performance. Over the longer term, it may be difficult for many SMEs to re-build connections with former networks, once supply chains are disrupted and former partners have set up new alliances and business contracts.

Businesses, including SMEs, will bear the brunt of a reduction in global demand for their products and services. This impact may particularly be felt in specific sectors such as tourism, but also amongst those SMEs catering for local markets where containment measures have been introduced.

SMEs may have less resilience and flexibility in dealing with the costs these shocks entail. Costs for prevention as well as requested changes in work processes, such as the shift to teleworking, may be relatively higher for SMEs given their smaller size, but also, in many instances, the low level of digitalisation and difficulties in accessing and adopting technologies. If production is reduced in response to the developments, the costs of underutilised labour and capital weigh greater on SMEs than larger firms. Furthermore, SMEs may find it harder to obtain information not only on measures to halt the spread of the virus, but also on possible business strategies to lighten the shock, and government initiatives available to provide support.

Given the limited resources of SMEs, and existing obstacles in accessing capital, the period over which SMEs can survive the shock is more restricted than for larger firms. Research in the United States suggests that 50% of small businesses are operating with fewer than 15 days in buffer cash6 and that even healthy SMEs have less that two month cash reserves (Federal Reserve Bank of New York, 2020[6]). As the OECD signals, there is a risk that otherwise solvent firms, particularly SMEs, could go bankrupt while containment measures are in force (OECD, 2020[7]).7

 Surveys on SME impact

Evidence on the COVID-19 crisis impacts on SMEs from business surveys indicates severe disruptions and concerns among small businesses. Table 1 presents the outcome of 41 SME surveys identified world-wide on the impact of COVID-19 on SMEs.8 The Table shows that more than half of SMEs face severe losses in revenues. One third of SMEs fear to be out of business without further support within 1 month, and up to 50% within three months.

The magnitude of SME concerns are confirmed in a recent NBER paper (Bartik et al., 2020[8]) that presents the results of a survey of over 5 800 small businesses in the United States. The survey shows that 43% of responding businesses are already temporarily closed. On average, businesses reduced their employees by 40%. Three-quarters of respondents indicate they have two months or less in cash in reserve. (Humphries, Neilson and Ulyssea, 2020[9]) report comparable impacts of the pandemic on small business. Similarly, according to a survey among SMEs in 132 countries by the International Trade Centre, two-thirds of micro and small firms report that the crisis strongly affected their business operations, and one-fifth indicate the risk of shutting down permanently within three months (ITC, 2020[10]). Based on several surveys in a variety of countries, (McKinsey, 2020[11]) indicates that between 25% and 36% of small businesses could close down permanently from the disruption in the first four months of the pandemic.

In the United States, a specific weekly small business survey was set up by the Census Bureau to measure the impact of COVID-19 on small business (Buffington et al., 2020[12]).9 In late June, the survey indicated that almost 90% of small businesses experienced a strong (51%) or moderate (38%) negative impact from the pandemic; 45% of businesses experienced disruptions in supply chains; 25% of businesses has less than 1-2 months cash reserves.

 
Table 1. SME Surveys on the Impact of COVID-19

Date

Country

Impact on business

Expectations

10 Feb.

China

80% of SMEs have not resumed operations yet

1/3 out of business in 1 month, another 1/3 in two months

25 Feb.

Finland

1/3 anticipated a negative or very negative impact

n.a.

Early March

Italy

72% directly affected

n.a.

Early March

UK

63% see crisis as moderate to high/severe threat to their business

n.a.

9 March

Germany

50% expect a negative impact

n.a.

9 March

Japan

39% report supply chain disruptions, 26% decrease in orders and sales

n.a.

10 March

Poland

1/3 of SMEs experience increasing costs and reduced sales

27% already encounter cash flow problems

11 March

USA

70% experience supply chain disruptions, 80% the impact of the crisis

n.a.

12 March

UK

69% experience serious cash flow problems

1/3 fear being out of business in 1 month

13 March

USA

23% negatively affected, 36% expect to be

16 March

Canada

50% drop in sales

25% expect not to survive longer than 1 month

16 March

Israel

55% experienced no impact yet, 1/3 planning lay-offs

n.a.

16 March

Greece

60% experience marked decline in sales

n.a.

17 March

USA

50% negatively affected, 75% very concerned

n.a.

17-20 March

Korea

61% have been impacted

42% fear being out of business in 3 months, 70% in six months

18 March

Belgium

75% report declines in turnover

50% fear not to be able to pay costs in the short term

19 March

USA

96% have been affected

51% indicate not be able to survive three months

20 March

Hungary

60% expect a decline in sales

n.a.

20 March

Netherlands

50% start-ups lost significant revenue

50% expect to be out of business within 3 months

21 March

Japan

92% experience economic impact

n.a.

24 March

Canada

60% experience significant impact

1/3 expect to be out of business in a month

31 March-6 April

Several Asian countries

30% of SMEs expect to lay off 50% of their staff.

50% of SMEs have a month cash reserves or less

1 April

United Kingdom

n.a.

18% of firms could be out of business in one month

1 April

United States

n.a.

35% of small business out of business in three months

3 April

Australia

Two thirds of small business experience the impact of the crisis. 41% experience a drop in income of 50% or more in the last two months

n.a.

3 April

Belgium

40% of companies see drop in revenue of 75% or more

1 in 10 companies likely to face bankruptcy

7 April

Belgium

n.a.

Over 31% of Belgium SMEs may not survive the crisis

7 April

Canada and the US

90% of small business affected

1/3 lack the reserves to survive longer than a few weeks

8 April

UK

37% expect to furlough 75-100% of their staff in the next week

6% out of cash, 57% three months reserves or less

8 April

Netherlands

n.a.

85% of SMEs in financial difficulty because of COVID 19

20% is at serious risk

6-10 April

Portugal

37% experience a drop in production of more than 50%.

50% do not have resources for more than 2 months

15-22 April

United States

62% of small business experience a drop in revenues

32% cannot stay open longer than 3 months

24 April

Germany

58% of SMEs experience a drop in turnover by on average 50%

Half of SMEs have only two months liquidity reserve

4 May

Canada

81% of small businesses indicate their operations are negatively affected

32% worry about the viability of their business over the next year

5 May

United States

n.a.

1/5 of small businesses closed down temporarily, 1/3 expects to close permanently within 2 months

11 May

United States

81% of firms experience and expect impact of pandemic in the next 12-16 months

n.a.

13 May

United Kingdom

37% of firms are considering, or have already made, redundancies

41% of firms have temporarily closed, 35% fear they will not reopen again

15 May

Thailand

90% of firms expect extreme revenue loss

52% of small business expects to close down if containment measures last longer

8 June

Ireland

SMEs that remained until 18 May closed incurred an average cost of EUR 177 000 during the lockdown period. Of businesses that remained open, 70% reported a decrease in revenue.

n.a.

Mid-June

Canada

78% of small business reported a drop in sales, 47% between 50 and 100%.

n.a.

20 June

New Zealand

71% of SMEs have taken a revenue hit by COVID-19

39% of SMEs fear having to close down

Source: Annex B

The survey examples in Table 1 are presented in chronological order, and show the increasing concerns among SMEs. However, in the more recent surveys – in particular in countries where lockdowns are being lifted – SME sentiment has become slightly more optimistic. A US Chamber survey released on 3 June, shows that 79% of small businesses are fully or partially open.10 Many (82%) small businesses remain concerned about the impact of COVID-19, but the share of businesses being ‘very concerned’ dropped from 53% in early May to 43% in early June. 56% feel comfortable with their companies cash flow situation (compared to 48% in May), and 47% expect an increase in revenues in 2021. In another United States survey by Verizon Business, 68% of small businesses indicate they expect to be able to recoup their COVID-19 related losses.11 In a survey by American Express in Australia, 80% of small business owners have high hopes to survive the crisis, although 52% fear that sales will not rebounce enough to survive in the longer term.12 A KPMG survey in Australia, finds that 79% of companies feel ‘confident’ their organisation is able to rebound financially.13 However, a third recent survey (the biannual Pushka ‘Canary in the coal mine report’14) gives a gloomier impression on entrepreneurs sentiments and expectations with only 225 of SMEs being confident in their business in May 2020 as compared to 40% a year before. In Germany, the ifo Business Climate Index (not specified by size) strongly improved in June.15 In the Netherlands, the sentiment of businesses on the continuity of their business improved in May compared to April.16 In Korea, in June the Bank of Korea business confidence indicator improved for the second month in a row, with the sentiment for small and medium sized companies improving more than for larger firms.17 A June survey in the United Kingdom showed that over 71% of small businesses indicate their firm has the opportunity to emerge better and stronger after COVID-19.18

Surveys on teleworking, digitalisation and new business practice

Some surveys also provide data on the uptake of teleworking and digital sales channels by respondents. A 4 May survey by the Canadian Federation of Independent Business (CIBC) finds that of the 26% of business owners who do have online operations, 30% have seen an increase in sales and 25% say they have remained the same compared to pre-COVID-19 levels.19 A survey by the US Chamber of Commerce that came out on 5 May showed an acceleration in digitalisation trends. Over April-May the share of small businesses transitioning some or all of their employees to teleworking increased from 12% to 20%, and small businesses that had begun moving the retail aspect of their business to digital means increased from 10% to 17%.20 A recent survey in Japan indicated that there is a gap in the prevalence of teleworking by the size of the companies (48 percent for large corporations versus 10-20 percent by the SMEs). The reasons cited include a lack of infrastructure and worker skills to use digital tools.21 A further survey in Japan supports these conclusions that the larger firm the higher the prevalence of teleworking; in SMEs of 5-29 employees, teleworking in June stood at 8% of firms (Okubo, 2020[13]). A survey in Germany from early May, shows that whereas at the outset of the crisis 88% of German SMEs operated with mandatory in-person work, 81% expect that the pandemic will make their companies more flexible and one third of SMEs esteems digitalisation has grown in importance due to the pandemic (McKinsey, 2020[14]). A survey on Europe suggested that only 56 percent of all companies with 50 or fewer employees provided remote access to email, applications, and documents for their employees, compared with 93 percent of all companies with more than 250 employees (McKinsey, 2020[15]). According to a survey among 86 000 small businesses in the United States by (Facebook & Small Business Roundtable, 2020[16]), 51% of businesses increased online interactions with their clients to adapt to the crisis. Also, 36% of self-employed personal businesses that use online tools report that they are conducting all their sales online, and 35% of businesses that have changed operations have expanded the use of digital payments. A survey in Hungary released on 23 June, indicates that where 24% of SMEs intend to return to their pre-COVID business method, 41% would rather continue with the business model developed during the pandemic.22

According to a June survey of Canadian small businesses23, 44% of these are facing a variety of technology and tech support challenges, such as in the areas of digital marketing (19%), ecommerce (13%) and their other online offerings, including their website(17%). 32% of small businesses reported needing assistance with safety measures, including workplace and customer safety, followed by finances (28%), marketing support (19%), refocusing their business (18%), community/networking (14%) and workspace equipment such as furniture or products (11%).

Late May, a survey by Verizon in the United States indicated that small business owners were seeking additional advice and assets to help them recover from the pandemic. In terms of the expertise needed for recovery, small businesses cited financial (54%), e-commerce (42%) and HR (40%) as the key areas that they would like help with.24

 Further empirical evidence on COVID-19 SME impact

Next to surveys, in recent weeks further empirical evidence about the impact of the crisis on SMEs became available, including on the possible impact of policies to counter this (see for instance (Chen et al., 2020[17]) (Chen et al., 2020[18]) (Liu and Volker, 2020[19]) (Gobbi, Palazzo and Segura, 2020[20]) (Gonzalez-Uribe and Wang, 2020[21]) (Humphries, Neilson and Ulyssea, 2020[9]) (Chetty et al., 2020[22]) (Portes, 2020[23]) (Boot et al., 2020[24]) (English and Liang, 2020[25]) (Deb et al., 2020[26]) (Federal Reserve Bank of New York, 2020[6]) (CPB, 2020[27]) (Hassan et al., 2020[28]) (Goolsbee and Syverson, 2020[29]) (Bennedsen et al., 2020[30]) (Juergensen, Guimón and Narula, 2020[31]). This evidence gives a further indication of how SMEs have been hit harder by the crisis than larger firms.

SMEs and most affected sectors

There is an above average representation of SMEs in sectors particularly affected by the crisis, which, according to OECD analysis, include: transport manufacturing, construction, wholesale and retail trade25, air transport, accommodation and food services, real estate, professional services, and other personal services (e.g. hairdressing). Recent OECD data show that whereas in the business economy at large, SMEs account for over 50% of employment across OECD countries, in these sectors the share of SMEs in employment is 75% on average across OECD countries, and nearly 90% in Greece and Italy (see Figure 1 and Figure 2) (OECD, 2020[30]).26 In some OECD countries, microenterprises are particularly strongly represented in affected sectors. In Italy and Greece, the share of microenterprises in the most affected sectors is 60%, whereas their share in total employment in the business economy is respectively 45% and 55% (OECD, 2020[30]).

 
Figure 1. Smaller firms dominate in the most affected sectors
Share of total employment in the most adversely affected sectors by firm size (%)

Source: OECD (2020) Strong, medium, vulnerable (OECD, 2020[30])

 
Figure 2. Employment by enterprise size, business economy
Percentage of employment in 2016 or latest available year

Source: OECD (2019) SME and Entrepreneurship Outlook (OECD, 2019[31])

A similar analysis was made in a recent Brookings paper (Parilla, Liu and Whitehead, 2020[32]), which classifies industries in three categories according to the risk of being affected by COVID-19 (immediate risk, near-term risk, and long-term risk), and looks at the presence of small businesses in each of these categories. According to the study, about 26% of small business establishments (those with fewer than 250 employees) in the United States are in the immediate risk category, and 28% in the near-term risk category. Combined, these two categories include 54% of small businesses (4.2 million total) and 47.8 million jobs. Microbusinesses (employers with fewer than 10 employees) within industries at immediate or near-term risk account for 2.9 million business establishments and 8.7 million jobs.

A study by the Central Bank of Ireland (McGeever, McQuinn and Myers, 2020[33]) shows that in highly affected sectors SMEs accounted for 79% of annual turnover in 2017, and for 59% of annual turnover in highly and moderately affected sectors combined, defined according to the impact of social distancing measures. To put this into perspective, the share of SMEs in value added in the business economy in Ireland was 44% in 2016. The study also suggests that of total employment in SMEs, 39% is in highly affected sectors and 71% in highly and moderately affected sectors combined. This puts the total number of jobs at risk in SMEs at 770 000, 50% of all employment in the non-agricultural business economy, and almost 75% of the total number of jobs affected by the pandemic (see also (McCann and Myers, 2020[34]).

(McKinsey, 2000[35]) indicates that minority-owned small businesses are even more vulnerable than SMEs in general, because of their smaller size, lack of access to credit and risky nature of their business, but also because of their high prevalence in strongly affected industries.

SMEs and jobs at risk

A recent study on the impact of the pandemic in Europe (McKinsey, 2020[15]) investigates jobs most at risk,27 and finds that "at least two of three jobs at risk are in an SME, and more than 30 percent of all jobs at risk are found within microenterprises consisting of nine employees or fewer". In Australia, SMEs account for 68% of all jobs at risk (McKinsey, 2020[36]).

The ILO Monitor on COVID-19 and the world of work (ILO, 2020[5]) shows that worldwide employment in the sectors most at risk is strongly concentrated in firms with less than 10 employees, whereas vice versa the vast majority of employment in low risk sectors is in larger firms with more than 10 employees. For instance, in sectors such as wholesale and retail trade, repair of motor vehicles and motorcycles, the share of firms with less than 10 employees is 70%, whereas in low risk sectors such as education, utilities and public administration the share is less than 20%.

The German research institute IFM developed two scenarios to assess the impact of the crisis on SMEs (Welter, Wolter and Kranzusch, 2020[37]). In a scenario where the lockdown would be limited to 2-2.5 months, for most SMEs (Mittelstand) the crisis would not lead to liquidation, although the impact on retail, cultural and leisure industries may be large. In case the lockdown would continue for more than six months, significant job losses of between 850 000 and 1.6 million are expected among SMEs, especially among microenterprises.

In the United States, of the 20 million jobs lost in April, 11 million came from small and medium sized businesses.28 New Zealand saw a 4% decline in jobs in small businesses in March and April.29

In Canada, it was reported that women-owned businesses laid off a disproportionally higher share of their workers. 62% laid off more than 80% of their workers, against 45% for the small business population at large.30

SMEs and partial redundancies

French labour market data from early April on partial redundancies of employees by firm size provide interesting insights (Table 2).31 The data show that SMEs account for nearly the entirety of partial redundancies (93%), whereas their share in employment in France is 63%. Microenterprises alone account for 42%, whereas their share in employment is 30%. Although subsequent labour market survey show a small decline in the share of microenterprises (39% on 14 April32), it is clear that their share in redundancies continues to vastly exceed their share in employment.

 
Table 2. Partial redundancies of employees and share of total employment by firm size in France
(1 April 2020)

Firm Size

Share of employees affected (%)

Share in employment (%)

0-19

42

30

20-49

20

8

50-99

25

10

50-249

6

15

250-

8

36

Total

100

100

(Altonji et al., 2020[38]) use Homebase data to analyse the impact of the pandemic on hours worked in small businesses in the United States. They find that average hours worked fell strongly in March, and although they slightly recovered, by 6 June they were still 35.9% below their value in late January. They find that reductions in the number of firms in operation and in the number of employees account for most of the hours reductions. Changes in hours worked by continuing employees are secondary. Reductions in hours and employment were larger for workers with lower wages. They find little difference in the reduction of hours worked between smaller and larger firms and attribute this to two offsetting effects. Smaller firms were substantially more likely to shut down than were larger firms. Larger firms that stayed open, on the other hand, were substantially more likely to reduce their number of employees. Per saldo, the impact was similar. The biannual monetary policy report by the US Federal Reserve Bank (Federal Reserve Bank, 2020[39]) also shows how activity was the main cause for employment declines to be deeper for small firms than for larger ones (Table 3).

 
Table 3. Change in employment by firm size in the United States
Firm size range (employment), %, from 15 February to 9 May

Firm size

Continuing firms

Inactive firms

1-9

-4.31

-15.52

10-19

-11.13

-11.48

20-49

-14.40

-8.13

50-99

-14.10

-5.53

100-249

-13.27

-3.30

250-499

-13.32

-2.22

500

-15.17

-1.59

Note:  Employment declines are relative to February 15 and extend through May 9, 2020. The key identifies bars in order from top to bottom.

Source: (Federal Reserve Bank, 2020[39])

In Australia, hours worked by the self-employed fell by 32% since the start of the pandemic, compared to a 9% reduction in hours worked across the economy.33 Another study on Australia suggests the difference in the drop in hours worked between self-employed and employees was 6.5% (Biddle et al., 2020[40]).

SMEs and impact on employee earnings

Recent research in the United Kingdom on the expected impact of the crisis on employee earnings by firm size shows that the drop in earnings could be considerably higher for employees in smaller as compared to larger firms, and that younger employees risk losing out most (Figure 3). 34 The paper suggests that because of the crisis the ‘large firm wage premium’ may increase (Bell et al., 2020[41]). (McKinsey, 2020[11]) shows how lower-income workers, minority business owners, and business owners with less educational attainment are particularly vulnerable to the crisis.

 
Figure 3. Expected change in earnings of employees by firm size

Note: % fall in real weekly earning based on work exposure regressions. Assumes 10% nominal fall in GDP, deflated by inflation forecast of 2%.

Source: Office of National Statistics. (2017) New Earnings Survey Panel Dataset, 1975-2016: Secure Access. [data collection]. 7th Edition. UK Data Service. SN: 6706, http://doi.org/10.5255/UKDA-SN-6706-7.

SMEs and liquidity gap

Several studies aim to calculate the expected liquidity shortage of SMEs due to the pandemic and lockdown. These calculations vary widely according to the underlying assumptions, for instance on the expected duration of the lockdown measures and the types of costs expected to be covered by governments. To calculate the liquidity gap, the studies in various ways try to assess: i) the size of the drop in revenues, ii) the ongoing costs, iii) the access to resources to address this, and iv) the government support offered. Some of these studies explicitly focus on SMEs, other do not.

(OECD, 2020[42]) evaluates the risk of a widespread liquidity crisis using a cross-sector sample of almost one million firms in 16 European countries, covering all manufacturing and non-financial service sector. The note focuses on the first-round effects of the containment measures induced by the crisis, abstracting from the potential cascading effects via supply chains (including global value chains), financial interconnections between firms and financial distress in the banking system – other than those implicitly assumed in the size of the sectoral shocks – as well as from the structural adjustments that will be needed in a second phase of the response to the crisis.

Comparing the share of firms that would turn illiquid under a no-policy change scenario and under policy intervention, results emphasise the key role of policies to avoid massive unnecessary bankruptcies. The note shows that without any policy intervention, 20% of the firms in the sample would run out of liquidity after one month, 30% after two months and 38% after three months. If the confinement measures lasted seven months, more than 50% of firms would face a shortfall of cash. This result is mainly driven by the impact of the confinement in the most hit sectors. The note underlines these estimates on liquidity shortages should be seen as a lower bound, since the dataset excludes very small firms and on average includes more larger, older and more productive firms, whereas liquidity shortages for smaller, younger and less productive firms could be higher. Adding up different policy measures (tax deferral, debt moratorium and wage subsidies at 80% of the wage bill), the note suggests that, after two months, government interventions could decrease the share of firms running out of liquidity from 30% to 10% compared to the non-policy scenario.

(Gourinchas and Kalemli-Özcan, 2020[43]) estimate the impact of the COVID-19 crisis on business failures among SMEs for seventeen countries and measure each firm’s liquidity shortfall during and after COVID. For each country and sector, the paper estimates the fraction of SME businesses that would fail by year end, absent fresh liquidity injections or public support. Across the seventeen countries, the authors estimate an average SME bankruptcy rate of 12.1 percent in the absence of any policy intervention compared to a baseline of 4.5 percent without COVID-19.

The paper also evaluates the impact of various policy interventions. Interest payment suspensions have only a very modest effect on business failures. Narrowly targeted interventions can have much larger effects for a relatively modest fiscal cost. The paper suggests that through such policies at a cost of 1.1% of GDP the bankruptcy rate could be brought back to its pre-COVID level, a decline of 8.75 percent. This would save about 1.5% of GDP in wages and about 5% of employment. However, blanket interventions can be quite wasteful. As an illustration, a subsidy equivalent to the entire 2017 payroll for the duration of an 8-week lockdown would decrease SME’s bankruptcy rates by 4% at a cost of 2.38% of GDP, saving 3% of employment. 2% of the fiscal cost, however, would be wasted on firms that do not need it.

(Bircan et al., 2020[44]) provide a firm level analysis on 19 countries to assess not only the need of SMEs for cash and liquidity but also where these firms still have room on their balance sheets to take more debt. They find wide variations between countries, indicating the liquidity challenge for SMEs differs by country.

(Revoltella, Maurin and Pal, 2020[45]) find that in the European Union, cumulative net revenue losses for companies in a 3 months lockdown scenario amount to 13-24% of GDP, with over half of firms facing liquidity shortfalls even after substantial policy intervention. SMEs face larger revenue losses than larger firms as a percentage of total assets (6-11% for SMEs, 2-4% for larger firms).

A study by the Central Bank of Ireland (McGeever, McQuinn and Myers, 2020[33]) on the size of the liquidity gap for SMEs in Ireland assumes that the cause for liquidity challenges stems primarily from non-personnel costs, since wage costs are assumed to be largely compensated by the government. Distinguishing between various shares of SMEs in highly and moderately affected sectors that would seek external finance, and various proportions of non-personnel costs that would need to be covered over a period of three months, the study estimates the potential liquidity gap for SMEs to be between EUR 2.4 and EUR 5.7 billion. Although Irish SMEs in June 2019 had EUR 2.7 billion in undrawn credit available from Irish retail banks, this is very unevenly spread across borrowers, with a relatively small set of borrowers accounting for a large majority of outstanding and undrawn balances. 80% of undrawn balances were committed to just 10% of borrowers. The authors therefore conclude that given this distribution across firms, existing bank credit lines are unlikely to be sufficient to cover the EUR 2.4-5.7 billion financing needs of all affected firms over a three month period.

(Drechsel and Kalemli-Ozcan, 2020[46]) and (Drechsel and Kalemli-Özcan, 2020[47]) calculate the liquidity gap in the United States, and discusses policy measures to address this. Contrary to the Irish study, this study takes payroll costs as a proxy for costs to be covered and the liquidity gap by firm size. Covering the payroll costs for firms with less than 100 employees for 3 months would for instance amount to USD 449 billion; extending this to firms of less than 500 employees would cost USD 678 billion. Estimates by the American Property Casualty Insurance Association in the US suggest that business interruption costs for small business (less than 100 employees) amount to USD 220-431 billion per month.35

(Liu and Parilla, 2020[48]) show how in the United States the liquidity challenge for small businesses varies widely across regions and cities. Loss of revenue varies between 74% in Buffalo, NY to 58% in Jacksonville, Fla. Similarly, the percentage of small business that only has 4 weeks cash reserves varies between 65% (Buffalo, NY) and 38% (Columbus, Ohio).

(Schivardi and Romano, 2020[49]) calculate the number of companies (all sizes) that run into liquidity problems and the size of the liquidity challenge in Italy. Under a mild scenario (i.e. the pandemic crisis ends in September), they estimate that 50 000 companies would need liquidity support. Under a more pessimistic scenario, with the crisis continuing into 2021, these estimates raise to 100 000 companies. The liquidity gap would amount to between EUR 30 and 80 billion.

(Carletti et al., 2020[50]) also look at the equity shortfall of Italian firms due to COVID-19. For a three-month lockdown, they estimate an aggregate annual drop in profits of EUR 170 billion, with an implied equity erosion of EUR 117 billion. The share of SMEs that face distress because of liquidity challenges in lockdown is higher than the share of large firms (17.2% compared to 6.4%).

A stress test on SMEs in the Netherlands shows that during the first three months of the crisis 30% of SMEs ran into a liquidity shortage, amounting to EUR 12 billion. After six months, 48% of SMEs were facing liquidity problems of a total of EUR 30 billion. Even with the support policy measures in place, in 6 months’ time 25% of SMEs will have a negative liquidity position, which would reduce to 17% in a 3 months scenario (CPB, 2020[27]) (CPB, 2020[51]).

SMEs and supply chain disruptions

(McCann and Myers, 2020[34]) analyse the impact of supply chain disruptions due to the pandemic, estimating that between EUR 35 and 40 billion of business to business purchases in Ireland in 2019 were in the highly and moderately affected sectors.36 A drop in such purchases is likely to also affect both SMEs and larger firms in sectors not directly impacted.

(WTO, 2020[52]) illustrates the different impact of supply chain disruptions on SMEs across countries and industries. MSMEs are especially impacted through import channels in sectors such as office equipment, electronics, chemicals, petroleum and plastic sectors, in which MSMEs import from foreign countries accounts for almost 60% of total inputs (backward participation). On the other hand, export disruptions impact strongly small businesses in the automotive and furniture sectors, since MSMEs – especially foreign-owned MSMEs – export more than 40% of their total sales through direct or indirect trade channels (forward participation). The report also documents that SMEs in the most affected sectors (see 3.3.1) are relatively more likely to export than larger firms, and hence bear more strongly the brunt of rising protectionism in these sectors (for instance in agriculture).

Start-ups

The impact of the pandemic may be particularly harsh for start-ups (Sedlácek and Sterk, 2020[53]). The first evidence suggests that the impact on firm creation may be even stronger than during the financial crisis. For instance, data on new business applications from in the United States from the last week of March show that applications were down 40% compared to the same week one year earlier, a contraction that is even sharper than that during the Great Recession. Figure 4 illustrates that business applications declined in all US states and is negatively related to the severity of the pandemic, which most likely reflects the intensity of lockdown measures.

 
Figure 4. Decline in start-up growth and COVID-19 deaths by state

Note: Horizontal axis: Change in high-propensity business applications during weeks 12–15 of 2020, relative to the same weeks in 2019, by US state. Source: Business Formation Statistics. Vertical axis: Total number of COVID-19-related deaths in the US

Source: Centers for Disease Control and Prevention; https://voxeu.org/article/startup-employment-calculator-covid-19.

 
Figure 5. COVID in 2020: New York State and Washington State New Business Registrations

Source: The Start-up Cartography Project

Data from the US Start-up Cartography Project37, show how new business registrations fell by more than 75% relative to the prior year from 15-16 March onwards – the day when lockdowns started (Figure 5). According to the analysis, this drop cannot be explained by the closure of government offices.38

(Howe, 2020[54]) documents that between 1 February and 28 March new business applications in the United States declined by 37% from 84 730 to 53 510. However, from April onwards the decline in new business applications has become smaller (Federal Reserve Bank, 2020[39]).

In the Netherlands, the number of start-ups dropped by 34% in April 2020 compared to April 2019, in particular in business services and construction.39

The drop in start-up (and potentially scale-up) activity can also be illustrated by declines in investment. For instance in China venture capital investment in new companies declined by 60% in the first quarter of 2020 compared to the first quarter of 2019 – three times the drop during the 2017-2019 crisis (Brown and Rocha, 2020[55]).40

Venture capital funding in Irish technology firms in Q1 2020 was reported to be 40% down compared to the same period in 2019, when corrected for a very large investment early in 2020, with the value of smaller deals (EUR 1-5 million) declining by 44%, and is expected to further decline in Q2.41

A recent survey in Canada, suggests that 59% of Canadians are considerably less likely to start a business after COVID-19 than before.42 Rabobank indicates that in its post COVID-19 projections it is factoring in lower levels of entrepreneurship (Erken, 2020[56]).

Bankruptcies

Bankruptcies in OECD countries are expected to rise as a consequence of the pandemic (OECD, 2020[1]). The Q2 Barometer from credit insurer and risk-management company Coface expects insolvencies to rise by one third world wide until 2021, ranging from 12% in Germany, 21% in France, 24% in Japan, 37% in the United Kingdom to 43% in the United States, 44% in Brazil and 50% in Turkey.43

In Japan, due to the effects of the coronavirus bankruptcies sharply increased, up by 15% in April 2020 15% (to 748 filings) compared to April 2019, especially affecting SMEs in the tourism and accommodation sectors44, with forecasts predicting over 10.000 bankruptcies in 2020.45 The Netherlands report a rise in bankruptcies in April 2020 (as compared to April 2019) of 36%, primarily in retail and the hospitality industry.46 Further analysis suggests that bankruptcies in the Netherlands may double or triple in 2021 as compared to 2019.47 The American Bankruptcy Institute reports a 14% increase in Chapter 11 filings in the first quarter of 2020 as compared to Q1 2019, and expects those to continue rising.48 Data from May suggest a further rise by 48% compared to May 2019.49 In the United States, between March and mid May 100 000 small businesses have closed and that – according to a survey between 9 and 11 May (Bartik et al., 2020[8]) – 2% of small businesses have closed down for good.50 In Mexico, 10,000 formal and 12,000 informal businesses closed down for good in April and May, with 600,000 more companies at risk due to the pandemic.51 Australia, however, witnessed a decline in insolvencies in March, which at 683 companies was the lowest for March since 2007, which is explained by the hibernation support measures put in place by the government.52 In Italy, almost 30 000 of companies went out of business in the first three months of 2020, compared to 21 000 in Q1 2019.53

(Prashar et al., 2020[57]) provide an assessment of the impact of COVID-19 on business dynamism in the UK. The paper compares company incorporations and dissolutions in the first quarter of 2020 with the same period in 2019 and observes a drop in incorporations and an increase in dissolutions. The analysis shows that there has been a 70% increase in the number of company dissolutions in March 2020 compared to March 2019. The sectors particularly influenced by this trend are Wholesale & Retail, Professional Services, Transportation & Storage, Information & Communication and Construction. The increase in company dissolutions is driven by young firms which appear as the most vulnerable when facing uncertainty and the current unprecedented challenges.

(Fairlie, 2020[58]) looks at the impact of COVID-19 in the United States and finds that the number of active business owners declined by 3.3 million (22%) between February and April 2020. African-American businesses experienced a 41% drop. Latino business owners fell by 32%, and Asian business owners dropped by 26%. Immigrant business owners experienced substantial losses of 36%. Female-owned businesses were also disproportionately hit by 25%.

(di Mauro and Syverson, 2020[59]) discuss the channels by which the pandemic may impact future productivity growth. They highlight potential risks of policies supporting labour hoarding for productivity, but estimate it is too early to assess in what way reallocation will affect productivity growth. Similarly, (Erken, 2020[56]) discuss the longer term productivity impact of the pandemic, through lower R&D investment, a possible retraction of value chains and reduced efficiency due to lower creative destruction and labour hoarding. (Isenberg and De Fiore, 2020[60]) expect that if entrepreneurs do not experiment and adapt, many ventures will ‘either disappear or join the rapidly swelling ranks of zombie companies.’ However, other analysis points at substantial reallocation from less to more productive sectors because of the pandemic (Abay, Tafere and Woldemichael, 2020[61]). (OECD, 2020[42]) shows that firms facing a high risk of liquidity shortfalls are mostly profitable and viable companies. Only a relatively small share of firms (around 10%) among those expected to face liquidity shortfalls would be close to insolvency when evaluating their overall net worth.

SME debt

Many of the policy measures implemented to sustain businesses through the COVID-19 crisis adopt debt financing instruments. As a consequence, SME debt may rise significantly. This may be pose challenges to business solvability, especially in countries that already exhibited high debt leverage in private companies. In Europe, the most recent ECB SAFE Survey reports ongoing declining debt-to-total-assets ratios for SMEs, although less than in the previous Survey (-4% from -7%), but cross-country differences can be noted (Figure 6) (ECB, 2020[62]).

 
Figure 6. Change in debt-to-total-assets ratio and interest expenses of SMEs across euroarea countries

Source: (ECB, 2020[62])

While information on the increase in SME debt since the crisis outbreak is limited, early evidence suggests that crisis policy responses may have increased SME debt leverage significantly. In Spain, the proportion of SMEs that uses bank loans rose from 6 to 37% between October 2019 and March 2020.54 In Canada, a survey by the Federation of Independent Business (CFIB) indicates that, on average, small businesses have taken up CAD 150,000 in debt due to the crisis.55 Also, media report that the debt-to-equity ratio of non-financial firms rose to 212% in Q1 of 2020, the highest ratio since 2009.56 In France, companies (which already had record debt levels of 70% of GDP before the pandemic) during the first two months of the lockdown took up a further EUR 100 billion debt, three quarters of which went to SMEs.57 According to the Italian Central Bank, as a result of debt financing in the COVID-19 policy response, the 80% debt-to-equity ratio in Italy from 2018 could rise by 10-30%-point. In Israel, start-ups have taken USD 144 million in bank loans, since other non-debt avenues for raising funding were cut off through the crisis.58 In Korea, the Financial Services Commission warned in early July that repayment deadline of SME debts related to support in the COVID-19 context amounting to USD 83.4 billion were nearing, with serious risks for the economy.59

Data from the Bank for International Settlements (BIS), indicate for Q4 201960a 165% share of core debt of private non-financial companies to GDP in the Eurozone and of 150% in the United States, which is expected to rise because of the financial support measures.61 Credit to non-financial companies in the euro zone hit an 11-year-high in April, with more than EUR 290 billion of loans in government-backed lending schemes granted across the European Union’s four largest economies and the United Kingdom during the continuing coronavirus slump.62 A study by the EIB expects an increase in indebtedness of between 4-6% of GDP for EU companies (Revoltella, Maurin and Pal, 2020[45]). A further study on the impact of the pandemic on capital markets in Europe (AFME, 2020[63]) reports that bank lending to SMEs has rapidly increased to record gross volumes of EUR 71 billion, EUR 103 billion and EUR 91 billion in the months of March, April, and May of 2020, respectively. In the United Kingdom, new gross bank lending to SMEs between March and May of 2020 totalled GBP 35 billion versus GBP 13.7 billion in the same period of 2019. Similar large increases have been observed in France (EUR 69.6 billion in March-May 2020 vs EUR 29.3 billion in same period of 2019), Germany (EUR 43 billion vs EUR 40 billion), and Spain (EUR 64 billion vs EUR 49 billion).

Recovery rate

A further important aspect regards the question of how recovery will take place for SMEs as compared to larger firms. For many countries where lockdown measures are still in place or only gradually being lifted, it is too early to answer that question. However, some evidence from China shows that SMEs are recovering more slowly than larger firms. For instance, data from China from 28 March show that the industry resumption rate was 98.6% and 89.9% of industry employees have returned to work. 63 Even in Hubei Province, the resumption rate has exceeded 95%. As for industrial SMEs, the resumption rate is 76%. Similarly, the Chinese manufacturing Purchasing Managers Index (PMI), which provides an early indication each month of economic activities in Chinese manufacturing, shows that recovery among the largest firms has been faster than for small and medium sized firms (see Figure 7). By 11 May, the resumption rate of large industrial enterprises has reached 100% in half of the 100 biggest cities (by GDP) and 99.1% on average across the country. For industrial SMEs, the resumption rate was 84% by 15 April, a significant increase from 76% on 28 March. On 20 May, the government indicated that 91% of SMEs had resumed operations.64 Whereas in May the PMI for smaller firms contracted, whilst it increased for larger firms65, media reported an improvement again in June.66

 
Figure 7. Manufacturing Purchasing Managers Index in China by firm size

 Country policy responses

Given the specific circumstances SMEs are currently facing, countries have put measures in place to support them. While the first concern is public health, a wide array of measures are being introduced to mitigate the economic impact of the coronavirus outbreak on businesses. Specifically, many countries are urgently deploying measures to support SMEs and the self-employed during this severely challenging time, with a strong focus on initiatives to sustain short-term liquidity. Such policies take various shapes. Some countries have focused on more general policies that have the potential to cushion the blow for the economy and for all businesses. For instance, in many countries, Central Banks have stepped in to support lending by alleviating monetary conditions and enabling commercial banks to provide more loans to SMEs. Examples include the unprecedented measures taken by the US Federal Reserve and European Central Bank.

Many countries have introduced SME specific policy measures:

  • Several countries have introduced measures related to working time shortening, temporary lay-off and sick leave, some targeted directly at SMEs. Similarly, governments provide wage and income support for employees temporarily laid off, or for companies to safeguard employment. In many cases, countries have introduced measures specifically focused on the self-employed.

  • In order to ease liquidity constraints, many countries have introduced measures towards the deferral of tax, social security payments, debt payments and rent and utility payments. In some cases, tax relief or a moratorium on debt repayments have been implemented. Also, some countries are taking measures regarding procedures for public procurement and late payments.

  • Several countries have introduced, extended or simplified the provision of loan guarantees, to enable commercial banks to expand lending to SMEs.

  • In some cases, countries have stepped up direct lending to SMEs through public institutions.

  • Several countries are providing grants and subsidies to SMEs and other companies to bridge the drop in revenues.

  • Countries increasingly use non-banking financial support intermediaries in their policy support mix.

  • Increasingly, countries are putting in place structural policies to help SMEs adopt new working methods and (digital) technologies and to find new markets and sales channels to continue operations under the prevailing containment measures. These policies aim to address urgent short-term challenges, such as the introduction of teleworking, but also contribute to strengthening the resilience of SMEs in a more structural way and support their further growth.

  • Some countries have introduced specific schemes to monitor the impact of the crisis on SMEs and enhance the governance of SME related policy responses.

This Chapter gives a first analysis and comparison of these SME policy measures. Table 4 provides an overview of country policy measures on the basis of available information. Annex A contains further details about policies in each country. Given the evolving situation, these overviews are not comprehensive. The stage of the outbreak varies greatly from country to country and policy responses are highly specific to the national economic and public health contexts. There is also no assessment or judgement made at this stage on the effectiveness of such measures.

Table 4 shows that, across countries, the most widely used instruments in response to the outbreak are income and profit tax deferrals, loan guarantees and direct lending to SMEs, and wage subsidies. This is in line with findings from the World Bank SME Support Measures dashboard, which suggests that out of 845 SME policy instruments used worldwide 328 relate to debt finance (loans and guarantees), 205 to employment support and 151 to tax.67 Structural policies have been used only modestly, with a focus on teleworking and digitalisation, although over time the number of countries setting up such policies has increased. The use of grants, debt moratorium and specific measures for the self-employed provide is mixed, and highly differs across countries.

 
Table 4. Overview of policy responses

Labour

Deferral

Financial instruments

Structural policies

(Partial) redundancies

Wage subsidies

Self-employed

Income/ corporate tax

Value Added Tax (VAT)

Social security and pension contributions

Rent/utilities/local tax

Debt moratorium

Loan guarantees

Direct lending to SMEs

Grants and subsidies

New markets

Teleworking/ digitalisation

Innovation

Training and redeployment

Argentina

Australia

Austria

Belgium

Brazil

Canada

Chile

China

Colombia

Costa Rica

Croatia

Czech Republic

Denmark

Egypt

Estonia

Finland

France

Germany

Greece

Hong Kong, China

Hungary

Iceland

India

Indonesia

Ireland

Israel

Italy

Japan

Korea

Latvia

Lithuania

Luxem-bourg

Malaysia

Mexico

Netherlands

New Zealand

Norway

Peru

Poland

Portugal

Romania

Russia

Saudi Arabia

Singapore

Slovak Republic

Slovenia

South Africa

Spain

Sweden

Switzerland

Thailand

Turkey

United Kingdom

United States

Vietnam

Disclaimer: This table has been prepared based on official sources and media reporting. Given the rapid developments of events and measures, the information in the table may not be comprehensive or fully up to date. It will be updated periodically.

Table 5 gives an indication of the intensity of measures used by different countries. The table distinguishes between immediate fiscal measures, which include for instance grants and subsidies to SMEs (but also additional health expenditure), deferral of tax, social security and debt payments (for businesses and consumers) and other liquidity and guarantee instruments. Although the data in table 5 are therefore not directly comparable to Table 4, they still provide an overview of differences in approaches taken by various countries.68 Table 5 for instance shows that the size of the fiscal impulse in Germany is significantly higher than in other countries, but also that countries like Germany, Italy and to a lesser extent the UK and France rely heavily on providing loan guarantees. In the United States the immediate fiscal impulse as a percentage of GDP is significantly larger than in other countries, although it should be taken into account that in many European countries the fiscal impulse works via non-discretionary through automatic stabilizers related to existing social security arrangements.

Early July, (Segal and Gerstel, 2020[63]) estimate the fiscal response in G20 countries to be 11.2% of GDP. (Elgin, Basbug and Yalaman, 2020[64]) show that the fiscal policy effort by countries correlates with GDP per capita and the number of COVID-19 cases.

 
Table 5. Selected discretionary fiscal measures adopted in countries in response to COVID-19 by 16 April 2020, % of 2019 GDP

 

Immediate fiscal impulse

Deferral

Other liquidity/guarantee

Belgium

1.4%

4.8%

21.9%

Denmark

2.1%

7.2%

2.9%

France

4.4%

8.7%

14.0%

Germany

13.3%

7.3%

27.2%

Greece

3.1%

1.2%

2.1%

Hungary

0.4%

8.3%

0.0%

Italy

3.4%

13.2%

32.1%

Netherlands

3.7%

7.9%

3.4%

Portugal

2.5%

11.1%

5.5%

Spain

3.7%

0.8%

9.2%

United Kingdom

4.8%

1.9%

14.9%

United States

9.1%

2.6%

2.6%

Source: (Anderson et al., 2020[65])l - update 23 June 2020. See for the methodology: https://www.bruegel.org/publications/datasets/covid-national-dataset/.

 Measures related to working time shortening, temporary lay-offs and sick leave

With production and demand collapsing, many SMEs face massive challenges in paying wages as well as sick leave for those workers affected. Governments have put measures in place to contribute to wage payments for employees temporarily out of work or on sick leave. Country approaches differ widely, given that labour market and social security institutions are different, meaning that possible and required support measures vary. In some cases, payments are directed to companies, to enable them to continue to pay wages and avoid lay-offs. In other cases, governments contribute to the employer share in paid sick leave. Possibilities for temporarily reducing working hours or redundancies are opened up for SMEs to temporarily withstand the impact of the pandemic.

Short term work (STW) schemes and wage support

Most OECD countries operate STW schemes (OECD, 2018[66]), which have been actively deployed in the context of the COVID-19 pandemic (Giupponi and Landais, 2020[67]) (OECD, 2020[68]). Various countries are opening up existing arrangements for companies to reduce working hours of their employees and their temporary redundancy. Many countries are expanding existing schemes or developing new ones. In Belgium, new options for partial unemployment for force majeure have been created, with provisions for temporary unemployment prolonged by three months and approval of requests within 3-4 days. Germany eased conditions for access to short-term work arrangements, by reducing the required percentage of workers involved from one-third to 10%. Denmark and Hungary relaxed employment legislation to allow companies to reduce employees hours temporarily. France is shortening procedures to encourage firms to have recourse to temporary lay-offs. Brazil eases possibilities to suspend employment contracts. Portugal simplified the lay-off regime for companies whose activities are affected by Covid-19 pandemic.

To compensate workers for reduced working hours through STW, governments pay (parts of) employee salaries for hours not worked. Brazil introduced possibilities for firms to reduce working hours and pay by up to 50% while maintaining the employment link. Further flexibility for firms will come from extended use of leave days and the possibility to anticipate annual leave, including collective annual leave. In France, the government will reimburse 100% of partial employment compensations (up from 70% previously). Norway is providing government support for wages when companies temporarily lay off workers, and is allowing companies to give two days’ notice to workers. Slovenia introduced an intervention law for co-financing temporary lay-offs. In Sweden, the government covers three quarters of the costs when staff working hours are reduced and covers one third of the cost for short-term workers. In Switzerland, companies can apply for part-time unemployment for employees, including subsidies for firms putting staff on shorter working hours. In addition, emergency aid to compensate salaries of temporary redundancies is being provided. In the Netherlands, companies expecting a drop in value added (minimum 20%), can ask for a compensation of 90% of wage costs, where 80% can be given in advance. In Denmark, the government increased security for employees’ jobs and support for wage costs through the Compensation for Corporate Expenses. In Poland, employers who find themselves in a difficult situation related to the spread of coronavirus will receive support from the Guaranteed Employee Benefits Fund. The financing will apply to companies whose turnover will drop by at least 15%. Romania is covering 75% of the salary of employees sent into technical unemployment by companies affected by the coronavirus crisis. Spain has extended social security bonuses in discontinuous fixed contracts to cover contracts from February to June 2020 in the tourism sector to preserve employment.

In some countries, wage subsidies are provided without a direct link to STW. Canada introduced a Canada Emergency Response Benefit of CAD 2 000 per worker for a maximum of four months. New Zealand is providing NZD 5.1 billion in wage subsidies for affected businesses in all sectors and regions. A Jobs Support Scheme in Singapore offsets 8% of wages for 3 months (subject to a cap) in order to help firms retain workers. The ceiling for the Wage Credit Scheme was raised to SGD 5 000.

A number of countries have set-up wage support specifically targeted to SMEs. In Brazil, the government will pay part of the salaries for micro and small companies. In Canada, small-business owners will receive a temporary wage subsidy equal to 10% of their salary bill for a period of three months. An Emergency Fund in Korea provides direct financial support to SMEs and self-employed, aimed at encouraging these firms to keep their employees.

Sick leave

There is large variation in the form and intensity of government financial contributions to costs related to sick leave and wage costs due to (partial) unemployment. Whereas in Denmark employers will be reimbursed completely by the government from the first day that an employee becomes ill or enters quarantine due to coronavirus, other countries offer partial reimbursements. For instance, in Brazil, the government will pay for the first 15 days of leave of the worker with COVID-19. In Latvia, the government will cover 75% of the costs of outbreak-induced sick leaves or workers’ downtime, or up to EUR 700 per month, per worker. In the United Kingdom, businesses employing fewer than 250 people are entitled to government refunds on any sick pay they give to the employees in the first two weeks. Small companies will be able to reclaim the costs of 14 days of sick pay (under GBP 200 per week) per employee. New Zealand is providing a NZD 126 million in COVID-19 leave and self-isolation support. Chile is extending unemployment insurance to those who are sick or unable to work from home.

Several countries have introduced specific measures to support the self-employed (see Box 1).

 
Box 1. Specific measures for the Self-employed

Several countries have introduced specific measures to support the self-employed, as many of these face a large drop in their income (OECD, 2020[68]) (Biddle et al., 2020[40]) (Blundell and Machin, 2020[69]). Compared to employees, the self-employed are not insured for sick leave or (temporary) unemployment. Measures range from providing sick leave payments and unemployment benefits, to lump sum subsidies.

Belgium deferred and reduced social contributions for the self-employed, conditional on proving a decrease in revenue due to the outbreak. Also, provisions for income replacement of EUR 1 300 to 1 600 per month are in place.

Canada introduced emergency support benefit for self-employed who do not qualify for Employment Insurance.

In Denmark, self-employed and those employed in small businesses with fewer than 10 employees facing a loss of earnings of 30% or more will receive 75% compensation, up to a maximum of DKK 23 000 (EUR 3 000) per month in direct financial support. Where the self-employed or small business owner’s partner is also employed in the business, the compensation threshold is DKK 46 000 (EUR 6 000). The compensation is subject to tax.

France set up a solidarity fund for the self-employed of EUR 2 billion, and provides EUR 1 500 monthly compensation for self-employed (and small companies), when their turnover is less than EUR 1 million and they experience a drop in turnover of 70% or more;

Germany provides 10 billion in direct subsidies to one-person businesses and micro-enterprises.

Ireland offers an increase in sick pay for workers affected by the virus, including for the self-employed, and a flat rate pay of EUR 203 per week for six weeks for the self-employed who have lost business. Self-employed are also entitled to a EUR 350 per week unemployment payment.

Israel provides a special aid grant for self-employed for projected losses due to the decline in economic activity and the postponement of self-employed mandatory payments.

Italy has temporarily suspended mortgage payments for first-time homebuyers, including self-employed who have lost more than one-third of their turnover during the last quarter. A fund for last resort income support (appropriation of EUR 300 million for 2020) is in place for employees and self-employed workers who ceased, reduced or suspended their employment relationship or business due to the pandemic. Self-employed workers will receive a tax-free one-time allowance of EUR 600 for March 2020. Furthermore, self-employed, freelance professionals and businesses whose revenues are lower than EUR 2 million can defer payments to the cashier to settle withholding taxes. Deferrals also apply to annual and monthly VAT, as well as social security and insurance. Payments are deferred to 31 May and can also be paid in up to 5 monthly instalments.

In Korea, an Emergency Fund provides direct financial support to SMEs and self-employed, aimed at encouraging these firms to keep their employees.

The Netherlands introduced non-reimbursable income support for three months of EUR 1 050 to 1 500 maximum through a fast track procedure, and a EUR 10 517 low interest loan for working capital.

Portugal defers payments on all contributions by self-employed people.

Spain provides self-employed similar benefits as unemployed in case of “force majeure”.

In the United Kingdom, self-employed and gig economy workers, who are not entitled to sick pay, receive assistance worth GBP 500 million as part of the 2020 Budget.

 Deferral of tax, social security payments, debt payments, and rent and utility payments

Most OECD countries have put in place measures that enable SMEs to postpone payments, in order to avoid further eroding their liquidity (see Table 4). Most countries have introduced such deferrals in corporate and income tax payments, although several countries include value added tax (VAT), social security and pension contributions.69

The scope and duration of deferral measures vary by country, although across countries the intensity of deferral measures – which were in many cases part of first response measures to the crisis – has increased. In some countries, next to tax deferral also tax relief is granted (See Box 2).

The scope of deferrals has been gradually further extended to other domains. In several countries, commercial banks, sometimes supported by the government, have announced a temporary moratorium on debt repayments. Furthermore, in some countries the payment of utility bills, mortgage payments and rent by small businesses and citizens was temporarily put on hold. Local governments have also deferred the payment of property taxes.

Income/corporate tax

Deferral of tax most often is introduced for corporate and income tax. In some countries, deferral of income and corporate tax has been targeted to specific sectors. Colombia, for instance, introduced deferral of income taxes for the tourism and aviation sectors. The United Kingdom gives all retail, hospitality and leisure businesses in England a 100% business rates tax holiday for the next 12 months;

The period for which deferral for corporate and income tax is offered differs widely. Many governments offer a period of two or three months (for instance Brazil, Croatia). Spain offers a deferral of six months. Canada introduced deferral of income tax until 31 August. Estonia extends deferral to 18 months. In Norway, companies liable for employee withholding taxes do not have to make second-term payments until 1 September rather than the scheduled cut-off of April 15.

No interest is charged on the delayed payments in many countries, such as Canada, Ireland, Lithuania, and the United Kingdom. Several countries announced that enforcement measures and penalty surcharges will be paused (for instance Canada, Czech Republic, Germany, Lithuania, and the Netherlands). Some countries offer payment in instalments after the deferral period. In Croatia, payments can be made in instalments of 24 months.

Some countries stop the payment of tax advances (Czech Republic), and/or speed-up the repayment of advances or rebates to SMEs (Latvia, Norway). Some countries offer lenience for tax overdue. Latvia, for instance, postpones tax overdue payments for up to three years if the overdue is an effect of the outbreak. Poland introduced a new method of loss settlement by entrepreneurs, with losses incurred in 2020 to be deducted from the tax that was due for 2019.

Some countries have announced specific budgets for tax deferral. Austria, for instance, installed EUR 10 billion in tax deferral. Denmark provides a DKK 125 million credit facility allowing firms to defer VAT and tax payments. New Zealand introduced a NZD 2.8 billion in business tax changes to free up cash flow, including a provisional tax threshold lift, the reinstatement of building depreciation and writing off interest on the late payment of tax.

 
Box 2. Tax Relief

In some countries, next to deferral, tax relief is offered by lowering rates or waiving payment. The distinction between deferral and relief is often ambiguous, especially when deferral is combined with a waiver of interest payments. However, tax relief (the reduction of tax rates or the cancelling of tax payments) is more akin to a grant or subsidy (see section 4.5). This Box gives a number of examples of tax relief measures. Such measures are often targeted to certain sectors. Many of the tax relief measures are introduced by local or regional governments.

  • Argentina exempts the sectors hardest hit form social security payments. Also, necessary overtime will have a 95% reduction in the rate of taxation. The salaries of workers hired for the necessities of the crisis period will have a 95% reduction in the tax rate.

  • Brazil announced a 50% reduction in social security contributions through “Sistema S” for 3 months (USD 0.4 billion);

  • China provides social security premium incentives, refunds of unemployment insurance premiums, and SME exemptions from pension, unemployment and work-related injury insurance premiums (totalling up to CNY 500 billion nationwide);

  • Next to tax deferral, Estonia introduces various tax incentives for companies;

  • France offers on a case-by-case basis exemption from corporate and income tax payments;

  • In Hong Kong, China profit taxes are reduced by 100% (subject to a cap);

  • Norway temporarily lowers VAT, through a nationwide VAT cut to 8% from the current 12%, until October 31. Businesses and individuals responsible for VAT will have until June 14 to make first-quarter payments;

  • In Turkey, accommodation tax will be cancelled until November;

  • Viet Nam introduced reductions in land lease fees;

  • Thailand introduced a reduction of withholding tax by 1.5 percentage points (from 3% to 1.5%), and tax deductions of salary expenses;

  • In the United Kingdom, small businesses will see their business tax rates waived entirely for 2020. Scotland offers 75% rates relief for retail, hospitality and leisure sectors with a rateable value of less than GBP 69 000 from 1 April 2020; 1.6% rates relief for all properties across Scotland; and fixed rates relief of up to GBP 5 000 for all pubs with a rateable value of less than GBP 100 000 from 1 April 2020.

Value Added Tax (VAT)

Several countries introduced possibilities for deferral of VAT. In some cases, deferrals are focused on specific sectors such as tourism and transportation (Colombia, Turkey). Other countries provide across the board deferral. Greece, for instance, introduced a four-month deferral of value-added tax (VAT) payments due at the end of March for companies operating in areas affected by the outbreak and which shut down for at least 10 days.

Deferrals are granted for three months to a year. Sweden introduced a deferral of VAT for three months, which is to be granted for up to 12 months retroactively applied from 1 January 2020. In some cases, VAT payments are waived (see Box 2).

Social security and pension contributions

A number of countries enable deferral of social security contributions and pension payments. Given the wide differences in social security and pension systems, measures differ widely. In some cases, the focus of deferral is on specific sectors. For instance, Spain extended social security bonuses in discontinuous fixed contracts to cover contracts from February to June 2020 in the tourism sector. Turkey introduced a deferral of social security premiums by six months for retail, iron and steel industries, shopping malls, automotive, entertainment and hospitality sectors, food and beverage businesses, textiles as well as event organisation sectors. Hungary introduced an exemption of social security contributions for sectors that were severely hit by the pandemic (tourism, film industry, restaurants, entertainment venues, gambling, sports, cultural services, passenger transportation).

The deferral periods range from three months (Brazil) to seven months (Portugal). For instance, Greece introduced a four-month deferral of social security payments due at the end of March for companies operating in areas affected by the outbreak and which shut down for at least 10 days. Israel has postponed National Insurance payments for the month of April, and allows payments in instalments. In Sweden, companies can defer payment of employers’ social security contributions for three months and for up to 12 months, retroactively applied from 1 January 2020. In some cases, payments are waived (see Box 2). In some cases, the suspension is related to the measures on reducing working hours, as part of compensation to avoid (permanent) job losses.

Some countries (China, Estonia) include pension payments in the deferral measures. Estonia, for instance, suspended payments in Pillar II of the pension system.

Rent/utilities/local tax

Some countries or local governments have extended deferrals to payments of local and property tax (Singapore, Belgium (Brussels Capital), Israel, Japan, Lithuania), rent (China, France, Thailand) and utility costs (Belgium (Wallonia), France, Lithuania) with the aim of avoiding costs and liquidity problems for companies. In some cases, the measures are specifically aims at SMEs or small businesses. For instance, the measures in France and Japan specifically target small business. In Hungary, evictions of small businesses unable to pay rent are suspended. Slovenia has temporarily freed small business customers and households from the obligation to pay for the support to producers of power from renewable sources and high-efficiency cogeneration. Additionally, the network charge has been significantly lowered.

Debt payment moratorium

In some countries, a deferral of debt payments was introduced in the form of a debt moratorium (see Box 3). In some countries, these are private initiatives by commercial banks. In other cases they are set-up or backed by the government.

 
Box 3. Debt Repayment Moratorium

In some countries, a moratorium on the repayment of debt has been introduced, whereby, for various lengths, SMEs can defer the repayment of debt. In some cases, these involve private sector initiatives. In other cases, the measures are backed by the government.

  • Australian banks announced support for SMEs through a six-month break in loan repayments;

  • In Belgium the financial sector will grant a deferral of debt payments until 30 September. Furthermore, the government opens up a EUR 50 billion new guarantee for all new credits up to 12 months. Brussels capital, a moratorium on debt repayments to Finance & Invest Brussels has been introduced;

  • The Brazilian Federation of Banks announced an agreement by which the five largest banks in the country (BB, Caixa, Itaú Unibanco, Bradesco and Santander) are willing to respond to requests for a 60-day extension for the debt maturity of individual and SMEs;

  • The six largest financial institutions in Canada have made a commitment to work with personal and small business banking customers on a case-by-case basis to provide flexible solutions to help them manage through challenges, such as pay disruption due to COVID-19, childcare disruption due to school or day care closures, or those suffering from COVID-19. As a first step, this support will include up to a six-month payment deferral for mortgages, and the opportunity for relief on other credit products;

  • In China, firms in hard-hit industries were authorised to apply for deferred payment or new loans;

  • A three-month moratorium on liabilities to the Croatian Bank for Reconstruction and Development (HBOR) and commercial banks;

  • In Egypt, SMEs receive a 6 month extension for credit repayments;

  • France and Germany offer conflict mediation between SMEs and clients/suppliers, and credit mediation to help SMEs wishing to renegotiate credit terms. The French Banking Association announced that firms facing a credit crunch are offered access to low interest loans (0.25%) to an amount equal to 3 months of revenues, with repayment starting in one year.

  • In Hungary, loan payments are suspended until the end of 2020 for all private individuals and businesses who took loans out before March 18th. Short-term business loans are prolonged until July 30th. The annual percentage rate (APR) of new consumer loans has been maximised at the central bank prime rate plus 5 per cent;

  • In Ireland, all the banks have announced that they will offer flexibility to their customers, and they may be able to provide payment holidays or emergency working capital facilities. A deferral of up to 3-months on loan repayments will be available to many businesses;

  • A debt moratorium by the Italian Banking Association was announced and is backed by the government. This concerns debt repayments, including mortgages and repayments of small loans and revolving credit lines on loans subscribed by companies until 31 January 2020;

  • Furthermore, in Italy micro-enterprises and SMEs of all types, including freelancers and sole proprietorships, can benefit from a moratorium on a total volume of loans estimated at around EUR 220 billion. Current account credit lines, loans for advances on securities, short-term loan maturities and instalments of loans due are frozen until 30 September. Part of these is made up of sums already disbursed which should have been repaid, representing in practice a new loan from the bank until 30 September, whereas the other part is made up of new financing which the company can obtain by using the credit line which is frozen. Banks or other lending institutions can activate a public guarantee covering 33% of the lent amount.

  • Israel’s five largest banks, which account for about 99% of overall banking activity, declared a deferment of mortgage and loan payments (with a waiver of deferred payment fees) for the next three months. Israel’s largest mortgage bank, bank Mizrahi Tefahot, will postpone payments for four months.

  • In Korea, domestic commercial banks and savings banks will also allow loans to be rolled over for small businesses if they cannot afford payment when due;

  • The Central Bank of Malaysia announced it requested a 6-month moratorium of all bank loans affected by the outbreak, except credit card balances;

  • The Netherlands Banking Association announced that SMEs with loans worth less than EUR 2.5 million will be granted a six month standstill period in loan repayments.;

  • Furthermore, Dutch small firms are offered a six month delay in repayments of micro loans through Qredits, with lowered interest rates to 2%;

  • In Saudi Arabia, SAR 30 billion will be allocated for banks and financing companies to delay loan payments due from SMEs for six months;

  • In South Africa, a Debt Relief Fund aims at providing relief on existing debts and repayments, to assist SMEs during the period of the COVID-19 state of disaster. For SMEs to be eligible for assistance under the Debt Relief Fund, the applicant must demonstrate a direct link of the impact or potential impact of COVID-19 on the business operations. The Ministry has set up a centralised registration system (www.smmesa.gov.za) where all those in need of financial aid will register and be screened;

  • In Spain, companies that have received loans from the General Secretariat for Industry and Small and Medium Enterprises are allowed to postpone their repayment;

  • In Turkey, a three-month deferral of loan payments by companies has been introduced;

  • Private financiers in the United Kingdom announced that they would ease rules for firms affected by the outbreak. A GBP 2 billion finance package was announced by Lloyds, free of fees (conditional on revenue below GBP 25 million). Measures from other commercial banks include putting a mortgage holidays, a 12-month capital repayment holidays for SMEs with existing loans above GBP 25 000, refunds on credit card cash advance fees, temporary increases to credit card limits, and a suspension of borrowing fees

Public procurement and payment

Some countries provide deferral and relief through public procurement measures. A number of countries have introduced derogations from standard procedures to cover extraordinary needs (e.g. Sweden, Portugal, Poland, Greece). Several countries stopped delay penalties regarding public contracts (Belgium, France), and have speeded up approval procedures in sectors like construction or chemical (France). Denmark and Israel offer an advance in payments of procured goods. In Korea procurement processes have been simplified by limiting on-site inspections. In New Zealand, administrations have been directed to pay their bills within ten working days to support small business.70 In several countries, retailers committed themselves to rapid payment of their small business suppliers. In China and Israel, the government promotes buying from local SMEs.

 Loan guarantees

Many governments have introduced and extended measures that incentivise commercial banks to expand their lending to SMEs. In some countries, central banks have lifted reserve requirements for banks, to allow them to increase their lending. In other cases, through unconventional monetary policy measures central banks have bought packages of loans to SMEs and others to boost further lending. Examples of these are included in Annex A.

In particular, in Europe and Asia, governments have introduced or intensified guarantee schemes to banks to strengthen lending to SMEs (Austria, Belgium, Denmark, Estonia, Finland, France, Germany, Greece, Hong Kong China, Ireland, Israel, Italy, Japan, Korea, Lithuania, the Netherlands, Poland, Portugal, Romania, Saudi Arabia, Singapore, Spain, Switzerland, and the United Kingdom). The measures include the extension of the types of SMEs and firms for which those measures are open, the raising of the ceiling up to which the guarantee applies as a percentage of the loan, the acceleration of guarantee and lending procedures and more generally the enlargement of public funding available to support guarantees.

New initiatives

Several countries have introduced new guarantee schemes in response to the crisis. For instance, Denmark introduced two new loan guarantee schemes, one specifically SMEs. The government will guarantee 70% of the value of any new bank loans given to SMEs who have seen operating profits fall by more than 50%. In Israel, a special loan facility has been introduced for struggling companies, primarily SMEs, to receive support from the State Guarantee Fund for Small Businesses. Japan is offering a specific guarantee programme for firms affected by the outbreak and whose sales and other profits are declining. The Japan Federation of Credit Guarantee Corporations (JFG) will guarantee the full loan amount for such SMEs, under a new framework.

Available funding

Several countries have significantly raised the amount of funding available for loan guarantees. For instance, in Germany, the amount of guarantees provided by guarantee banks will be doubled to EUR 2.5 billion, with the government assuring it will provide an unlimited supply of loans. The Austrian Wirtschaftservice (AWS) is providing new guarantees for SMEs worth EUR 10 million up to 80% of the loan amount or EUR 2.5 million for five years. Italy introduced a EUR 1.5 billion increase in the appropriation of the Central Guarantee Fund for SMEs. New credits in France are being offered by Bpifrance with guarantees on loans made to SMEs worth EUR 300 billion. Portugal introduced EUR 3 billion in state-backed credit guarantees and a EUR 200 million credit line to support companies’ treasury needs, with a credit line of EUR 60 million available for micro-companies in the tourism sector. Switzerland rapidly increased the amount of guarantees available when it appeared demand for support was very strong. The United Kingdom introduced a GBP 330 billion rescue package of loan guarantees for business.

Level of public guarantee

Furthermore, countries have increased the level of guarantees that governments are offering on credit. In several countries (Germany, France, Switzerland) the public guarantee has been raised to 100% for certain loan categories. Israel increased state guarantees to 85% of the loan amount and reduced collateral up to 10%, with longer repayment period up to 5 years. In the Netherlands, the guarantee ceiling of the Guarantee Entrepreneurs finance measure (GO) was raised from EUR 400 million to EUR 1.5 billion. The first tranche of new guarantees in Spain offers 80% of public guarantee. In Singapore, the government’s risk-share as part of the Enterprise Financing Scheme’s Working Capital Loan was increased to 80% and the maximum loan amount was doubled to SGD 600 000 per annum.

Coverage

A further measure undertaken to support loan guarantees is to extend the scope and coverage. In Austria, self-employed can now apply for guarantees as well. In Germany, guarantees apply to liberal professions. In Italy, debt rescheduling operations are eligible for the public guarantee. The Netherlands opened up the guarantee instrument for SMEs (BMKB) to those affected by the outbreak, providing EUR 300 million extra credit for SMEs.

Administrative procedures

Some countries have simplified administrative procedures to ease the access to loan guarantees. The Austrian Wirtschaftservice (AWS) has waived fees for handling and requires no planning calculations, business plans or loan collateral. A fast-track procedure will be introduced to enable guarantees to be given immediately. In Finland, the state-owned financing company Finnvera provides an instalment free period for loans granted. Bpifrance France has put in place support teams will help the 1 500 accelerated start-ups to date to manage the crisis and in particular the cash position. In Israel, loan approval at the bank has been shortened to up to 9 working days. Italy and Poland have lifted fees for guarantees.

 Direct lending to SMEs

Next to providing guarantees to commercial banks to support their SME lending, a large number of governments have also enhanced direct lending to SMEs (Australia, Austria, Brazil, Canada, Colombia, Croatia, Czech Republic, Hong Kong China, India, Ireland, Japan, Lithuania, Luxembourg, Portugal, Malaysia, Saudi Arabia, Slovenia, Spain, Switzerland, Thailand, United Kingdom, United States). In some cases, new loan instruments have been set-up. In other cases, existing instruments for disaster relief are opened-up for SMEs affected by the COVID-19 crisis. In some cases, the measures include the expansion of funding available for loans or the easing of the accessibility of loan schemes, by extending the group of potential beneficiaries, simplifying and speeding up procedures to receive loans, and offering more favourable terms and reduced interest rates.

New loan schemes

Several countries have set-up specific new loan schemes to support companies affected by the outbreak. Austria, Croatia and the Czech Republic have introduced specific COVID-19 loan funds, providing working capital to SMEs. In Australia, the government is introducing a time limited 15 month investment incentive (through to 30 June 2021) to support business investment and economic growth over the short term. Canada introduces a new Business Credit Availability Program which will provide more than CAD10 billion of additional support to businesses experiencing cash flow challenges. Ireland introduced a EUR 200 million working capital scheme implemented by the Strategic Banking Corporation of Ireland and targeting firms that are considered to be significantly impacted. The United Kingdom introduced a GBP 1.2 million "Coronavirus Business Interruption Loan" for small and medium sized businesses affected by coronavirus. The new USD 2 trillion United States stimulus package includes a USD 367 billion scheme for small and medium sized firms (with fewer than 500 employees). The programme would give loans without interest of up to USD 10 million to pay for employee salaries, rental costs and other expenses. These loans would be forgiven in proportion to the share of staff kept in employment.

Specific sector

Some countries focus new loan instruments on specific sectors. Columbia opened-up a new credit line for the tourism and aviation sector. In Austria, EUR 100 million is available for loans to hotels that suffer more that 15% losses in sales. Brazil has also opened a working capital loan line for small and medium-sized firms of tourism and service sectors and the simplification and waiver of documentation (CND) for credit renegotiation. Spain introduced a EUR 400 million credit line to most affected sectors such as tourism and transport.

Increase of funding of existing loan schemes

Furthermore, several countries have increased the amount of funding available for lending to SMEs through existing lending schemes. In Brazil, the state-owned Federal Savings Bank will extend USD 14.9 billion in credit lines to small-and medium-sized firms aimed at working capital, purchase of payroll loan portfolios from medium-sized banks and agribusiness. The bank also cut interest rates on some types of credit and offered clients a grace period of 60 days. Japan expanded the amount of the special loans offered to SMEs (to JPN 1.6 trillion) with zero-interest loans with no collateral to SMEs. SMEs facing more than a 15% decrease in sales can claim compensation of interests and can borrow without collateral. Luxembourg offers financial aid for SMEs facing financial difficulties through instruments regarding ‘exceptional events’. The aid will take the form of a repayable advance. The scheme should cover the income lost and ongoing costs of staff and rent, in the form of a recoverable advance. Firms can borrow up to EUR 500 000, up from 200 000. In the United States, next to the Economic Injury Disaster Loan Assistance programme of the Small Business Administration (SBA), the Payment Protection Plan offers EUR 349 billion in loans (non-repayable if businesses maintain employment). High demand for the facility led the administration to propose further raising the amount of funding available.

Easing of access and conditions

Countries have also eased the procedures and conditions for obtaining loans. For instance, Business Development Canada (BDC) offers a Small Business Loan of up to CAD 100 000 which can be obtained online in 48 hours from time of approval.

 Grants and subsidies

A number of countries, regions and cities have started to provide direct financial support to SMEs. In many cases these are direct lump sum subsidies; in other cases they regard tax exemptions. In some cases existing instruments are being used. For instance, in Chile an existing programme of targeted subsidies to firms undergoing hardship will be extended to firms in the tourism sector, starting in April 2020.

In other cases, new instruments are being set-up. France created a solidarity fund to support microenterprises with cash flow problems. In Korea, an Emergency Fund, providing direct financial support to SMEs and self-employed, is being used to encourage these firms to keep their employees.

Some countries (e.g. China) target the financial support to enterprises or sectors that are strategic to the prevention and control of the pandemic. In Bavaria, Germany, a EUR 10 billion fund is available to buy a stake in struggling companies.

In some cases, countries provide lump sum grants to SMEs and or self-employed. There are large variations in the amount SMEs receive, as well as in the conditions for application. Box 4 gives country and regional examples.

 
Box 4. Examples of direct grants to SMEs

In Australia, the Boosting Cash Flow for Employers measure would initially provide up to AUD 25 000 grant to small and medium-sized businesses, with a minimum tax free payment of AUD 2 000 for eligible businesses with a turnover of less than AUD 50 million that employ staff. The 22 March government package raises this tax free cash payment to AUD 100 000 and will be available to businesses with turnovers below AUD 50 million and also to eligible not-for-profit charities. West Australia provides small to medium businesses with a payroll of between AUB 1 million and AUD 4 million will a one-off grant of AUD 17 500.

In Belgium, SMEs in need may receive between EUR 1 300 and 1 600 per month in direct support. Brussels capital provides a EUR 4 000 payment for companies that have to close their doors (EUR 2 000 for hairdressers). Wallonia provides EUR 5 000 payment that have to close their doors and EUR 2 500 for companies that have to adjust their opening hours. Flanders provides a EUR 4 000 payment for companies that have to close their doors.

In Denmark, small business that see revenue fall by more than 30% will get up to 75% of their lost revenue covered by the state and they will receive help to cover some of their fixed expenses.

In France, small companies and self-employed can be granted a EUR 1 500 monthly compensation, when their turnover is less than EUR 1 million and they experience a drop in turnover of 70% or more. Germany has EUR 10 billion available in direct subsidies to one-person businesses and micro-enterprises. Bavaria offers a scheme of immediate and easily accessible aid to EUR 5 000 to 30 000 for affected companies.

Switzerland considers potential further measures for companies particularly affected worth CHF 1 billion.

The United Kingdom is increasing grants to small businesses eligible for Small Business Rate Relief from GBP 3 000 to GBP 10 000. Furthermore, GBP 25 000 in grants is provided to retail, hospitality and leisure businesses operating from smaller premises, with a rateable value over GBP 15 000 and below GBP 51 000. Small businesses in England that already pay little or no business rates will be eligible for a one-off coronavirus grant of up to GBP 3 000. Scotland is to provide grants of at least GBP 3 000 to small businesses in sectors facing the worst economic impact of COVID-19.

 Non-banking finance

Most of the SME policy instruments used in response to COVID-19 are debt finance via bank loans. However, an increasing number of countries also use other forms of finance. In some cases, debt finance is disbursed by other intermediaries than banks, for instance through crowd-funding or fin-tech companies. In other cases, non-debt financing instruments are being used, for instance equity (see also section 4.7.5 on start-ups).71 This follows a sustained trend in the past decade. The 2020 edition of the OECD Financing SMEs and Entrepreneurs Scoreboard documents the rise in non-banking finance for SMEs and government measures to support this (OECD, 2020[70]).

Australia includes non-bank lenders in its SME Loan Guarantee Scheme72 as well as its Structural Finance Support package.73

In the COVID-19 context, in Belgium, the Flanders region has eased the conditions for the “win-win crowd-lending facility”, through which individuals are incentivized to lend to small businesses.74

In Canada, fintech companies are involved in bringing finance to SMEs through the Canada Emergency Business Account scheme.75

In Germany, guarantee banks support regional equity investment societies (“Mittelständische Beteiligungsgesellschaften”).

In France, Bpifrance strengthened the equity capital of French start-ups and SMEs with the launch of two vehicles: the "Fund for reinforcement  of SMEs" endowed with nearly EUR 100 million, and the "French Tech Bridge", a EUR 80 million pocket for start-ups expected to raise funds in the coming months. This financing, which may range from EUR 100 000 to €5 million, takes the form of Convertible Bonds, with possible access to capital, and must be co-financed by private investors.

In Hungary, the Hungarian Development Bank Group partners with state-owned venture capital company Hiventures to provide equity finance to viable SMEs that ran into difficulty during the pandemic.76

To provide equity funding for firms with growth potential, India set up a fund of funds of INR 500 billion with a INR 100 billion corpus.

In Italy, several cooperative non-profit guarantee consortia work together with fintech companies in providing finance to SMEs, also supported through European funding programs.77 Moreover, non-bank financial institutions are allowed to provide loans under the government guarantee scheme Garanzia Italia.78 SME financing by online lenders grew significantly during the pandemic.79

In Lithuania, the Avieta scheme run by national promotional institute INVEGA allows SMEs to borrow through crowd-funding platforms,80 which is also used in the COVID-19 context.81

The credit guarantee fund KODIT in Korea runs a public co-investment scheme which supports equity investment.82

In the Netherlands, the public guarantee scheme BBMKB has been opened up for participation by non-banking intermediaries.83

Sweden, the state investment company Almi Företagspartner works with a loan platform to get bridge loans to SMEs.84

In Switzerland, COVID-19 brought up new initiatives in crowd-funding for SMEs, although at the same time loan guarantee support may have reduced SME demand for crowdfunding.85

In the United States, online lenders and fintech companies are included in getting Paycheck Protection Program funding to small businesses and the self-employed.86 The Security and Exchange Commission has eased crowdfunding rules to support finance for SMEs.87

In the United Kingdom, the British Business Bank ENABLE programme already was open to other lenders than banks. 88 In the context of the COVID-19 pandemic, a number of fintech companies and online lenders participate in the Bounce Back Loans (BBL) and Coronavirus Business Interruption Loans (CBILs).89

 Structural policies

Some countries have taken actions to help SMEs adopt new work processes, speed up digitalisation and find new markets. Such policies aim to address urgent short-term challenges but also contribute to strengthening the resilience of SMEs in a more structural way and support their further growth. Such policies include support for finding new alternative markets, for teleworking and digitalisation, for innovation and for (re) training of the workforce. These policies are of particular importance, since SMEs maybe less able to adopt such new technologies and methods. At the same time, supporting adoption of new technologies and practices may enable them to strengthen their post-crisis competitiveness and ability to address the challenges posed by megatrends.

Measures to find new and alternative markets

Some countries have adopted measures to support SMEs in recovering markets or finding new or alternative markets. Belgium, for instance, has opened up existing financial instruments for SMEs – such as the SME growth subsidy – as to support firms to find alternative markets, particularly where supply chains are impacted. China is encouraging large enterprises to cooperate with SMEs, by increasing their support in supply chains, in terms of loan recovery, raw material supply, and project outsourcing.

Several countries have intensified export support measures for SMEs:

  • Canada has expanded Export Development Canada’s ability to provide support to domestic businesses.

  • The Czech Republic launched an emergency package for Czech exporters and other support to exporters.

  • The Danish Export Credit Fund (EKF), a state agency that secures payments of exports of goods and services out for Denmark, will increase its liquidity for in particular SME’s. An increase guarantees will assist some 250 SMEs in continuous export business.

  • Germany has set up an Economy Stabilisation Fund (Wirtschaftsstabilisierungsfonds), aiming to ring-fence businesses seen as of critical importance for the German economy as a whole.

  • Indonesia tries to boost SME exports by virtual business match making events.

  • Korea allocates KRW 36 trillion to trade finance. The government will extend the maturity of trade insurance and guarantees within a ceiling of KRW 30 trillion. Also emergency liquidity worth KRW 5 trillion is available to help local companies expand overseas activities.

  • New Zealand and Slovenia offer aid for internationalisation and measures to diversify export- and import markets.

  • Switzerland offers compensation for reduced exports promotion activities of CHF 4.5 million.

  • To support export activity, the Italian export credit agency (SACE) has announced a EUR 4 billion package to help SMEs address cash flow needs and diversify export markets. In addition, the Italian Agency for the promotion of business internationalisation (ICE) has cancelled the costs already incurred by companies for participation in fairs and events, also proposing alternative visibility solutions.

  • As part of its additional loan guarantee programme, Spain offers EUR 2 billion in guarantees to exporting companies.

  • In South Africa, the Business Growth or Resilience Facility aims to enable continued participation of MSMEs in supply value-chains, in particular those who manufacture (locally) or supply various products that are in demand, emanating from the current shortages due to COVID-19 pandemic.

Measures to support teleworking and digitalisation

Many SMEs find it harder to adopt teleworking (Brussevich, Dabla-Norris and Khalid, 2020[71]), new sales channels and other digital solutions that may help mitigate the impact of the outbreak and containment measures. Several countries have introduced measures to support SMEs adopting teleworking (Argentina, France, Japan, Slovenia, Spain), which may also bring longer-term advantages in terms of adoption of technology and new practices. For instance, Argentina introduced a financing line of EUR 7.2 million for SMEs used exclusively for teleworking. Other countries have more generally intensified SME digitalisation support in the context of the crisis. In some countries, private initiatives have been also launched to support SMEs in this area. For instance, in France industry associations, support SMEs during the crisis through a toolkit on teleworking and advice to companies.

  • The "Digital Team Austria" initiative consists of companies in the digitisation industry and offers digital services to SMEs free of charge for at least three months. This helps SMEs to switch to mobile working.

  • Chile introduced a number of measures to support digitalisation and teleworking, such as SME Online, an initiative that seeks for SMEs to increase their sales, lower their costs and improve their relationship with customers and providers, using available digital technologies and training, changes to Labor Code for regulating teleworking, the development of teleworking / digitalization to connect affected SMEs with the main Chilean e-Commerce platforms and consumers.

  • China has introduced measures to foster the adoption by enterprises of new technologies, business practices (e.g. unmanned retail, contactless delivery, standardized package of fresh food) and business models (e.g. online shopping, online medical care, online education, online office, online services, digital entertainment, and digital life). To accelerate the adoption of digital technologies, China supports SMEs cloud computing and purchase of cloud technology and for online working such as remote office, home office, video conferencing, online training, collaborative R&D and e-commerce.

  • In Italy, the Ministry of Innovation and Digitalisations launched an initiative called “Digital Solidarity”. This includes a portal where companies (in particular SMEs and self-employed) can register to access without costs digital services from large private sector companies regarding smart/tele-working, video conferencing, access to mobile data, cloud computing etc., to enable them to cope with restrictions to movement and work.

  • Ireland has extended its Digital Trading Online Voucher scheme by an additional EUR 3.3 million, by which micro-enterprises can get a EUR 2 500, and have expanded free online training to entrepreneurs.

  • Japan offers subsidies to support – next to teleworking in SMEs - for firms to adopt IT solutions and develop e-commerce sales channels.

  • Korea introduced measures to encouraging brick-and-mortar shops to open their business online;

  • In Latvia and Mexico, Fintech initiatives are being developed to support SME finance in the context of the crisis.

  • The Malaysia Digital Economy Corporation, set-up by the government as part of the country’s digital strategy, offers an extensive list of digital solutions for SMEs by Malaysian tech companies.

  • Singapore’s SMEs Go Digital Programme provides support for businesses to digitally transform and expands the scope of pre-approved solutions eligible for the Productivity Solutions Grant to help businesses implement safe distancing and business continuity measures.

Spain has in the context of the crisis set up measures to help digitalise SMEs to facilitate teleworking, and prevent external (outside the EU) takeovers of Spanish firms in strategic sectors. It supports connected Industry 4.0 projects for SMEs. and has various programs in place to support SMEs and self-employed to rethink their business models and strengthen managerial and digital skills. Furthermore, the Acelera PYME programme aims to accelerate the use of digital technologies by SMEs.

Measures to support innovation

Similarly, countries offer support for innovation by SMEs. In some cases, these measures aim to support start-ups and SMEs to help find solutions to the COVID-19 outbreak. In other cases, support is offered to strengthen SME innovation and competitiveness, to help them better withstand the impact of the crisis. The COVID-19 pandemic is also triggering public sector innovation.90

  • China encourages SMEs to engage in the innovation of technologies and products related to pandemic prevention and control.

  • The Czech Republic launched the COVID Technology Program 19, a subsidy for projects directly linked to the fight against the further spread of coronavirus through the acquisition of new technological equipment and facilities, CZK 300 million in total. Furthermore, the Czech Rise Up Program aims to encourage the introduction of new solutions to fight the coronavirus crisis by supporting innovative companies, including start-ups, CZK 200 million in total.

  • In Denmark, an Innobooster-programme administered by the Innovation Fund will be increased by DKK 350 million to support new projects.

  • The European Institute for Technology launched a call to startups and SMEs with technologies and innovations able to help in treating, testing, monitoring or other aspects of the COVID-19 outbreak to apply for funding under the European Innovation Council Accelerator programme.

  • The Finish, Latvian and Polish governments back hackathons among start-ups and SMEs to help find innovative solutions to the crisis.

  • France introduced an accelerated payment of the PIA innovation support grants already allocated but not yet released, for an estimated total amount of EUR 250 million. Following a government request, Bpifrance and Ademe automatically accelerate the payment of innovation support grants from the PIA, such as innovation contests, by paying in advance the instalments not yet released for projects that have already been validated. Concurrently, for companies receiving subsidies in the form of repayment advances or grants accompanied by fees, the next repayment deadlines are postponed for up to six months. Furthermore, the State maintains, through Bpifrance, its support for innovative companies with nearly EUR 1.3 billion planned for 2020 (grants, repayable advances, loans, etc.). Bpifrance will also continue its direct equity investments and investments in fund of funds, alongside private investors.

  • Enterprise Ireland and Údarás na Gaeltachta clients are eligible for grants for accessing consultancy services for immediate finance reviews, as well as for innovating, diversifying markets and supply chains. Local Enterprise Offices in Ireland are providing vouchers worth between EUR 2 500 and EUR 10 000 with match funding for innovation, productivity and business continuity preparedness.

  • Israel introduced a NIS 650 million stimulus plan for the tech sector, via the Israeli Innovation Authority. NIS 50 million will be used for innovation for combatting the COVID-19. Furthermore a package of measures to boost “growth engines” once containment measures are eased was introduced, including the acceleration of public investment projects (NIS 1.1 billion), support for SMEs in the high-tech sector (NIS 1.5 billion), and further measures to boost economic activity (NIS 5 billion).

  • Japan introduced subsidies to promote teleworking, online schooling and reshoring of factories.

  • Norway introduced: grants for young growth companies, innovation loans, interest-payment support, grants for private innovation groups, business-oriented research support, capital for funding and matching investments.

  • The existing Adapt and Grow initiative in Singapore increased its funding period to six months to better support SMEs during the crisis.

Measures to support training and redeployment

Several countries have opened up existing programmes for training and skills development by SMEs in the context of the outbreak, or launched new initiatives for this purpose. Enabling SMEs to maintain access to skills during the crisis, as well as develop further skills, constitutes an important aspect of the required structural policy response to the crisis.

  • Australia is offering support for small business to retain their apprentices and trainees. Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage for up to 9 months from 1 January 2020 to 30 September 2020. Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice. This measure will support up to 70,000 small businesses, employing around 117,000 apprentices. Queensland offers mentoring support (50 mentors available) and financial workshops to support SMEs, with an emphasis on local business communities.

  • China is using instruments for subsidising training for SMEs, and offers free access to online training platforms. Technical knowhow and management lessons will be offered to SMEs free of charge during the pandemic via mobile platforms. Online training is supported as well (Ping An Digital Economic Research Center, 2020[71]). In Hubei province, China, SMEs can receive a grant to hire new college graduates.

  • Finland provides EUR 500 000 for counselling and support services for entrepreneurs.

  • France asks companies to invest in training in return for partial unemployment and wage support.

  • Germany announced a EUR 4 000 assistance for SMEs to cover consultancy services to help SMEs find solutions in coping with the crisis.

  • Greece provides economic support in the form of a training voucher of EUR 600 for six scientific sectors (economists/accountants, engineers, lawyers, doctors, teachers and researchers).

  • Ireland offers support for online trading of EUR 7.6 million and free mentoring, free online training for all businesses.

  • New Zealand launched a NZD 100 million redeployment package. Furthermore, the government offers NZD 25 million in the next 12 months for business consultancy support.

  • In Portugal, a special budget is set up to allow people who are out of a job to get training.

Measures to support start-ups

Start-ups are among the most affected SMEs (OECD, 2020[72]) (World Economic Forum, 2020[73]). Although many of the support programmes put in place to support SMEs are open to start-ups (and self-employed) as well, start-ups generally struggle or completely fail to meet the criteria set to access liquidity programmes announced in relation to the COVID-19 crisis. For instance, because start-ups in initial years may not make profits, they may fail to meet the solvency criterion underlying such schemes. In response, several countries have announced dedicated measures aimed at supporting start-ups (France, Germany, United Kingdom, see Table 6).

 
Table 6. Start-up support schemes in France, Germany and the United Kingdom

 

France

Germany

United Kingdom

Date

25 March

31 March

20 April

Name

Emergency Plan to support Start-ups

Start-up Liquidity Programme 2020

Support Package for Innovative firms (Future Fund)

Size

EUR 4 billion

EUR 2 billion

GBP 1.25 billion

Objective

Strengthen bridge finance, liquidity and innovation for start-ups

Support availability of venture capital

Foster high growth and innovation

Target group

Start-ups

Equity funded businesses

High growth companies and R&D intensive SMEs

Instrument type

*Bridge finance for start-ups who are between two fund-raising round

*State guaranteed treasure loans of two times the 2019 wage bill or 25% of annual revenue

*An accelerated refund by the State of corporate tax credits refundable in 2020

* An accelerated payment of the PIA innovation support grants already allocated but not yet released

*Support from Bpifrance for innovative companies, including for direct equity investments

*Additional public funding to public venture capital investors (both individual funds as well as funds of funds, e.g. KfW Capital) for funding rounds for start-ups as part of co-investments made jointly with private investors

* Venture capital financing and equity replacement financing for small businesses and new start-ups that do not have venture capitalists as shareholders

In parallel to the introduction of the Start-up Liquidity programme, Germany "Future Fund" (Zukunftsfonds) for start-ups which will offer additional liquidity of up to EUR 10 billion and should support the way out of the crisis in the medium term

*A Future Fund for high-growth companies in partnership with the British Business Bank will provide UK-based companies with between GBP 125 000 and GBP 5 million from the government, with private investors at least matching the government commitment. These loans will automatically convert into equity on the company’s next qualifying funding round, or at the end of the loan if they are not repaid.

* Targeted support for the most R&D intensive small and medium size firms through Innovate UK’s grants and loan scheme.

Source: See Annex A for further information

Various other countries have put in place measures to support start-ups as well. For instance, in the Netherlands, the government announced Corona bridge loans for start-ups and scale-ups of between EUR 50 000 and EUR 2 million, for which EUR 100 million will be available. Loans under EUR 500 000 should be available in 4 to 9 working days after request.91

In Switzerland, a special guarantee procedure was created to secure bank loans to qualified start-ups. 65% of the guarantee is paid by the federal government and 35% by the canton or third parties. In this way, the federal government and the canton (or third parties) jointly guarantee 100% of an amount of up to CHF 1 million per start-up company. The total amount guaranteed may not exceed one third of the start-up's 2019 running costs.92

Denmark is developing two loan schemes with subsidised interest rates for start-ups. The first scheme targets companies in their early stages, while the second scheme focuses on companies having already received venture capital. The schemes have a total budget of approximately EUR 296 million billion. The support, in the form of loans, will be managed by the Danish State public investment fund Vækstfonden.93

Italy introduced support to high-tech start-ups: the endowment of the main national subsidised finance programme for innovative start-ups is increased by EUR 100 million. EUR 10 million are allocated to incentivise start-ups to use services by business incubators and accelerators. The thresholds for the national investor visa scheme for foreign citizens financing SMEs and start-ups are halved. An additional tax credit for start-up equity investor is set up.

Portugal launched a EUR 25 million support initiative for start-ups, which includes five measures:94

  • Financial support through an incentive. The value will be equivalent to minimum wage per employee (up to a maximum of 10 employees per start-up);

  • Three month extension of the Start-up Voucher scheme (EUR 2 075 per entrepreneur job);

  • Support for start-ups with less than five years of business activity, through the contracting of incubation services based on an incentive of EUR 1 500, non-refundable;

  • A loan convertible into social capital (supplies), after 12 months, applying a discount rate that allows start-ups to avoid a dilution of investors’ equity. Average investment ticket between EUR 50 000 Euro and EUR 100 000 per start-up;

  • Launch of the “Covid-19 — Portugal Ventures instrument”: for investments in start-ups, with tickets starting at EUR 50 000.

Austria set-up a EUR 150 million COVID-19 start-up Relief Fund, to fund innovative Austrian start-ups founded not more than 5 years ago. The initiative includes two parts:95

  • An aid fund through the state-owned promotional bank AWS of EUR 100 million, which doubles fresh equity for Austrian start-ups

  • A EUR 50 million venture capital fund.

Canada introduced a CAD 250 million support programme to assist innovative, early-stage companies that are unable to access existing COVID-19 business support, through the National Research Council of Canada’s Industrial Research Assistance Program. Furthermore, Canada launched CAD 20.1 million in support for Futurpreneur Canada to continue to support young entrepreneurs across Canada who are facing challenges due to COVID-19. The funding will allow Futurpreneur Canada to provide payment relief for its clients for up to 12 months.

Regional governments have also launched initiatives. For instance, Upper Austria is developing a EUR 4 million start-up package, which aims to stabilise start-up companies and support founders. This package currently consists of a special consulting service by the regional start-up consulting and support council "tech2b Inkubator" and a deferral of active start-up loans from "tech2b Inkubator". Start-ups can also benefit from the Region’s Corona guarantee. In Belgium, Flanders launched a EUR 250 million package for start-ups, scale-ups and SMEs. Under the scheme, viable companies affected by the COVID-19 outbreak are eligible for subordinated loans of up to EUR 800 000 over three years. The credits must fully cover the financing needs for at least 12 months. Companies pay an interest rate of 5%.

Temporary changes in insolvency and bankruptcy regimes

Several countries have introduced modified insolvency and bankruptcy regimes in response to the pandemic (see Box 5). The aim of these changes is to provide breathing space for companies running into financial difficulties during the pandemic and avoid their unnecessary bankruptcy.

 
Box 5. Temporary changes in bankruptcy and insolvency regimes

Several countries have adjusted bankruptcy regimes in the context of the crisis (for instance Australia, Belgium, Colombia, Germany, Italy, New Zealand, Portugal, Russia, Turkey, Ukraine and the United Kingdom). The aim of these changes is to provide companies in difficulty because of COVID-19 with more time and flexibility before they file for bankruptcy (Bosio et al., 2020[74]) (OECD, 2020[75]).

Australia increased the debt thresholds for creditors to apply for bankruptcy, increased the timeframe for a debtor to respond from 21 days to 3 months and increased the temporary protection period for debtors from 21 days to 3 months.

Belgium introduced a moratorium on bankruptcies for businesses severely affected by the crisis but which had been in good health up to 18 March. It protects them against foreclosures, and from being declared bankrupt at the request of their debtors, although this can still occur at the request of the Attorney General or of the debtors themselves. Ongoing contracts cannot be terminated for non-payment and, for now, debtors are not obliged to file declarations of bankruptcy.

Italy has suspended provisions for the declaration of insolvency or bankruptcy.

New Zealand introduced a business debt hibernation regime (providing businesses with an option to place existing debts on hold until they can start trading normally again) and a safe harbour regime (offering security to directors against legal claims).

The “German Covid-19 Insolvency Law Amendment” suspends the obligation of the management of a legal person to file for bankruptcy until 30 September 2020 if certain conditions are met. The new rules shall provide the management with more time and flexibility to decide whether the company can be continued and shall help to avoid insolvencies caused by the circumstances triggered by the Covid-19 pandemic. The new rules do not relieve the management from carefully and constantly observing the situation of the company and updating their assessment as the situation further develops. Making use of the additional rules may also impose personal liability risks on the managing directors.

The United Kingdom announced temporary changes in insolvency law to provide a breathing space for companies. The changes include the suspension of the application of the law on wrongful trading; and a new restructuring regime known as a 'business rescue moratorium', designed to (i) prevent creditors from taking enforcement action whilst the business seeks a rescue/restructure, and (ii) permit the business to continue to access the supply of goods and services necessary to continue to trade.

Private sector initiatives and entrepreneurship

Over the last weeks, several private sector initiatives have been launched to harness the potential of entrepreneurship in the context of the crisis. Box 6 illustrates a number of examples.

 
Box 6. COVID-19 and entrepreneurship

The COVID-19 pandemic calls for all hands on deck by governments, in containing both the health and economic impact of the outbreak. Many entrepreneurs are among the most vulnerable, and have already experience a huge drop in revenue whilst meeting ongoing costs. Governments have set-up a variety of instruments to help entrepreneurs and SMEs withstand the crisis.

But there is also another story to be told. The crisis is also bringing examples of entrepreneurship and small business creativity in coping with the crisis. For example, an Irish small firm is offering a virtual fashion showroom, creating new ways to bridge supply and demand for fashion, now that access to fashion houses and events like “fashion weeks” are no longer possible.96 Digital education tools developed by start-ups in Estonia help to put in place long distance learning in other countries where schools have been closed.97 More generally, e-learning platforms see a large boost in activity, with small firms and entrepreneurs moving their content online.98 Also in other sectors, such as disinfectants, start-ups are booming.99 Platforms have been set-up to share world-wide creative initiatives in dealing with the crisis and containment measures.100 In several countries (Latvia, Mexico), Fintech initiatives are being launched or speeded up, to alleviate liquidity problems of entrepreneurs. Reports from China suggest that blockchain technology and other industry 4.0 advances such as Big Data, 5G and AI have helped speed up business recovery, and have played a part in efforts to control the spread of the virus and to develop a COVID-19 vaccine.101 In several countries, hackathons have been organised to harness the creativity of start-ups and entrepreneurs to contribute to solutions to the crisis.

In many countries, industry organisations are playing a strong role in harnessing the entrepreneurial capacity of small firms. Industry associations are stepping up their efforts in supporting entrepreneurs during the crisis. For instance, France Digital has created a toolkit on teleworking and advice to companies in dealing with the crisis. Large corporates intensify their cooperation with small firms in biotech innovation to help find a vaccine to COVID-19.102 The Malaysia Digital Economy Corporation, set-up by the government as part of the country’s digital strategy, offers an extensive list of digital solutions for SMEs by Malaysian tech companies.103

The private sector and non-governmental organisations are also taking part in efforts to support entrepreneurship during the crisis. Several large tech firms have announced or extended funding initiatives to support the innovative potential of start-ups and SMEs. 104

In several countries (e.g. Switzerland105), crowdfunding initiatives have been introduced to keep local entrepreneurs in business. A community initiative by La France Tech Toulouse highlights how start-ups can play a role in combatting the crisis.106 Many German stores and other service providers (e.g. cinemas and restaurants) are asking clients to buy Gutscheine (vouchers) for future use in order to stay afloat despite the closure. A platform for this has been set up in Berlin (private initiative), but local authorities are also involved (for instance in Swabia).107 In countries such as Sweden and New Zealand, further initiatives have been launched to support citizens and communities to help their local small firms.108

Beyond any doubt, the environment for SMEs and entrepreneurs in the coming period will be challenging, with government support needed to help firms to survive. At the same time, “pandemics and recessions are accelerants to innovation.”109 In responding to the crisis, governments should take this entrepreneurial contribution and potential of SMEs into account.

The OECD Open and Innovative Government Division (OIG), in which the Observatory of Public Sector Innovation sits, is issuing a call-out to all levels of government, civil society, international organisations and the private sector to gather innovative, digital and open government solutions and inspiration on how individuals and organisations across the globe are responding to the crisis.110

 Monitoring of impact and governance of policy responses

Several governments have set up coordination mechanisms to monitor the outbreak and develop responses. In most cases, the focus of such coordination is on health aspects. In some countries, SME aspects are explicitly considered in these coordinated efforts, as are multi-level governance matters, since regional and local governments play an important role in the SME policy response.

Examples include:

  • In Austria, the Ministry of Economy and Digitalisation established a taskforce to monitor the impact of the outbreak on all firms.

  • In Denmark, the government has set up the “Government and Business Corona Unit” in collaboration with the business sector, with a mandate to discuss possible temporary and targeted measures that can address the current challenges of the business because of the outbreak of COVID-19.

  • In France, regional task forces have been set up together with public development banks to accelerate support measures for enterprises. Joint action is being taken between national and regional authorities to manage the crisis as part of the new Economic Council ‘Etats-Régions’.

  • Israel has created a network of local authority’ representatives, for peer learning and communicating “field” knowledge to the Ministry of Economy, and vice versa.

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Annex 1.A. Overview of country responses

 Argentina

Argentina announced a EUR 43 million financing line for SMEs from Banco Nacion at soft rates, of which EUR 36 million will be for firms that produce food, medical supplies, personal hygiene and essential goods, for working capital and / or investments. Another financing line of EUR 7.2 million will be used exclusively for teleworking.

On 26 and 27 March, the government expanded its credit program for SMEs to cover employee wages and extended the maturity dates of SME debts.

On 31 March, the government created a USD 453 million guarantee fund for SMEs.

On 20 April, the government launched a USD 12.9 billion support package. In sectors particularly affected by the lockdown such as entertainment, transport, restaurants and hotels, the government will pay part of the salaries and exempt employers from social security contributions. Unemployment insurance protection has been reinforced for workers dismissed without a fair cause during the lockdown.

The Productive Recovery Programme (REPRO) will be extended to guarantee employment for those working in companies affected by the health emergency which means that the State will pay part of the wages of the workers concerned. A total of 350 000 million Argentinian pesos will be used to ensure the production and supply of food and basic inputs, boost activity and finance the functioning of the economy. Necessary overtime will have a 95% reduction in the rate of taxation. The salaries of workers hired for the necessities of the crisis period will have a 95% reduction in the tax rate.

Furthermore, the following measures have been put in place:

  • Refunds for domestic taxes paid during the production process for exporting firms are accelerated.

  • In sectors particularly affected by the lockdown social security contributions and payroll taxes for employers are reduced or postponed.

  • Due payments for taxes have been postponed for SMEs to 30 June.

  • Public and private banks will support private companies with working capital for up to 180 days. This measure targets firms most affected by the lockdown, especially SMEs. Rates will be around half of current inflation, with an estimated fiscal cost of around 0.33% of GDP. Part of these credits will be directed to companies producing foodstuff, medicaments and hygienic articles as well as equipment necessary for teleworking. To protect banks, soft-credit lines will be guaranteed by the State through a Public Credit Guarantee Fund which has received additional resources from the government.111

  • The public sector provides loans of up to USD 2 300 USD with zero interest rates to self-employed workers whose revenues have strongly decreased due to the crisis. The amount of the loan is equivalent to the average monthly revenue of the self-employed and paid out over three months (with repayment in twelve quotas starting after 6 months). The total fiscal cost of the measure amounts to around 11 billion Pesos and loan guarantees of 26 billion Pesos have been provided by the government.

  • Public credit guarantees for bank lending to SMEs affected by the emergency situation have been reinforced.

 Australia

After consultation of its members, the Australian business organisation COSBOA drafted a communiqué on measures needed in response to the outbreak, calling for cash injections, communication and collaboration.112 The Council of Small Business Australia requested concessional tax measures followed by business investment promotion, including through a removal of the current cap on instant asset depreciation (IAD) for small businesses in the 2021 financial year.113

On 12 March, the Government announced a federal economic stimulus package of AUD 18 billion114 with measures to support investment and cash flow assistance for small business:115

Delivering support for business investment:

  • The Government is increasing the instant asset write-off threshold from AUD 30 000 to AUD 150 000 and expanding access to include businesses with aggregated annual turnover of less than AUD 500 million (up from AUD 50 million) until 30 June 2020. In 2017-18 there were more than 360 000 businesses that benefited from the current instant asset write-off, claiming deductions to the value of over AUD 4 billion.

  • Backing business investment: The Government is introducing a time limited 15 month investment incentive (through to 30 June 2021) to support business investment and economic growth over the short term, by accelerating depreciation deductions. Businesses with a turnover of less than AUD 500 million will be able to deduct 50 per cent of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the assets’ cost.

Boosting cash flow for employers

  • The Boosting Cash Flow for Employers measure will provide up to AUD 25 000 back to small and medium sized businesses, with a minimum payment of AUD 2 000 for eligible businesses. The payment will provide cash flow support to businesses with a turnover of less than AUD 50 million that employ staff. The payment will be tax free. This measure will benefit around 690 000 businesses employing around 7.8 million people.

  • Supporting apprentices and trainees: the government is supporting small business to retain their apprentices and trainees. Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage for up to 9 months from 1 January 2020 to 30 September 2020. Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice. This measure will support up to 70 000 small businesses, employing around 117 000 apprentices.

On 22 March, the Government announced a second additional package of AUD 66 billion.116 The package includes a tax free cash payment of up to AUD 100 000 and will be available to businesses with turnovers below AUD 50 million and also to eligible not-for-profit charities.117 Through a new Coronavirus SME Guarantee Scheme118, the Government will guarantee 50 per cent of new loans issued by eligible lenders to SMEs. The total lending capacity of the facility will be AUD 40 billion (2% of GDP). Under a plan put forward by the banking industry, businesses with up to AUD 10 million in total loan facilities will be able to defer their loan repayments for six months.

On 24 March, the government announced temporary changes to the bankruptcy law:119

  • Debt threshold for creditors to apply for a Bankruptcy against a debtor will increase from AUD 5000 to AUD 20 000.

  • Timeframe for a debtor to respond to a Bankruptcy before a creditor can commence bankruptcy proceedings will be increased from 21 days to up to six months.

  • Temporary protection period procedure available for debtors to prevent recovery action by unsecured creditors will increase from 21 days to six months.

On 30 March, the government launched its third package, which includes a new wage subsidy plan: a AUD 1 500 per fortnight ‘job keeper payment’ before tax for each employee companies keep on over the next six month, also available for self-employed.120

On 8 June, the government announced the extension of the business support measures.121 On 3 July, media reported on plans of the government for a further AUD 10 billion support plan for companies aimed at recovery.122

On 6 July, measures became effective to reduce the power bill for small companies. Small businesses can receive up to AUD 20,000 to upgrade equipment to reduce energy consumption, invest in monitoring systems to better manage energy use and conduct energy audits to investigate other opportunities for efficiency.123

The Australian government set-up a dedicated website with information for businesses on available support measures, and set-up a hotline for SMEs.124 Also, a small business COVID-19 planning tool has been developed.125 Media report that further measures in Australia are expected.126

States in Australia have taken measures to support SMEs as well.

  • West Australia, for instance, announced an AUD 607 million support package.127 Small to medium businesses with a payroll of between AUB 1 million and AUD 4 million will receive a one-off grant of AUD 17 500. Also, changes to the payroll tax exemption threshold are being brought forward, in an effort to support 11 000 businesses.

  • In Queensland, applications are open for a deferral of tax payment for SMEs until 31 July 2020. In addition, a business impact survey was implemented. Mentoring support (50 mentors available) and financial workshops are being delivered in several locations in Queensland to support SMEs, with an emphasis on local business communities. Sectoral support targeting tourism operators and the commercial fishing industry has also been announced in the state.128 Queensland offers AUD 500 million in interest free loans.129

  • Victoria announced a package of AUD 1.7 billion for business.130

  • New South Wales announced an AUD 10 000 cash grant for 75 000 small businesses.131

Furthermore, Australian banks announced support for SMEs through a six month break in loan repayments.132

Internet providers announced AUD 150 million support to households and small businesses in free internet access.133

 Austria

Austria is introducing support measures for sectors heavily affected by the outbreak, such as tourism and air transportation, and uses existing measures to reduce hours worked (Kurzarbeit). EUR 100 million are available for loans to hotels that suffer more that 15% losses in sales.134 The maximum is 80% of the loan or EUR 500 000.

The Austria Wirtschaftservice (AWS) is providing new bridge finance guarantees for SMEs worth EUR 10 million up to 80% of the loan amount or EUR 2.5 million for 5 years.135 The guarantees will have a one-time processing fee starting with 0.25 % of the amount to be financed and a guarantee fee, starting with 0.3 % p.a. (variable to risk) of outstanding liability.136 As of 12 March, the bridge finance guarantees were expanded by:

  • Waiving the charging of handling and guarantee fees;

  • No planning calculations or business plans required;

  • No loan collateral required;

  • Freelance activities are now eligible for guarantee;

  • Guarantees can also be used to defer existing credit lines, and;

  • A fast-track procedure will be introduced to enable guarantees to be given immediately.

On 15 March, a COVID-19 crisis management ("Krisenbewältigungsfonds") fund was announced, with EUR 4 billion in funding.137 On 18 March, a further EUR 38 billion support fund was announced.138 The measures include EUR 9 billion in guarantees and warranties, EUR 15 billion in emergency aid, and EUR 10 billion in tax deferral. The following measures are of particular relevance to SMEs:139

  • Corona worktime reduction enables companies to temporarily reduce normal working hours and pay, such that as many employees as possible remain employed in the company. Employees are entitled to 80-90% of their salary, while the company covers only 10% of the salary costs. EUR 4 billion are available for the worktime reduction model and companies can take advantage of it within 48 hours.

  • A hardship fund for micro-entrepreneurs and freelancers cover personal living costs through grants. This support consists of EUR 1000 immediate aid and up to EUR 15 000 over 6 months in total. A total of EUR 2 billion is available to the federal hardship fund according to the hardship fund law.

  • By means of a bridging guarantee, the federal government provides EUR 9 billion in guarantees and warranties to secure loans. This enables enterprises, especially SMEs, to remain liquid. In addition, there is a special credit policy for export companies which can provide credit of up to 15% of the export turnover of SMEs. Furthermore, a Corona relief fund alleviates liquidity bottlenecks and grants companies a quarterly turnover as a loan, up to a maximum of EUR 120 million.

  • Tax deferrals (up to EUR 10 billion) for personal income and corporate income taxes. Taxes can be deferred until end of September. Deferrals of social security contributions are possible for the months February to April.

  • The "Digital Team Austria" initiative consists of companies in the digitisation industry and offers digital services to SMEs free of charge for at least three months. This helps SMEs to switch to mobile working.

Part of the Krisenbewältigungsfonds is a EUR 400 million support measure to subsidise working hour reductions (Kurzarbeit), accessible within 48 hours and in all sectors. The guarantees include facilities for family businesses, self-employed persons and one-person-enterprises ("Härtefonds für Familienbetriebe und EPUs"), which amounts to EUR 100 million, to help bridge liquidity shortages.

On 3 April, the government announced a payment moratorium on loans to consumers and small business.140 The government also announced a further loan guarantee under which the state will guarantee 90% of companies’ loans of up to EUR 120 million or three months’ turnover, under the condition of a one-year ban on dividend payments and a requirement that bonus payments to board members be “strictly limited.” Furthermore, the state is providing grants of up to EUR 90 million to cover part of firms’ fixed costs such as rent, electricity and phone bills, and perishable or seasonal goods whose value has fallen by at least half.

On 15 June, the government announced plans for a further EUR 14 billion stimulus package including tax cuts, welfare payments, investment subsidies and fixes of the rescue fund.141

The Ministry of Economy and Digitalisation established a taskforce to monitor the impact of the outbreak on all firms.142

All nine Austrian regions (Bundesländer) have set up aid packages that complement and expand the measures taken by the federal government. In particular, the regions are strengthening hardship funds and measures to secure liquidity and are adapting the programmes to local circumstances:

  • The region of Burgenland supports SMEs with non-repayable grants to cover fixed costs (maximum EUR 5000) and rental costs (maximum EUR 500). To support the liquidity of SMEs, the region takes over guarantees for credit financing of fixed costs.

  • Carinthia allows companies to defer state taxes and waives interest and will cover consultancy costs of up to EUR 750 for SMEs that need support to apply for federal support measures.

  • The region of Upper Austria has put together a EUR 580 million aid package, which pays specific attention to SMEs. The region‘s hardship fund supports small businesses affected by the crisis with EUR 15 million. The region has also set up a EUR 100 million Corona guarantee scheme to ensure the liquidity of SMEs. The guarantees cover up to EUR 15 million per company are aimed at medium-sized and large companies. In addition, Upper Austria is developing a EUR 4 million start-up package, which aims to stabilise start-up companies and support founders. This package currently consists of a special consulting service by regional the start-up consulting and support council "tech2b Inkubator" and a deferral of active start-up loans from "tech2b Inkubator"143. Start-ups can also benefit from the Region’s Corona guarantee.

  • In Lower Austria, the Chamber of Commerce (WKNÖ) offers subsidised business management consulting services that examine the current financial situation of SMEs and propose further steps to overcome the crisis. Companies in Lower Austrian that have suffered a strong loss of turnover can apply for a subsidy of up to EUR 5000 from the existence assurance fund of the WKNÖ.

  • The region of Salzburg focuses strongly on the expansion of existing economic programmes and the postponement of taxes and fees. In addition, the care, tourism and culture sectors are at the forefront of assistance in Salzburg. Micro-entrepreneurs in Salzburg are supported with an eased application for personal housing assistance.

  • The region of Styria assumes the interest costs for bridging loans in order to support the liquidity of SMEs. The state provides EUR 42 million for this purpose. The new "Telearbeit!Offensive" support programme promotes SMEs to switch to telework. The program covers up to 80% of the costs to build up the necessary infrastructure. The regional government of Styria and the Styrian Chamber of Commerce are providing a further EUR 12 million for the region‘s hardship fund, which provides rapid support to micro-enterprises in an emergency.

  • The regional hardship fund of Tyrol complements the federal fund and provides SMEs with fast and non-bureaucratic financial assistance. An important measure for the longer-term SME development of the region is the Digitisation Initiative. This programme invests already since 2018 in the nationwide expansion of broadband and digitisation, in the digitisation of SMEs and digital skills. As a COVID-19 measure, the funds of the Digitisation Initiative have been doubled for the years 2020 and 2021. In particular, this is intended to benefit rural areas in the region.144

  • The region of Vorarlberg provides a EUR 100 million aid package. The regional government and the Economic Chamber of Vorarlberg provide additional liquidity for micro-enterprises with guarantees for micro-credits. Micro-loans up to a maximum amount of EUR 10 000 per company are possible.

  • The City of Vienna and the Vienna Chamber of Commerce have put together a EUR 35 million aid package. Vienna is topping up the emergency hardship fund of the federal government with EUR 20 million, which Viennese micro-enterprises can access. To secure liquidity, the region will provide guarantees of up to 80% for bridging loans to finance fixed costs.

 Belgium

The Belgian government has taken several measures in response to the crisis. 145 An impact analysis focusing on businesses was published. The Belgian government is informing companies on shortening working hours in response to the coronavirus. Existing financial instruments for SMEs – such as the SME growth subsidy – can be used by SMEs, particularly where supply chains are impacted.146

On 6 March, the government announced further measures, including147:

  • New options for firms wishing to have recourse to partial unemployment for force majeure. Provisions for temporary unemployment are prolonged by three months, with approval of requests within 3-4 days;

  • An optional deferral of VAT payment, social contributions and corporate tax;

  • Reduced social contributions for self-employed conditional on proving a decrease in revenue due to the outbreak;

  • Cancellation or deferral of social contributions for the self-employed;

  • Income replacement for the self-employed, and;

  • Suspension of penalties for suppliers failing to fulfil government contracts.

On 20 March, the government announced a further package, which include measures for SMEs and self-employed:148

  • Support to the self-employed and SMEs in difficulty, by a monthly payment of between EUR 1 300 and 1 600, and;

  • Support for specific sectors (retail, hospitality, events, agriculture and horticulture).

The government on 20 March has also intensified the measures to allow deferral of tax and social security:

  • The payment of social security contributions for H1/2020 is postponed until mid-December for employers and the self-employed.

  • All payment deadlines for personal income tax, corporate income tax, VAT and withholding tax are automatically extended by two months.

  • Additional flexibility in payment of tax arrears for businesses in distress, including new postponement and repayment plan.

  • Reduction of social security contribution for the self-employed who considers their income is lower than the amount used to calculate their contribution.

On 22 March, the government, central bank and the financial sector announced further measures to safeguard credits to citizens, self-employed and business. The financial sector will grant a deferral of debt payments until 30 September. Furthermore, the government opens up a EUR 50 billion new guarantee for all new credits up to 12 months.149

Mid-April, Belgium introduced a moratorium on bankruptcies for businesses severely affected by the crisis but which had been in good health up to 18 March. It protects them against foreclosures, and from being declared bankrupt at the request of their debtors, although this can still occur at the request of the Attorney General or of the debtors themselves. Ongoing contracts cannot be terminated for non-payment and, for now, debtors are not obliged to file declarations of bankruptcy.

Belgian regional governments have taken measures as well:

  • On 19 March, Brussels capital amongst other measures introduced a EUR 4 000 payment for companies that have to close their doors; EUR 2 000 for hairdressers; a deferral of city tax for the first semester of 2020; guarantees on bank loans of EUR 20 million; easier access to loans; moratorium on debt repayments to Finance & Invest Brussels;150

  • For Flanders, measures include: EUR 100 million in crisis guarantees for companies; EUR 4 000 payment for companies that have to close their doors.151

  • For Wallonia, measures include: EUR 5 000 payment that have to close their doors; EUR 2 500 for companies that have to adjust their opening hours; possible waiver of utility payments, and; guarantees for loans to companies.152

Early May, a EUR 250 million package for start-ups, scale-ups and SMEs in Flanders was approved. Under the scheme, viable companies affected by the COVID-19 outbreak are eligible for subordinated loans of up to EUR 800 000 over three years. The credits must fully cover the financing needs for at least 12 months. Companies pay an interest rate of 5%.

 Brazil

On 16 March, the government announced a USD 30 billion package of emergency measures, including an deferral of company taxes, with further measures with regard to SMEs announced on 17 and 18 March.153 The package includes:154

  • PROGER/FAT: credit for Micro and Small Firms (USD 1 billion);

  • Salaries: the government is set to pay part of the salaries incurred by micro and small companies;

  • Employment contracts: possibility to suspend employment contracts;

  • Payment of federal taxes: To provide liquidity to companies, the government is considering postponing firms’ payment of federal taxes for two or three months;

  • FGTS: deferral payment term for 3 months USD 6 billion. In April this was extended to 4 months.

  • Contributions from “Sistema S”: 50% reduction in contributions for 3 months (USD 0.4 billion);

  • Workers with COVID-19: the government will pay for the first 15 days of leave of the worker who is identified with the COVID-19;

  • Caixa: The state-owned Federal Savings Bank will extend USD 14.9 billion in credit lines to SMEs firms aimed at working capital, purchase of payroll loan portfolios from medium-sized banks and agribusiness. The bank also cut interest rates on some types of credit and offered clients a grace period of 60 days. In April, the amount of credit available was extended to USD 21.6 billion and the grace period to 90 days.

  • Banco do Brasil announced a USD 20 billion increase in its credit lines, aimed at working capital, investments, prepayment of receivables, agribusiness and credit to individuals. The bank also increased the credit limit for 13 million customers;

  • The National Development Bank (BNDES) announced several measures announced, such as: i) opening of a working capital loan line for micro and small firms; ii) 6-month interruption of outstanding loan payments, with no late interest payment; iii) suspension of amortizations of R$ 19 billion (USD 3.8 billion) for direct operations and R$ 11 billion (USD 2.2 billion) for indirect operations. Sectors eligible include oil and gas, airports, ports, energy, transportation, urban mobility, health, industry and commerce and services; iv) scope expansion of the “BNDES Credit Small Business” line, covering from micro to USD 60 million annual turnover companies. The credit limit per year will be increased to USD 24 million. The companies will have a 24-month grace period and five years of total term to pay for these new loans; v) the Bank is studying a new emergency credit line of USD 8 billion to micro, small and medium companies.

  • Credit to finance payroll aimed at companies in general (with the exception of credit companies), for up to two months. Impact of USD 6.8 billion.

  • Credit contracting requirements: simplification and waiver of documentation (CND) for credit renegotiation;

  • Capital charge relief: Lending and credit support through capital charge relief to loans secured by commercial real estate; and credit charge relief to retail exposures, to non-significant investment in the capital of financial institutions and insurance entities and to exposures secured by covered bonds issued by the own bank;

  • Restructured loans: Increased flexibility of the provisioning rules for a period of 6 months;

  • Conservation Capital Buffer (CCB): reduction from 2.5% to 1.25% for 1 year and setting a transitional arrangement to restore the original 2.5% CCB in the subsequent year;

  • For SMEs, an emergency credit line has been opened to cover 2 months of wages for employees earning up to 2 minimum wages, under the condition that the employee is not dismissed. This is a loan over 36 months, with a grace period of 6 months, and a nominal interest rate below current inflation. Payments are directly disbursed into workers' accounts, but firms are liable for the debt. 85% of the credit risk is borne by the federal government.

  • Febraban: The Brazilian Federation of Banks announced an agreement by which the five largest banks in the country (BB, Caixa, Itaú Unibanco, Bradesco and Santander) are willing to respond to requests for a 60-day extension for the debt maturity of individual and SMEs.

On 18 March, Brazil’s Central Bank lowered the benchmark interest rate SELIC by 50 bps to a historical minimum of 3.75%. This follows a reduction of the countercyclical capital buffer requirements. On 6 May, the rate was further reduced to 3%.155

On 18 March, Brazilian authorities also announced the possibilities for firms to reduce working hours and pay by up to 50% while maintaining the employment link, but there is no compensation for workers for the resulting income losses. Further flexibility for firms will come from extended use of the bank of hours and the possibility to anticipate annual leave, including collective annual leave.

On 20 April, state-owned savings bank Caixa Econômica Federal and the small business association Sebrae announced a new credit line for small business.156

 Bulgaria

The government put in place the following measures of relevance to SMEs:

  • A salary subsidy for workers whose jobs are under threat where the government will pay 60% of salaries for employees facing being laid off, with employers paying the remaining 40%.

  • Certain taxes and fees due to the government have been delayed. This includes the deadline for submission of the annual income tax return and for payment of the tax assessed, which have been extended until end-June for firms/sole traders involved in commerce and for farmers who pay taxes under this regime.

  • The government will allocate BGN 200 million (EUR 102 million) to the Bulgarian Development Bank (BDB) for guaranteeing non-interest consumer loans up to BGN 1500 (EUR 765) for employees who have gone on unpaid leave. To support liquidity for firms, an increase of BGN 700 million is provided to the BDB's capital, which includes BDB portfolio guarantees in the amount of BGN 500 million (EUR 255 million), in order to provide them to commercial banks to allow them to give more flexible conditions for business loans. With the funds given to BDBs, the business and citizens will be able to acquire credits at the amount up to BGN 2.5 billion (EUR 1.27 billion).

  • Penalties for late payments to private entities have been temporarily abolished, as well as non-monetary penalties, such as contract termination and seizure of property.

  • A package of measures worth EUR 4.76 billion announced by the Bulgarian National Bank which aims to maintain the resilience of the banking system in Bulgaria.

On 24 April, a EUR 150 million support scheme for SMEs was approved by the European Commission. The scheme, which will be open to SMEs active in all sectors with certain exceptions, aims at enhancing access to liquidity by those companies, which are most severely affected by the economic impact of the coronavirus outbreak, thus helping them to continue their activities, start investments and maintain employment. The support will not exceed 800 000 euro per company.157

 Canada

On 5 March, the Bank of Canada lowered the policy rate by 50 basis points.158 On 12 March, the Bank decided to lower rates by a further 50 basis points from 1.25% to 0.75%.159 On 27 March, the rate was further reduced to 0.25%.

The Canadian Federation of Independent Businesses (CFIB) has issued business-specific public health advice,160 as have small business organisations at the provincial level.161 As elsewhere, some fiscal stimulus will occur automatically to the extent to which the economic impact of coronavirus lowers tax revenue and increases public health spending.

On 11 March, Canada announced a 1 billion CAD COVID-19 Response Fund with an emphasis on health. For business, this includes the following: “To support businesses should the economy experience tightening credit conditions, the Government will act swiftly to stimulate the economy by strengthening investment in federal lending agencies such as the Business Development Bank of Canada (BDC) and Export Development Canada. This partnership between Canada’s financial Crown corporations and private sector financial institutions, in response to credit conditions during the 2008-2009 financial crisis, provided CAD 11 billion of additional credit support to 10 000 firms. In addition, flexible arrangements could be made for businesses trying to meet payment obligations to the Canada Revenue Agency.”162 Moreover, access to the Employment Insurance fund has been improved. This measure provides income support to employees eligible for Employment Insurance benefits who work a temporarily reduced work week while their employer recovers.

Business Development Canada (BDC) now offers the following support for entrepreneurs163:

  • Small Business Loan of up to CAD 100 000 can be obtained online in 48 hours from time of approval;

  • Working capital loan to bridge cash flow gaps and support everyday operations;

  • Purchase Order Financing to increase cash flow to fulfill domestic or international orders with very flexible terms.

On 18 March, the government announced a further CAD 82 billion support package as part of its COVID-19 Economic Response Plan, including CAD 27 billion in emergency aid for workers and businesses and CAD 55 billion in tax deferrals.164 The measures include:

  • Allow all businesses to defer, until after August 31, 2020, the payment of any income tax amounts that become owing on or after today and before September 2020. This relief would apply to tax balances due, as well as instalments, under Part I of the Income Tax Act. No interest or penalties will accumulate on these amounts during this period. This measure will result in businesses having more money available during this period;

  • Increase the credit available to small, medium, and large Canadian businesses. As announced on 13 March, a new Business Credit Availability Program will provide more than CAD 10 billion of additional support to businesses experiencing cash flow challenges through the Business Development Bank of Canada and Export Development Canada. The Program has subsequently been extended and now includes CAD 85 billion, with several measures:165

    • The new Canada Emergency Business Account which will provide interest-free loans of up to CAD 40 000 to eligible small businesses and not-for-profits, to help them cover their operating costs during a period where their revenues have been temporarily reduced.

    • The Loan Guarantee for Small and Medium-Sized Enterprises. Export Development Canada will provide guarantees to financial institutions so that they can issue new operating credit and cash flow term loans of up to CAD 6.25 million to SMEs. These loans will be 80 per cent guaranteed by Export Development Canada and are to be repaid within one year.

    • SMEs can also receive help through a new Co-Lending Program for Small and Medium-Sized Enterprises that will see the Business Development Bank of Canada working together with financial institutions to co-lend term loans to businesses for their operational cash flow requirements. Eligible businesses may be able to obtain incremental credit amounts of up to CAD 6.25 million through the program, which will be risk-shared at 80 per cent between the Business Development Bank of Canada and the financial institutions.

  • Provide additional emergency support benefit for self-employed and part-time workers who do not qualify for Employment Insurance;

  • Provide small-business owners a temporary wage subsidy equal to 10 per cent of salary bill for a period of three months;

  • Further expand Export Development Canada’s ability to provide support to domestic businesses;

  • Provide flexibility on the Canada Account limit, to allow the Government to provide additional support to Canadian businesses, when deemed to be in the national interest, to deal with exceptional circumstances;

  • Augment credit available to farmers and the agro-food sector through Farm Credit Canada;

  • Launch an Insured Mortgage Purchase Program to purchase up to CAD 50 billion of insured mortgage pools through the Canada Mortgage and Housing Corporation (CMHC). As announced on 16 March, this will provide stable funding to banks and mortgage lenders and support continued lending to Canadian businesses and consumers. CMHC stands ready to further support liquidity and the stability of the financial markets through its mortgage funding programs as necessary. The Government will enable these measures by raising CMHC’s legislative limits to guarantee securities and insure mortgages by CAD 150 billion each.

On 25 March, the government announced further measures for SMEs, including:166

  • A subsidy of up to 75% for wages for up to three months;167

  • Access to one year interest free loans;

  • A broadening of tax deferral to include sales tax until June, and;

  • A Canada Emergency Response Benefit of CAD 2 000 per worker for a maximum period of four months.168

Furthermore, the government has extended the maximum duration of the Work-Sharing program169 from 38 weeks to 76 weeks to support businesses affected by COVID-19. The Work-Sharing program provides income support to workers who agree to reduce their normal working hours because of developments beyond the control of their employers.

On 17 April, the government announced a further CAD 1.7 billion support package, which includes several support measures for small businesses:170

  • CAD 675 million to give financing support to small and medium-sized businesses that are unable to access the government’s existing COVID-19 support measures, through Canada’s Regional Development Agencies.

  • CAD 287 million to support rural businesses and communities, including by providing them with much-needed access to capital through the Community Futures Network.

  • CAD 250 million to assist innovative, early-stage companies that are unable to access existing COVID-19 business support, through the National Research Council of Canada’s Industrial Research Assistance Program.

  • CAD 20.1 million in support for Futurpreneur Canada to continue to support young entrepreneurs across Canada who are facing challenges due to COVID-19. The funding will allow Futurpreneur Canada to provide payment relief for its clients for up to 12 months.

These measures will be executed in the context of a Regional Relief and Recovery Fund and delivered by regional development organisations, and specifically aim to support small business that so far have not been reached by earlier policy measures.171

On 18 April, the government announced a CAD 306 million support package for indigenous businesses.172

On 24 April, the government announced the Canada Emergency Commercial Rent Assistance ("CERA") program to support small business cover their rent for the months of April, May, and June. Under the CERA program, commercial property owners will be able to access forgivable loans to cover 50% of the applicable rent periods. The loans, which would go directly to the mortgage lender, will be forgiven if the property owner agrees to reduce eligible businesses' rent by at least 75% for the duration of the program. The provinces and territories will contribute up to 25% of the total cost of the CERA program, as well as manage its implementation. A business is eligible for rent relief if it pays less than CAN 50 000 per month in rent, has had to temporarily cease operations, or has experienced at least a 70% reduction in revenue as a result of the COVID-19 pandemic.173

The government also expanded the Canada Emergency Business Account, a government-guaranteed credit program to provide small businesses with CAD 40 000 in loans. Companies with 2019 payroll costs between CAD 20 000 and CAD 1.5 million are now eligible. Previously the range was between CAD 50 000 and CAD 1 million.174

On 16 May, a CAD 15 million COVID 19 support scheme for women entrepreneurship was announced.175

The government and the Canadian Chamber of Commerce work together in the Canadian Business Resilience Network, to assist SMEs in preparing for opening, for instance through a toolkit.176

The six largest financial institutions in Canada have made a commitment to work with personal and small business banking customers on a case-by-case basis to provide flexible solutions to help them manage through challenges, such as pay disruption due to COVID-19, childcare disruption due to school or day care closures, or those suffering from COVID-19. As a first step, this support will include up to a six-month payment deferral for mortgages, and the opportunity for relief on other credit products.

Digital platforms have also set-up support services for SMEs.177 Logistic service providers also launched SME support178, as have Fintech companies.179

 Chile

The Chilean Central Bank announced on 16 March it would lower interest rates from 1.75% to 1%, and further cut rates to 0.5% on 31 March.180

On 19 March, the government announced the Emergency Economic Plan I of USD 11.7 billion package. The package includes:

  • Extending unemployment insurance to those who are sick or unable to work from home;

  • Delaying tax payments for small businesses;

  • A cash bonus for approximately 2 million workers who lack formal employment.

On 22 March, the Chilean government announced it would provide additional financing needs for a new emergency package of USD 5.5 billion to save jobs and help small businesses.181 On 8 April this Emergency Economic Plan II was launched. The following measures have been put in place:182

  • Accelerated income tax refund for self-employed (in April 2020 instead of May 2020).

  • Advanced income tax refund for self-employed of amounts withheld in January and February 2020 (rate of 10.75%).

  • Suspension of mandatory monthly provisional payments on account of corporate income tax for the next 3 months. This measure should benefit 700.000 businesses.

  • Deferral of VAT payments for the next 3 months. Applicable to businesses with sales of less than UF 350 000 (approximately USD12 million). They will be able to pay the VAT in 6 to 12 monthly instalments (depending on their size) at a 0% interest rate. This measure should benefit 240 000 businesses.

  • Accelerated income tax refund for SMEs (in April 2020 instead of May 2020). This measure should benefit 500 000 SMEs.

  • Postponement from April to July 2020 of the payment of CIT for SMEs. The CIT return shall be submitted in April (as usual). This measure should benefit 140.000 SMEs.

  • Deferral of the payment of Property Tax to be due in April 2020, with 0% interest rate. Applicable to businesses with sales lower than UF 350.000 (approximately USD 12 million). The payment delayed shall be paid along with the 3 next instalments to be due in June, September and November 2020.

On 27 April, the government presented Compra Agil, a program to facilitate the participation of SMEs as government contractors. The program will be applied to all acquisitions for values below CLP 1.5 million (USD 1 773), which represent 80% of all central government acquisitions.183 Furthermore, from April, the State will pay all pending invoices to date by the central government. Additionally, any invoice issued after this process will be paid within a period of up to 30 days. The measure involves a cost of USD 1 000.

On 28 April, the government launched a USD 3 billion guarantee fund for small entrepreneurs by Banco Estado. The program will offer guarantees for up to USD 24 billion dollars and will benefit 99.8% of companies in the country.184

On 29 April, the government signed a new bill to protect 1.2 million independent workers, putting in place a new income protection insurance system that will benefit self-employed individuals whose incomes fall by at least 20%.

The Financial Market Commission unveiled a package of measures to facilitate the flow of credit to businesses and households, which includes: (i) special treatment in the establishment of provisions for deferred loans; (ii) use of mortgage guarantees to safeguard SME loans; (iii) adjustments in the treatment of assets received as payment and margins in derivative transactions; and (iv) start of a review of the timetable for the implementation of Basel III standards.

On 15 June, agreement was reached on a further USD 12 billion stimulus package. The new measures will boost income for poor families and the unemployed, subsidize job creation and cut taxes for SMEs.185

Through the three stimulus packages, the following deferral measures have now been put in place:

  • Relief treatment for tax debt: Measure that makes flexible the agreements of payment of tax debt of companies with annual sales of up to UF 350.000 with the General Treasury of the Republic, without fines or interests and temporarily suspending actions of judicial collection and auctions for tax debts.

  • Insolvency advisory: The Superintendency of Insolvency and Re-entrepreneurship enabled an online form so that affected SMEs can provide information on the situation of the company, for this body to provide legal and financial assistance free of charge.

  • Suspension of Provisional Monthly Income Tax Payments (PPM): Measure that will allow 700 thousand SMEs and large companies to suspend the payment of PPM during the months of April, May and June 2020. The measure will give USD 2,400 million of liquidity.

  • Deferral of real estate contributions: It postpones the first payment of contributions for real estate from April 2020 and allows its payment in up to 3 monthly periods without penalties or interest. The payment could be addressed on the following payment period in June, September, and November 2020. The measure involves liquidity for a total of USD 670 million for companies with sales up to UF186 350,000 and individual property owners with tax assessment less than CLP 133 million.

  • Income tax refund advance payment: The income tax refund payment is advanced from May to April 2020 for 500 companies with annual sales up to UF 75,000, which means liquidity of up to USD 770 million. In addition, the expenses declared to face the health crisis may be considered within the tax base of the company.

  • Deferral of payment of income tax: Deferral until July 31st 2020 of the payment of income tax for companies with annual sales up to UF 75,000, according to their declaration in “Income Operation” of April 2020. The measure will allow greater liquidity for a total amount of USD 600 million to 140,000 SMEs.

  • Health contingency related disbursements considered tax expenses: Company disbursements related to reducing the negative effects of the health contingency, such as those related to the health of workers, will be accepted as a deduction from the income tax base. The focus is on SMEs and large companies.

  • Extension of deadlines to file 2020 income operation related sworn tax statements: The IRS has extended the deadlines for filing 19 tax statements that originally came between March 23 and 30 for SMEs and large companies.187

  • Extension of deadlines to join Pro SME Regime: The deadline for taxpayers to opt for the Pro SME regime tax systems is extended until July 31. These are: 1) the system where the company pays 25% first-class tax or 2) tax transparency, in which the company frees itself from first-class tax and it is the owners who directly pay their personal tax on the company's income.

  • Stamp tax reduction: The stamp tax for credit operations (real estate, consumption, and other credit payments) is reduced to 0 until September 2020. The tax cost is up to USD 420 million and focuses on families, SMEs and large companies.

  • Deferral of payment of Value Added Tax (VAT): VAT deferral during the months of April, May and June 2020, which will allow liquidity of up to USD 1,500 million to be injected into 240,000 companies. Focus on companies with sales up to UF 350,000. The deferral could be addressed in 12 payments, without penalties or interests.

The following financial measures have been put in place:

  • Capitalization of Banco Estado: Capitalization of state bank, Banco Estado, for USD 500 million that will be used to provide financing to individuals and SMEs. This measure will increase Banco Estado's credit capacity by approx. USD 4,400 million.

  • Local micro main street business solidarity fund: Creation of a USD 100 million fund to support the loss in sales of main street businesses, which will be channeled through municipalities.

  • "Reactívate" Program: A Sercotec-led program that seeks to support companies with annual sales of up to UF 25,000 through a subsidy of up to CLP 4 million for working capital and fixed assets. The cost of the program is of USD 6.6 million188.

  • "Reimpulsa" Program: A Corfo-led program that will allow companies with annual sales of up to UF 100,000 to access subsidies for working capital or capacity building. The cost of the program is of USD 3.6 million and the amounts to be delivered per company reach up to CLP 4 million.189

  • Capitalization of the Guarantee Fund for Small Businesses (FOGAPE): Capitalization FOGAPE for up to USD 3,000 million to enable credit operations for companies and individuals with annual sales of up to UF 1 million. The measure aims to guarantee a total amount of credit operations of around USD 24,000 million. In turn, the credit lines for working capital may reach a value for up to 3 months of sales of a beneficiary under normal conditions, they will have 6 months grace, they can be paid in 24 to 48 monthly periods and may have maximum real rates of 0%. The banks' commitment is to offer the line of credit in a massive, expedited and standardized way. This means that it will be available to the vast majority of those who are commercial clients of banks, that is, 1.3 million potential beneficiaries, considering legal entities and individuals.

  • Support in guarantees for loans with Guarantee Fund for Investment and Working Capital (FOGAIN): Reduction in commission rate for the use of FOGAIN guarantees. A 0% rate is set for the rescheduling of operations that already have a FOGAIN guarantee and a 0.5% rate for new financing. In turn, coverage quotas will be made available for placements in MSMEs for CLP 200 million under this guarantee scheme.

  • Guarantee Fund for Non-Banking Institutions: Corfo will led the creation of a fund which will guarantee credit operations for SMEs from non-banking institutions. The fund will allow credit operations for up to USD $1.000 MM.

The following measures have been put in place regarding labour:

  • Employment Protection Law: Workers with Labor Code contracts and affiliated to the Unemployment Insurance can access benefits and supplements charged to the Unemployment Fund.

  • Bill that establishes an income protection social insurance for self-employed workers: The insurance seeks to protect the income of independent workers against exceptional circumstances such as natural disasters, public calamities, economic or health crises, as long as these imply a decrease in the level of their income. The Insurance will apply to about 1.2 million people and in regime it will reach about 2 million.

The government also put in place a number of structural policy measures, which include:

  • SMEs Online: Initiative developed by the Development Corporation (Corfo), within the framework of the Digitalize your SME program of the Ministry of Economy, Development and Tourism. It seeks for SMEs to increase their sales, lower their costs and improve their relationship with customers and providers, using available digital technologies. In addition, it makes training content available at no cost to help sell online. The initiative will allow access to exclusive content on e-Commerce, social networks, payment methods, digital marketing, among others.

  • Changes to Labor Code for regulating teleworking: Law that modifies the Labor Code and that allows an employer and employee to agree to the telework option at the beginning or during the term of the employment relationship without implying a decrease in workers' income, nor in the individual and collective rights recognized in the Labor Code.

  • Teleworking / digitalization: Platform led by the Development Corporation (Corfo) and the Technical Assistance Service (Sercotec), the main public development agencies, which diffuses national SMEs directly to consumers (www.TodosXLasPymes.cl)

  • www.ApoyameAqui.cl: Platform that connects affected SMEs with the main Chilean e-Commerce platforms. The platform is led by the Santiago Chamber of Commerce in collaboration with the Ministry of Economy, Development and Tourism.

    On 5 July, the government launched further measures of USD 1.5 billion, ion particular to support the middle class.190

Chilean banks have also introduced support measures for SMEs.191

 China

Since late January, the Chinese Government has adopted several financial support measures192 aimed at reducing the burden its virus-control policies have placed on companies. Some measures, such as liquidity injections by the central bank and reductions to port and logistics fees, provide generalised economic support. In some cases these benefit SMEs as well, for instance, the reduction of the reserve requirement ratio for banks’ lending to SMEs, agriculture and entrepreneurs as well as for selected joint-stock banks.

There has been strong emphasis on more targeted policies to channel funding directly to the companies that need it most, including SMEs193. The February G20 Newsletter on Entrepreneurship, published by The Entrepreneurship Research Centre on G20 Economies, provides a comprehensive overview of such measures: These include short term measures to address liquidity shortages and financing difficulties, as well as longer-term plans for improving SME resilience, such as through technology adoption and digitalisation: 194

  • Tax and social security premium incentives;

  • Reducing rents;

  • Waiving administrative fees;

  • Stabilizing loans for enterprises;

  • Streamlining processes and reducing costs;

  • Innovating financial products and services; Providing differentiated financial services;

  • Refunding unemployment insurance premiums; Reduce recruitment costs;

  • Subsidising training, including the introduction of free online skill development courses;

  • Special funds for all startup companies;

  • Addressing the difficulties in resuming work;

  • Upgrading the government digital services;

  • Establishing a list of key SMEs for pandemic prevention and control

  • Making full use of SME public service platforms;

  • Strengthening legal services and insurance services;

  • Reducing operating costs;

  • Fostering SMEs participation in public procurement by central and local governments, including for projects related to pandemic prevention and control;

  • Encouraging large enterprises to cooperate with SMEs, such as by increasing their support in supply chains, in terms of loan recovery, raw material supply, and project outsourcing;

  • Encouraging SMEs to engage in the innovation of technologies and products related to pandemic prevention and control;

  • Fostering adoption by enterprises of new technologies, business practices (e.g. unmanned retail, contactless delivery, standardized package of fresh food) and business models (e.g. online shopping, online medical care, online education, online office, online services, digital entertainment, and digital life), and;

  • Accelerating the digital transformation of SMEs.

For a number of these measures, a timeline could be constructed on how they evolved during the crisis:195

  • On 30 January, the State Administration of Taxation announced tax deferrals for firms in response to the pandemic.

  • On 31 January, firms in hard-hit industries were authorised to apply for deferred payment or new loans. This goes hand-in-hand with a reduction of loan interest rates and increased loan volumes, especially long- and medium-term loans.

  • On 1 February, the Ministry of Finance asked guarantee institutions to cancel counter-guarantee requirements and reduce fees. In areas affected by the pandemic, the State Financing Guarantee Fund reduced the re-guarantee fee by 50%. This comes on top of a streamlining of credit application and credit approval. Further support to enterprises that are strategic to prevention and control of the pandemic includes re-lending facilities with preferential lending rates, government subsidies, extensions of loan repayment periods and increased credit volumes.

  • In early February the central bank announced an CNY 300 billion (USD 42.47 billion) relending fund to support loans to firms producing and distributing medical supplies. Later in February, the government launched an additional relending fund of CNY 500 billion (USD 70.79 billion), with CNY 100 billion (USD 14.16 billion) earmarked to support agriculture and CNY 300 billion to support micro and small firms.196

  • On 5 February, a notice was issued by several ministries to support SME employment. Efforts to refund the unemployment insurance will be increased, and insured companies that find themselves in temporary difficulty due to the outbreak and do not lay off employees can get a refund of unemployment insurance premiums.

  • On 6 February, the Ministry of Finance and the State Administration of Taxation proposed that the loss carry-forward period of SMEs in the industries affected by the pandemic would be extended from five to eight years.

  • On 8 February, the Ministry of Human Resources and Social Security authorised insured enterprises and individuals to defer payment of the social security premium.

  • On 12 February, the Ministry of Human Resources and Social Security announced free access to its online training platform. SMEs are also encouraged to join online training. Policy interpretation, technical knowhow and management lessons will be offered to SMEs for free during the pandemic via mobile platforms.

  • On 18 February, the Ministry of Industry and Information Technology encouraged SMEs to make use of cloud computing and equip themselves with cloud technology. In addition, SMEs are required to pay attention to online working such as remote office, home office, video conferencing, online training, collaborative R&D and e-commerce. On the same day, the decision was made that SMEs would be exempt from pension, unemployment and work-related injury insurance premiums (totalling up to CNY 500 billion nationwide). Enterprises can also apply for deferred payment of housing provident funds.

  • On 20 February, the government cut, and in some cases exempted, enterprise contributions to social insurance funds (including pensions, unemployment, and workers’ compensation) at least through June.

  • On 22 February, the National Medical Insurance Bureau prescribed that, starting from February 2020, provinces could halve the contribution ratio of enterprises on employees’ medical insurance, according to the fund’s operating conditions and actual demands, while ensuring the medium- and long-term balance of revenue and expenditure. The period of reduction shall not exceed 5 months.

  • On Feb. 26, the central Bank of China launched CNY 500 billion relending and rediscount quota, encouraging small and medium-sized banks to offer loans at favourable rates, to MSME which hit by coronavirus.

  • On 1 March, it was announced that affected SMEs and micro-enterprises, including small business owners and individual household businesses, can apply for deferred repayment if they have difficulties in repaying capital or interest during the pandemic. Banks can give enterprises a certain period of deferred payment according to their impact level and business conditions, which can be extended up to June 30 2020.

  • In early March the government instructed banks to suspend collection of interest and principal payments on loans extended to struggling micro, small, and medium-sized firms, until at least the end of June.

  • Media reporting on 12 March suggested SME lending is not picking up.197 On 13 March, the Chinese central Bank announced it would release USD 80 billion in liquidity in the banking sector.198 Furthermore, on 19 March, media reported China’s is planning USD 394 billion in infrastructure spending.199

  • On 19 March, the government announced a package to support the digitalisation of SMEs in the context of the crisis.200

  • In March the government announced that small firms that maintained their employment levels would receive a refund on all the unemployment insurance premiums that they had paid in 2019.

On 31 March, the government announced it will step up support for SMEs by increasing financing quotas of small- and medium-sized banks by USD 140 billion.201 It also announced measures to reduce the tax burden for SMEs through deferrals, preferential tax policies and increasing export tax rebates rates.202 Furthermore, financial institutions will extend loans totalling CNY 300 billion to small and micro firms. Other loan programs are developed, including using SME’s business orders and potential revenue as collateral, to help SMEs raise CNY 800 billion in capital.203

On 13 May, the government announced support measures for the digitalisation of SMEs.204 The National Development and Reform Commission (NDRC) will cooperate with other government departments, leading enterprises, financial institutions, research institutes and industrial associations to provide online services for SMEs to help them digitalise.

On 22 May, the government announced further measures to support SMEs, included plans to delay loan repayments and interest payments, as well as increasing bank loans. 205 SMEs will be entitled to delay loan and interest payments by a further nine months, and big commercial banks will be obliged to increase lending to SMEs by more than 4%. The Chinese government also aims to reduce the country’s corporate tax and fee burden  by more than CNY 2.5 trillion (USD 350.5 billion) for all businesses over the course of the year.

On 1 June, the Central Bank started its USD 140 billion programme to buy bank loans made by local lenders to small firms, to increase lending to small business.206

On 4 June, the government extended the repayment of USD 183 billion of loans to SMEs.207

In addition, a wide range of policy measures have been announced for SMEs at the regional level in China.208 These include deferred tax payments for SMEs, reducing rent, waiving of administrative fees, subsidizing R&D costs for SMEs, social insurance subsidies, subsidies for training and purchasing teleworking services, and lowering lending rates. Furthermore, banks are being granted extra funding to spur SME loans.209 In Hubei province, SMEs can receive a grant to hire new college graduates.210 Northeast China’s Jilin Province launched an online financing system for small businesses.211

Online banks and technology firms are stepping up SME support as well.212

 Colombia

On 11 Mach, the Colombian president announced a package of economic measures to mitigate the effects on the tourism and aviation sectors. In particular, the government postponed the payment of the VAT and income taxes for the tourism and aviation sectors. Furthermore, it decided to reduce the import tariffs for some inputs related to the health and aviation sectors, on a temporary basis. The Government has also opened a new credit line for the tourism and aviation sector.

On 27 March, the Central Bank cut the interest rate to 3.75%. On 30 April, the rate was lowered to 3.25%.

On 6 April, development bank Findeter launched a COP713 billion credit line to underpin private companies and municipal and state governments affected by COVID-19. Of these, COP461 billion were allocated as 7-year loans with a 2-year grace period for working capital needs. Another COP252 billion were allocated to 12-year loans with a 2-year grace period for investment needs. Beneficiaries were given access to these loans through financial intermediaries whose interest rates were capped at 2% above Findeter’s interest rates.213 Also, the government announced the creation of a new COP12 trillion special guarantees program to mitigate the impact of COVID-19 on the business sector. Through this program, the government will guarantee small business loans serving liquidity requirements to pay for personnel and fixed costs.214

Furthermore, the following measures have been put in place:

  • a period of grace and refinancing of credits for companies and individuals;

  • a financial relief to SMEs having difficulties with their credits in the next 2 months;

  • a line of guarantees so that SMEs can cover salaries;

  • new subsidized credit line with a capped quota of COP 250 billion aimed at the tourism, aviation and public events sectors;

  • Reduction of the gasoline price.

  • A new subsidized credit line with a capped quota of COP 250 billion aimed at the tourism, aviation and public events sectors and additional COP 350 billion for other sectors; reduction of the gasoline price; the Government injected 70 billion pesos (7% of GDP) into the National Guarantee Fund to channel loans to the companies and people most affected by the fall in their income

On 9 April, the government announced a line of loan guarantees to finance 3 months salaries of MSMEs up to 5 minimum wages, as long as no worker is fired; and special credit line to own accountant workers.

On 16 April, the government announced the National Guarantees Fund, or FNG, will provide guarantees for loans held by SMEs and microenterprises to cover working capital and payroll costs.215

On 29 April, Findeter opened a working capital line of credit for utility companies at 0% interest so that they can defer for 36 months payments from low income clients during the pandemic. Utility companies will have three years to pay back, with a three month grace period.

On 7 May, the government launched further plans to mitigate the effects of the pandemic. The government will subsidize 40% of minimum salary and 20% of receipts for companies. The subsidy will have a cost of COP 2 trillion (USD 507 million) per month, and a total of COP 6 trillion over a period of three months.

 Costa Rica

The government introduced the following measures of relevance to SMEs:

  • A 3-month moratorium on the payment of Value Added Tax (VAT), Income Tax and Customs Duties for companies, extendable to a fourth month;

  • The Ministry for the Economy, Industry and Commerce and the and the Development Fund of Micro Small and Medium Enterprises of Banco Popular have made 10 billion Colon available for SME support;

  • Working Capital Credits for MSMEs, aimed at guaranteeing business continuity and job protection, and;

  • Business Development services to train companies in order to return to economic activity once the crisis period has passed.

  • Collection of social security contributions for the time actually worked, in addition to deferring the payment of contributions. Needs to be approved by the Social Security Board of Directors.

  • A preferential rate for occupational risk insurance for companies with less than 30 workers (announced/not yet implemented).

  • A new law, No. 9832, allows the reduction of employee working hours (by up to 50%) for companies that report inter-annual income losses between 60% and 75%. The law will be applied during the second quarter and can be extended for three more months.

  • The (state-owned) National Insurance Institute, authorised to extend, for up to four months, the grace periods in the commercial insurances subscribed and those that will be subscribed in the next four months. This will postpone the premium payments of the companies while maintaining coverage.

  • Through the Bono Proteger programme (intended budget CRC 296 billion) the government provides direct cash transfers for three months to individuals who lost their job or faced reduced working hours due to Covid-19 crisis. An important element is that the government aims for this support to be easily accessible, also for informal sector workers. Applications will only be collected electronically and applicants will sign an affidavit as a statement of good faith, in order not to leave out workers in the informal sector. Government aims to reach out to 680 000 beneficiaries among which 10% are in poverty.

  • Business Development services are in place to train companies in order to return to economic activity once the crisis period has passed, for instance through the Alivio programme. This targeted initiative by the Costa Rican Foreign Trade Promoter (PROCOMER), the Development Banking System (SBD) and the National Learning Institute (INA) aims to provide consultancy services to 200 selected SMEs that export or intend to export, to help them recover from the crisis. The programme will provide 200 SMEs USD 5.6 million upon rigorous evaluation procedure. It includes grants, support to export promotion, contact with international buyers and links to Global Value Chains, and consultancy to adapt or re-orient the business model (www.programaalivio.com).

 Croatia

On 17 March, the government adopted 63 measures to support the economy.216 The measures include:

  • Deferral of public contributions, including income and profit tax for a period of three months, which can be extended. Thereafter, payments can be made in instalments of 24 months;

  • Measures for financial liquidity including a three-month moratorium on liabilities to the Croatian Bank for Reconstruction and Development (HBOR) and commercial banks, as well as the approval of loans for cash flow in order to pay wages, suppliers and to reschedule other liabilities;

  • The approval of new loans for liquidity for enterprises to finance wages, utility costs and other basic business operating costs;

  • Increasing of the allocation for the 'ESIF micro loans" for working capital for micro and small enterprises implemented by the Agency for SMEs, Innovation and Investments (HAMAG-BICRO);

  • A new financial instrument "COVID-19 loans" of HRK 380 million for working capital for small and medium-sized enterprises;

  • Establishment of a new financial instrument Micro Rural Development Loan for Working Capital (faster processing, grace period, lower interest rate).

From 23 March, the government has made available special subsidies to employers, to cover salaries of full-time and part-time workers in accommodation, food and beverage, transportation and storage and other sectors in which workers are prevented from attending work due to confinement measures. In April, the government increased this support from HRK 3250 per worker to HRK 4000. The total payment for March amounted to HRK 1.55 billion.

On 1 April, the government announced an exemption on payment of income tax and contributions for entrepreneurs with an annual income of less than HRK 7.5 million (representing 93% of firms), whose revenue declined by more than 50%. Companies with an annual income above the threshold will be partially exempted.

The Croatian Bank for Reconstruction and Development (HBOR) allows for moratoriums and loan extensions on debts towards it, as well as new liquidity loans to assure basic expenses of businesses. The total value of the measures is estimated at around HRK 13.5 billion.

 Czech Republic

The government (Ministry of Industry and Trade (MIT) and the Czech-Moravian Guarantee and Development Bank (ČMZRB)) has approved the national program COVID Loan.217 It aims to facilitate access to operational funding for small and medium-sized enterprises, whose economic activities are limited due to the occurrence of coronavirus infection and related preventive measures. The COVID 1 Loan program (CZK 5 billion, EUR 180 million) provides support for SMEs in the form of soft loans from CZK 500 000 up to CZK 15 million with zero interest rate. Loans are granted up to 90% of eligible expenditure with a maturity of 2 years, including the possibility of deferred repayment for up to 12 months. The loan may be used, for example, for the acquisition of small tangible or intangible assets, the acquisition and financing of inventories or for other operating expenses and expenditures. There are no fees associated with the processing and granting of the loan or its possible early repayment. Applications can be submitted to the ČMZRB branches from 1 April 2020.

To accommodate high demand for loans under COVID I the government further approved COVID II program with another 5 billion CZK allocation in the form of guarantees for loans (CZK 10 000 to 15 million) from commercial banks (with annual deferral of repayments), where the Czech-Moravian Guarantee and Development Bank will be subsidising the interest rate. This is expected to facilitate distribution of up to CZK 30 billion among the programme participants.

Furthermore as of 16 March, taxpayers may postpone certain payments of requests for tax delays, requests for adjustment or reduction of advances, requests for waiver of penalties in case of delay, requests for extension of deadlines for certain tax returns. These include:

  • Delay in tax payment until 1 July;

  • Adjustment (reduction) of advances or exemption from their payments;

  • Waiver of sanctions in case of delay, and;

  • Extension of the deadline for certain tax returns.

On 31 March, the government launched the Antivirus company support programme. Through this programme, the government will pay out (through the respective employers) 60% of the average contribution base to employees affected by the quarantine. At the same time the Government will support employers who continue, despite their businesses being shut down, to pay out 100% of the salary to affected employees by covering 80% of salary costs. In case of a supply chain interruption which is crucial for an employer and such employer still pays at least 80% compensation of standard remuneration to their employees, the state will contribute by 50% of the compensation. In case the employer is hit by significantly lowered demand on his/her services and such employer pays at least 60% compensation of standard remuneration, the State will contribute by 50% of the compensation.

On 8 April, the parliament passed a bill that allows for individuals and companies affected by the coronavirus to delay paying their rents, and introduces a ban on evictions of companies/individuals unable to pay rents.

Other measures put in place include:218

  • To keep the employment rate, the state will provide CZK 100 billion in direct support and CZK 900 billion in indirect in the form of guarantees.

  • The state will help self-employed persons, who are taking care of a child from 6 to 13 years of age and are not able to go to work due to the coronavirus, by CZK 424 per day. All self-employed, who have income only from their business, will be given a six-month holiday in the payment of health and social insurance. Holidays cover the amount of the minimum insurance premium, i.e. CZK 4 986.

  • The government released CZK 3.3 billion for the 2020 Rural Development Program. This funding should help entrepreneurs in agriculture, food and forestry while fighting coronavirus crisis. The main reason for this support is ensuring the Czech food independency.

  • The COVID Technology Program 19: a subsidy for projects directly linked to the fight against the further spread of coronavirus through the acquisition of new technological equipment and facilities, CZK 300 million in total.

  • The Czech Rise Up Program, to encourage the introduction of new solutions to fight the coronavirus crisis by supporting innovative companies, including start-ups, CZK 200 million in total.

  • An emergency package for Czech exporters and other support to exporters.

 Denmark

On 10 March, a first stimulus package was issued, including:219

  • A DKK 125 million credit facility allowing firms to defer VAT and tax payments, which could boost liquidity and help companies;220 The VAT and income tax payment deferral is expected to boost liquidity by EUR 22 billion in total, of which EUR 5.4 billion are targeted to SMEs.

  • Compensations for event managers;

  • Creation of a unit to prepare additional measures.

On 12 March, the government announced a DKK 200 billion package with further measures:221

  • The release of the so-called 'countercyclical capital buffer' that banks have been required to keep on their books since the 2007 financial crisis. This will provide them an extra DKK 200 billion in liquidity, which they can either use to lend to businesses or to withstand losses on existing loans; 

  • Two new loan guarantee schemes, one for large companies and one for small and medium enterprises (SMEs). The government will guarantee 70% of the value of any new bank loans given to SMEs who have seen operating profits fall by more than 30%. This could back up to DKK 4.8 billion in new loans. Second, it will guarantee 70% of the value of new loans to large companies who can demonstrate a fall in turnover over more than 30%. This could back DKK 2.7 billion in new loans;222

  • Employers will be completely reimbursed by the government from the first day that an employee becomes ill or enters quarantine due to coronavirus, rather than having to themselves absorb the bill for the few days; 

  • Employment legislation is being relaxed to allow companies to reduce employees hours temporarily, with the employees’ incomes then supplemented by unemployment benefit. The Ministry of Employment hopes that this will prevent employees from being laid off.

On 18 March, Denmark announced a further three months package of DKK 40 billion, which includes the following measures for business:223

  • Compensation for corporate fixed expenses: Firms with a drop in turnover of more than 30% can get cash support to cover part of their fixed costs (up to 80%). Full compensation of fixed costs is provided to firms forced to temporarily close due to the containment measures. The scheme runs for three months (expected cost EUR 5.4 billion).

  • Compensation scheme for self-employed persons: The self-employed are not directly covered by the tripartite agreement on wage compensation, although they also may be challenged on their livelihood. The government will ensure compensation to the self-employed, who experience large declines in their turnover. Self-employed and those employed in small businesses with fewer than 10 employees facing a loss of earnings of 30% or more will receive 75% compensation, up to a maximum of DKK 23 000 (EUR 3 000) per month in direct financial support. Where the self-employed or small business owner’s partner is also employed in the business, the compensation threshold will now be DKK 46 000 (EUR 6 000), as opposed to the DKK 34 000 (EUR 4 500) proposed by the Government. The compensation is subject to tax.

  • Support to employees at risk of layoff: For firms experiencing large falls in demand and at risk of laying off 30% of workers (or minimum 50 people), the employees can be sent home and the government will cover 75% of the salary (maximum EUR 4 000), if the firm promises not to lay off any workers for economic reasons. Firms will also have to cover the remaining 25% to ensure employees can keep their full salary. For hourly workers the compensation rate is 90% (maximum EUR 4 000). The scheme is so far available for three months (expected fiscal costs EUR 0.6 billion). An existing short-time work scheme is also available and has been made more flexible and allocated more resources (EUR 13 million).

  • Compensation is provided to organisers of events that are cancelled due to the ban on large public gatherings (EUR 13 million).

On 18 April, a further package of measures was announced:

  • An extension of the compensation scheme for companies' fixed costs. The share of fixed costs that can be compensated is 80% (if the decrease in turnover is between 80-100%), 50% (if the decrease in turnover is between 60-80%), or 25% (if the decrease in turnover is between 35-60%). For companies that are required to close the share of fixed costs that be compensated is 100%. Available for the period from 9 March to 8 July, with expected fiscal costs around DKK 65.3 billion.

  • An extension of the compensation scheme for self-employed. Self-employed and freelancers experiencing more than a 30% decrease in turnover will be entitled to 90% compensation (max DKK 23 000 per month). For self-employed forced to close, 100% compensation is provided. Available for the period from 9 March to 8 July, with expected fiscal costs around DKK 14.3 billion.

  • Additional initiatives for SMEs and self-employed. VAT payments are deferred by combining two payment periods. For small enterprises' tax period will be extended from 6 months to 12 months in 2020, while medium-sized enterprises' tax periods will be extended from 3 months to 6 months for the first half of 2020 (estimated DKK 35 billion liquidity impact). VAT payments already made for second half and last quarter of 2019 (due 2 March 2020), are made available as interest free loans (estimated DKK 35.4 billion). Provisional taxes for self-employed (B-taxes) are deferred, payment deadlines for April and May are postponed by 2 and 7 months respectively (estimated DKK 5 billion liquidity impact).

  • Loans and equity provided to entrepreneurs and venture firms. The state investment fund (Vaekstfonden) will provide risky capital to start-ups and venture firm, facing difficulties in financing as private investors withdraw from the market. Available for 2020 only and a total capacity of DKK 3.4 billion.

  • An Innobooster-programme administered by the Innovation Fund will be increased by DKK 350 million to support new projects.

The Danish Export Credit Fund (EKF), a state agency that secures payments of exports of goods and services out for Denmark, will increase its liquidity for in particular SME’s. An increase access to export credit for SMEs by EUR 0.2 billion will assist some 250 SMEs in continuous export business. Furthermore, EKF will establish a new liquidity guarantee worth DKK 1.25 billion in new loans to SMEs with export activities. EKF will cover up to 90% of credit insurance companies' risk on new export activities. A reserve of DKK 5 billion in expected losses is included in the reported budget impact. The government will provide guarantees of DKK 30 billion to insurance companies in 2020, similar to construction implemented in Germany.

The government provides an advance in payments of procured goods and services and waives penalties. Local governments will frontload payments to firms and defer charging tax on business properties (EUR 1 billion).

The government is developing two loan schemes with subsidised interest rates for start-ups. The first scheme targets companies in their early stages, while the second scheme focuses on companies having already received venture capital. The schemes have a total budget of approximately EUR 296 million billion. The support, in the form of loans, will be managed by the Danish State public investment fund Vækstfonden.

On 15 June, the government launched further stimulus and a phase-out of COVID-19 related measures. The elements of most relevance to SMEs are:

  • Support for apprenticeships and in-firm training of DKK 6.1 billion (0.3% of GDP), mainly through a wage subsidy scheme. This reflect an agreement with social partners and is financed by employer contributions from an existing fund.    

  • A temporary increase in R&D tax credits in 2020 and 2021. Fiscal costs about DKK 1.3 billion.   

  • The job retention scheme to support workers at risk of layoff will expire by 29 August. Negotiations are ongoing to increase accessibility and generosity of an existing short-time work scheme as a replacement.

  • The support scheme for self-employed will expire on 8 August. Self-employed that are not enrolled in the unemployment insurance scheme will have the opportunity to join on favourable terms.

  • The support scheme to cover firms’ fixed costs will expire on 8 July, but targeted support will be available until 31 August for firms still affected by containment measures.

  • The closure of direct support will be replaced by increased access to loans, in particular for export-dependent firms. A new government-backed fund of DKK 10 billion (0.4% of GDP) will act as investor of last resort with the possibility to recapitalise large and important firms at risk of bankruptcy.

Commercial banks in Denmark are easing interest rate repayment for their small business clients.224

 Egypt

On 22 March, the government announced a USD 6.4 billion stimulus package. Furthermore, the Central Bank Egypt gave small and medium-sized businesses a six-month extension for credit repayments and cancelled ATM withdrawal fees for the same period.

The central bank also increased the daily withdrawal limits for credit and debit cards, and said lenders will “immediately” provide financing for the import of key commodities.225 On 17 March, the central Bank announced a rate cut of 3%-points. The preferential interest rate on loans to SMEs, industry, tourism and housing for low-income and middle-class families, has been reduced from 10% to 8%.

Furthermore, the government introduced a number of tax measures of relevance to SMEs:

  • The price of natural gas and electricity has been reduced for industrial use.

  • Capital gains tax has been postponed until further notice.

  • The Export Subsidy Fund will pay out the entire EGP 1 billion in arrears in March and April 2020, plus 10% in cash payments to exporters in June 2020.

  • Three months extension for the payment of property taxes for companies in the industrial and tourism sector. The property taxes shall be payable in monthly instalments over the following six months.

The Egyptian government has undertaken various efforts to integrate the specific needs of women in its COVID-19 response plan. The National Council for Women (NCW) will be part, along with other state institutions, of the committee in charge of designing additional tailored measures to mitigate the impact of the crisis on informal sector workers. Its recent policy brief outlines the pillars of Egypt's response to women's situation during the outbreak, including immediate and medium-term policy suggestions to mainstream the needs of women in health, social protection and economic measures. It also recently launched a policy tracker to monitor the policy measures taken by the government to respond to women's needs in the context of the COVID-19 outbreak.

In May, Egypt’s second-largest private bank, got a loan of USD 100 million from the European Bank for Reconstruction and Development (EBRD), to be lent to businesses most affected by the pandemic, especially SMEs. The EBRD also raised the banks limit under its Trade Facilitation Programme by USD 100 million to USD 250 million.

On 12 May, the EIB and the Banque du Caire announced EUR 100 million in finance for SMEs in Egypt.226

Mid-May, the digital platform “Together we Continue” was launched to provide services to SMEs affected by COVID-19 in Egypt and other Middle Eastern countries.227

 Estonia

On 19 March, Estonia has launched a EUR 2 billion support programme, including:

  • Loan collateral amounting to EUR 1 billion for bank loans already issued in order to allow for repayment schedule adjustments (maximum EUR 600 Million for the surety collection) through the KredEx Foundation;

  • Tax deferral for 18 months;

  • Tax incentives, and;

  • Suspension of payments into the pension system.228

  • A job retention scheme, administered through the Unemployment Insurance Fund. Qualifying employers will receive wage subsidies covering 70% of employees' average salary over the last 12 months, with a maximum of EUR 1 000 per month. Available for companies with at least 30% decline in turnover, who do not have work for 30% of its employees and who have reduced employees' salaries by at least 30% (or to the minimum wage). Employees will receive the 70% reimbursement or max EUR 1 000 per month, plus at least EUR 150 paid by the employer. All taxes and allowances to be paid by the Unemployment Insurance Fund and the employer. Expected fiscal costs EUR 250 million.

  • The government will ensure sick pay to the employee for the first three days of sick leave for all sick leave certificates from March to May (normally unpaid). Expected fiscal costs EUR 7 million.

  • Support to self-employed. The government will pay the advance payment of social tax for self-employed persons for the first quarter of 2020. Estimated fiscal costs EUR 3.3 million.

  • The state-owned financial institution KredEx will provide loans to businesses affected by the covid-19 crisis. These include:

    • Operating loans to overcome liquidity problems, including payment of bank loans, are provided (EUR 500 million). The maximum loan amount is EUR 5 million per company with 4% interest per annum.

    • Investment loans to take advantage of the new business opportunities created by the spread of coronavirus, and other new business opportunities are made available (EUR 50 million). The maximum loan amount is EUR 5 million per company with 4% interest per annum. Expected losses included in budget amounts to around EUR 55 million.

  • The Rural Development Foundation will provide additional financial measures for rural and agricultural businesses. These include:

    • Loan guarantees (EUR 50 million)

    • Operating loans (EUR 100 million)

    • Land capital (EUR 50 million).

Estonia announced it would share digital education tools developed by its start-ups to other countries.229 Furthermore, community initiatives were launched to support small business.230

 European Union

On 10 March, the European Union announced the establishment of a coronavirus emergency fund of EUR 25 billion, 7.5 billion of which would be available at short notice for healthcare systems, sectors particularly exposed to the outbreak and SMEs.231 Through the adoption of a temporary framework, state aid approval for SME support was eased and speeded-up. On 13 March, the EU announced that this fund would increase to EUR 37 billion.232 On 13 March, a call was launched to startups and SMEs with technologies and innovations able to help in treating, testing, monitoring or other aspects of the Coronavirus outbreak to apply for funding under the EIC Accelerator programme.233 On 29 March, the EC reported in the media that EUR 93 billion had already been made available.

On 12 March, the ECB left interest rates unchanged, but announced it will conduct additional longer-term refinancing operations (LTROs), temporarily, to provide immediate liquidity support to the euro area financial system. The LTROs will provide liquidity at favourable terms to bridge the period until the TLTRO III (targeted LTROs) operation in June 2020. Through TLTRO III, “considerably more favourable terms will be applied during the period from June 2020 to June 2021 to all TLTRO III operations outstanding during that same time. These operations will support bank lending to those affected most by the spread of the coronavirus, in particular small and medium-sized enterprises. Throughout this period, the interest rate on these TLTRO III operations will be 25 basis points below the average rate applied in the Eurosystem’s main refinancing operations. For counterparties that maintain their levels of credit provision, the rate applied in these operations will be lower, and, over the period ending in June 2021, can be as low as 25 basis points below the average interest rate on the deposit facility. Moreover, the maximum total amount that counterparties will henceforth be entitled to borrow in TLTRO III operations is raised to 50% of their stock of eligible loans as at 28 February 2019. In this context, the Governing Council will mandate the Eurosystem committees to investigate collateral easing measures to ensure that counterparties continue to be able to make full use of the funding support.”234 On 18 March, the ECB launched a EUR 750 billion Pandemic Emergency Purchase Programme (PEPP), for public and private securities and the expansion of the range of eligible assets under the corporate sector purchase programme (CSPP) to non-financial commercial paper, making all commercial papers of sufficient credit quality eligible for purchase under CSPP.235

On 13 March, the European Bank for Reconstruction and Development (EBRD) announced a 1 billion solidarity emergency financing package.236

On 13 March, the European Commission introduced a Temporary Framework to allow Member States to adopt economic aid measures in the context of the COVID-19 pandemic as an exception to the ordinary State aid rules. In its Communication "Coordinated economic response to the COVID-19 emergency" of 13 March 2020, the Commission set out the different options available to Member States for granting measures that can be activated in the current crisis without involvement of the Commission, including, for example, the suspension of payment of corporate taxes, VAT or social security contributions. In its Communication of 19 March 2020, the Commission identified temporary State aid measures that are compatible with the internal market due to their purpose to remedy a serious disturbance in the economy of a Member State. Such measures can be approved by the Member States after notification by the concerned Member State. Eligible measures include aid to ensure liquidity and access to finance for business activities. The eligible types of aid and aid intensities were clarified by the subsequent Communication of 3 April 2020. According to this document, Member States are now authorised to grant up to EUR 800 000 per company in interest-free loans, loan guarantees covering 100% of the risk or provide equity. The intervention can be cumulated with other measures allowed on an ordinary basis, such as other de minimis aid, thus bringing the aid amount per business to EUR 1 million, and with other measures allowed on an extraordinary basis under the Temporary Framework. The Communication of 3 April 2020 also allowed for further public support measures, such as support for research and development and coronavirus-related production activities, deferral of tax payments and/or suspension of social security contributions, and targeted support in the form of a contribution to the wage costs of companies in most-affected sectors or regions which would otherwise have to lay off staff.237 On 16 June, the temporary state aid framework was extended as well as modified to allow for state aid to be given more easily to start-ups. 238

On 16 March, the European Investment Bank announced it will rapidly mobilise EUR 40 billion in support.239 On 3 April, the Bank reported the development of a EUR 20 billion guarantee fund to support EUR 200 billion in funding for the European economy.240 On 6 April, the European Commission and the European Investment Fund announced they would unlock EUR 8 billion in finance for 100 000 SMEs.241

On 2 April, the European Commission proposed a new instrument of temporary support to mitigate unemployment risks (SURE). SURE support could take the form of loans granted on favourable terms from the EU to Member States, to help them cover the costs directly related to the creation or extension of national short-time work schemes, and other similar measures for the self-employed, in the context of the current crisis. The Commission proposes that EUR 100 billion (0.7% of 2019 EU27 GDP) will be available for this instrument (with no pre-allocated national envelopes), backed by EUR 25 billion of guarantees voluntarily committed by Member States to the EU budget. SURE will have a temporary nature: its duration and scope are limited to tackling the consequences of the coronavirus pandemic.

Also on 2 April, the Commission presented the Coronavirus Response Investment Initiative Plus (CRII+), which complements the CRII (already in force since 1 April, and summarised below) by further enhancing flexibility in the use of cohesion funds. This enhanced flexibility is inter alia provided through transfer possibilities across the three cohesion policy funds (the European Regional Development Fund, European Social Fund and Cohesion Fund), transfers between the different categories of regions (e.g. less vs more developed), flexibility regarding thematic concentration, the possibility for a 100% EU co-financing rate for the accounting year 2020-2021, and simplified procedural steps. 

On 10 April, European Ministers of Finance agreed on a EUR 540 billion virus rescue package, which included next to the SURE proposal and the EUR 200 billion EIB funding credit lines of up to EUR 240 billion from the European Stability Mechanism.

On 8 April, the Commission announced some flexibility in competition rules for cooperation between companies in the context of the COVID-19 response.242

On 15 April, the Commission presented a Roadmap with guidance on lifting the COVID-19 containment measures, which include a monitoring role for the SME Envoys.243

On 27 May, the Commission presented its EUR 750 billion recovery plan Next Generation EU. The plan includes a number of elements of direct relevance to SMEs, such as a new Solvency Support Instrument, aiming to mobilise private resources to support viable firms in the sectors, regions and countries most affected (EUR 26 billion of guarantees) and a reinforcement of InvestEU, the main EU investment programme, including a new Strategic Investment Facility to generate investments in boosting the resilience of strategic sectors and key value chains in the internal market (EUR 30.3 billion of guarantees).244

On 4 June, the ECB increased the envelope for its the pandemic emergency purchase programme (PEPP) EUR 600 billion to a total of EUR 1,350 billion, and extended the horizon for its net purchases to at least July 2021.245

 Finland

On 5 March, the Finnish government announced it stood ready to take measures if the impact of the outbreak on the economy worsened.246 The website of the Ministry of Economic Affairs and Employment includes information on how the impact is monitored and measures in place in the context of the State of Emergency declared on 16 March, including a set of mainly health related measures.247

On 20 March, the government announced an additional stimulus package worth EUR 10 billion (4% of GDP). The total stimulus so far amounts to EUR 15 billion (6% of GDP), including:248

  • Loan guarantees for firms, support for working capital and an instalment free period for loans granted (4% of GDP), most notably via Finnvera, the state’s financing and export credit company;249

  • Increase of grants (0.1% of GDP): the public funding agency Business Finland's grant authorisations will be increased to permit immediate business support measures;

  • ELY centres (regional centres for economic development, transport and the environment working under the corresponding line ministries) will allocate EUR 50 million for SMEs, in particular in the service sector. EUR 150 million will be made available for companies including in the creative sector, tourism and supply chains through Business Finland network;

  • Various tax measures, including an extension for filing corporate income tax returns, the waiving of penalties for late filing of VAT returns, companies in financial difficulties can request a payment arrangement for the company's corporate income taxes and can also request a change to prepayments if the company's profits for the year seem to be less than expected, and a reduction of the interest rate for late payment to 4% (currently 7%) for taxes due from 1 March 2020.

  • Entrepreneurs and freelancers can temporarily receive unemployment benefit, and;

  • EUR 500 000 will be dedicated for counselling and support services for entrepreneurs.

The government also announced several labour market reforms, including:  

  • Faster lay-off procedures to avoid bankruptcies (i.e. the notice period will be shortened from 14 to five days);

  • Temporary recognition of entrepreneurs and freelancers as unemployment benefit recipients;

  • Elimination of waiting period for unemployment benefits, and;

  • Temporary reduction in employer pension contributions.

On 8 April, additional spending of EUR 3.6 billion was announced.

On 27 April, media announced the government is developing a plan whereby the value-added tax (VAT) paid in the earlier part of 2020 could be reimbursed to businesses.250 

The Finish government backs a hackathon to help find innovative solutions to the crisis.251

 France

The French Ministry of the Economy and Finance on 12 March announced measures for firms encountering serious difficulties due to the coronavirus.252 These include:

  • Possibilities for deferral of corporate/income tax payment and social security contributions for firms and entrepreneurs, and, on a case-by-case basis, exemption from these payments;

  • New credits offered by Bpifrance (public investment and existing credits maintained). Guarantees on loans made to SMEs increased to 90% of the amount borrowed (up from 70%);253

  • Encouraging firms to have recourse to temporary lay-offs (by shortening procedures and with higher public coverage of firms’ costs). The Government will reimburse 100% of partial employment compensations (up from 70% previously);

  • Conflict mediation between SMEs and clients/suppliers;

  • The creation of a Solidarity fund to support microenterprises with cash flow problems.

  • A suspension of penalties for payment delays in government contracts, and;

  • A mobilisation of credit mediation to help SMEs wishing to renegotiate credit terms.254

On 17 March, the government announced a further package of EUR 45 billion to support businesses:255

  • The government provides EUR 300 billion of guarantees for loans to companies;

  • Small companies and self-employed can be granted a EUR 1 500 monthly compensation, when their turnover is less than EUR 1 million and they experience a drop in turnover of 70% or more;

  • The government will pay rent, gas and electricity bills for small companies;

  • A solidarity fund for the self-employed will receive EUR 2 billion.256

The government underlined that no SMEs will lack necessary liquidity.257

Since 12 March, Bpifrance further stepped up its support:

  • 90% guarantee for short to medium term credit extensions (above EUR 300 000);

  • Under EUR 300 000 the guarantee is increased to 70% while the threshold for delegation to banks was raised (from EUR 200 000 before to 300 000);

  • Mobilisation of regional partners to increase the guaranteed quotas, and to launch “rebound loans” without guarantee up to EUR 500 000;

  • Unsecured loans with 90% coverage, up to EUR 5 million for SMEs and EUR 30 million for mid-caps, and;

  • Support teams will help the 1 500 accelerated start-ups to date to manage the crisis and in particular the cash position.

On 23 March, the French banking association announced that French firms facing a cash crunch will be able to get access to low-interest loans (0.25%) to an amount equal to three months of revenue to help tide them over during the coronavirus crisis, with repayments starting after one year.258

On 25 March, France launched a EUR 4 billion emergency plan for start-ups.259 This includes the following measures:

  • An EUR 80 million package, financed by the Programme d'investissements d'avenir (PIA) and managed by Bpifrance, to finance bridges between two fund-raising rounds This scheme is targeted at start-ups that were in the process of raising funds or were expected to raise funds in the coming months and are unable to do so due to the contraction of venture capital activity. These funding will be provided in bonds with possible access to capital and are intended to be cofinanced by private investors, for a total amount of at least EUR 160 million.

  • State-guaranteed treasury loans of up to twice the 2019 wage bill for France or, if higher, 25% of the annual revenue, as for other companies. Backed by the EUR 300 billion state guarantee adopted in the dedicated finance bill, these loans are distributed by both private banks and Bpifrance, start-ups’ primary contact, with a dedicated product. They should represent a total of almost EUR 2 billion. The guarantee can cover up to 90% of the loan and is priced at a low cost, depending on the maturity of the loan.

  • An accelerated refund by the State of corporate tax credits refundable in 2020, including the research tax credit (CIR) for the year 2019, and VAT credits. All companies have the possibility to apply for an early refund of corporate tax claims refundable in 2020 and an accelerated processing of VAT credit refund claims by the Public Finances Directorate General (DGFiP). Start-ups as SMEs and/or Young Innovative Enterprises (JEI) are eligible for immediate refund of the CIR. They can therefore apply now, without waiting for the filing of their annual financial statements ("liasse fiscale"), for a refund of the CIR for the year 2019, which amounts to a cash advance of around EUR 1.5 billion. The corporate tax services (SIE) are mobilised to process the companies' refund requests as soon as possible, within a few days.

  • An accelerated payment of the PIA innovation support grants already allocated but not yet released, for an estimated total amount of EUR 250 million. Following a government request, Bpifrance and Ademe automatically accelerate the payment of innovation support grants from the PIA, such as innovation contests, by paying in advance the instalments not yet released for projects that have already been validated. Concurrently, for companies receiving subsidies in the form of repayment advances or grants accompanied by fees, the next repayment deadlines are postponed for up to six months.

  • Finally, the State maintains, through Bpifrance, its support for innovative companies with nearly EUR 1.3 billion planned for 2020 (grants, repayable advances, loans, etc.). Bpifrance will also continue its direct equity investments and investments in fund of funds, alongside private investors.

On 31 March, the government announced a further set of measures:260

  • the strengthening of the “solidarity fund” for the self-employed workers and smallest firms, by lowering the eligibility conditions and increasing public funding to EUR 7 billion. Insurance companies will also contribute to the fund.

  • tax exemptions for bonuses of workers in “essential” sectors. Firms will be able to pay EUR 1 000 bonuses to those workers until the end of August (and up to EUR 2 000 if they have a firm-level agreement).

  • additional support for exporting firms, including: higher coverage and guarantees of public export insurance.

  • a reinsurance scheme of EUR 10 billion for inter-firm payments (credit-insurance).

On 15 April, the government expanded the size of the stimulus package from EUR 100 billion to EUR 110 billion.261

On 9 June, the government launched a EUR 15 billion aerospace support package, which will also benefit SMEs.262

On 25 June, the government extended support measures for business.263

On 14 July, the government announced a further EUR 100 billion in economic support measures, include EUR 30 billion to make the partial employment scheme more long term.264

In addition, national and regional authorities are collaborating to deal with the crisis as part of the new Economic council ‘Etats-Régions’. In practice, regional task forces have been set up together with public development banks to accelerate support measures for enterprises. For instance, Ile de France launched a number of measures for company support.265

Community initiatives, such as the one by La France Tech Toulouse, have been launched to highlight how start-ups can play a role in combatting the crisis.266 Industry associations, such as France Digital, also step up their efforts in supporting SMEs during the crisis, for instance through a toolkit on teleworking and advice to companies. France insurers have also announced up to EUR 1 billion measures to support SMEs.267

 Germany

At the start of the crisis, the government has referred SMEs to instruments already available to help companies cover short-term liquidity requirements, including working capital loans and guarantees.268 Access to short-term work arrangements (Kurzarbeit) was expanded in order to avert a sharp rise in unemployment. In practice, firms can apply for the funds when just 10% of their workers are affected by a work stoppage, compared to one-third previously.269 On 10 March, the federal cabinet extended the short-time work allowance to prevent employee layoffs due to the current slump in orders. Furthermore, the country’s labour ministry plans to relax the Sunday work ban to prevent supply bottlenecks.270

On 9 March, the government announced a package of measures, with federal investments to be increased by EUR 3.1 billion between 2021 and 2024 and including extensive measures to improve liquidity for companies, including SMEs.271

On 13 March, a comprehensive package to guarantee liquidity of affected firms was announced without limits to credits:

  • Firm size limitations for liquidity support will be adjusted upwards and the risk taken by the government will be increased. The volume of guarantees provided by guarantee banks will be doubled to EUR 2.5 billion. Also, there will be a higher risk assumption by the Federal Government through an increase in the counter-guarantee, and banks will be able to decide on guarantees more quickly. The measures support all commercial small and medium-sized enterprises (SMEs) and the liberal professions across all sectors and will be implemented by the guarantee banks as soon as possible.272

  • Moreover, KfW working capital loans, which are channelled through commercial banks, will come with an increased risk coverage by the KfW of up to 80% for up to EUR 200 million EUR working capital loans, thereby increasing the willingness of commercial banks to lend to enterprises.

  • Tax deferrals were made possible and tax prepayments can be adapted to the expected lower income in 2020. Enforcement measures (e.g. attachment of accounts) and penalty surcharges will be paused in 2020 if the enterprise is hit hard by the virus;

  • Furthermore, the measures put in place include conflict mediation between SMEs and clients/suppliers, a suspension of penalties for payment delays in government contracts, and a mobilisation of credit mediation to help SMEs wishing to renegotiate credit terms.

The government announced it will do what whatever it takes and evaluate budgetary consequences later.273

On 21 March, the government announced it was working on an emergency budget including support for SMEs, an economy stabilisation fund and further public guarantees through KfW.274 On 25 March, agreement was reached on the size of the package, worth over EUR 750 billion in total.

As part of this, on 23 March, the government announced EUR 50 billion in support to small business.275 The measures include grants for small business in all sectors, including the self-employed and liberal professions with up to 10 employees:

  • one-time payments of up to EUR 9 000 for three months, for businesses with up to five employees

  • one-time payments of up to EUR 15 000 for three months, for businesses with up to 10 employees

A further part of the package is the creation of an economy stabilisation fund (Wirtschaftsstabilisierungsfonds). It aims to ring-fence businesses seen as of critical importance for the German economy as a whole. The fund comprises support of EUR 600 billion, EUR 400 of which for liquidity guarantees, EUR 100 for direct equity participation in businesses of strategic importance for the German economy (incl. critical SMEs) and EUR 100 for re-financing by the KfW.

Furthermore, the package includes a new KfW loan guarantee programme for both SMEs and larger firms with no cap on funds.276 The conditions for taking out loans have been improved. KfW will apply lower interest rates and a simplified risk assessment procedure for loans of up to EUR 3 million, which will bring additional relief to the economy. Furthermore, KfW will grant a higher rate of exemption from liability of up to 90 per cent for working capital and investments by small and medium-sized enterprises in order to make it easier for banks and savings banks to grant loans.

On 27 March, the “German Covid-19 Insolvency Law Amendment” became effective.277 Through this amendment, the obligation of the management of a legal person to file for bankruptcy has been suspended until 30 September 2020 if certain conditions are met. The new rules shall provide the management with more time and flexibility to decide whether the company can be continued and shall help to avoid insolvencies caused by the circumstances triggered by the Covid-19 pandemic. The new rules do not relieve the management from carefully and constantly observing the situation of the company and updating their assessment as the situation further develops. Making use of the additional rules may also impose personal liability risks on the managing directors.

On 31 March, the government announced a start-up fund of EUR 2 billion (Start-up Liquidity Programme 2020), with state support for venture capital for start-ups.278 The measures include:

  • Additional public funding will quickly be made available to public venture capital investors (both individual funds as well as funds of funds, e.g. KfW Capital, the European Investment Fund (EIF), the High-Tech Gründerfonds, Coparion). This money will be used for funding rounds for start-ups as part of co-investments made jointly with private investors.

  • The plan is to provide the funds of funds KfW Capital and the EIF with additional public funding so that they are able to take over the shares of funds that pull out.

  • Venture capital financing and equity replacement financing will be facilitated for small businesses and new start-ups that do not have venture capitalists as shareholders.

The Programme focusses on businesses that are characterised by their use of equity, such as start-ups and technology focused companies, and aims to minimize access criteria, apart from some due diligence and assessment. The liquidity support will not be provided to the start-up itself, but to the private investor(s) who aim to invest in those. Applications may be submitted by private venture capital investors or by shareholders such as the founders of a start-up. ​When applying, such private investors will have to demonstrate in which Start-Ups in their portfolio they want to invest the requested liquidity and the suitability of such choice will be checked. In addition, public Venture Capital investors such as KfW Capital and the European Investment Fund will also benefit from the programme to invest as co-investors jointly with private investors. The provided liquidity is structured as debt, which should ideally return to the German taxpayer with a surplus at some point in time, and not as grant.  ​The government aims for the programme to start in April 2020.

In parallel to the implementation of the Start-up Liquidity Programme, the Federal Government is continuing to coordinate the design of the "Future Fund" (Zukunftsfonds) for start-ups which will offer additional liquidity of up to EUR 10 billion and should support the way out of the crisis in the medium term.279 

On 3 April, the government announced a EUR 4 000 assistance for SMEs to cover consultancy services to help SMEs find solutions in coping with the crisis.280

On 6 April, the government announced further measures to support SMEs. It intends to increase the risk coverage ratio to 100% held by KfW, up from 80/90%.281 Conditions for this Schnellkredit are:282

  • The Schnellkredit is available to medium-sized companies with more than 10 employees who have been active on the market since at least January 1, 2019.

  • The credit volume per company is up to 3 monthly sales in 2019, maximum EUR 800 000 for companies with more than 50 employees, maximum EUR 500 000 for companies with up to 50 employees.

  • The company must not have been in difficulty as of December 31, 2019 and must be in good economic order at that time.

  • Interest rate of currently 3% with a term of 10 years.

  • The bank receives a 100% indemnity from KfW, backed by a federal guarantee.

  • The credit approval is granted without further credit risk assessment by the bank or KfW. This allows the loan to be approved quickly.

On 4 June, the government announced a further support package of EUR 130 billion. The package includes a number of measures of relevance to SMEs:

  • A temporary VAT cut from 19% to 16%, from 1 July until 31 December.

  • An EUR 300 one-off payment for every child in the country

  • An EUR 50 billion fund to address climate change, innovation and digital technology

  • An EUR 25 billion loan support programme for small firms that have seen their sales drop by more than 60% for June to August, under which SMEs can have fixed operating costs of up to EUR 150,000 for three months reimbursed.

German Länder are putting measures in place as well. Bavaria has announced a EUR 10 billion fund to buy a stake in struggling companies.283

Many German stores and other service providers (e.g. cinemas and restaurants) are asking clients to buy vouchers for future use in order to stay afloat despite the closure. A platform for this has been set up in Berlin (private initiative), but local authorities are also involved (for instance in Swabia).284

 Greece

On 9 March, the Greek government announced financial relief for companies in areas hit by the coronavirus to safeguard jobs and boost liquidity.285 The measures include:

  • A four-month deferral of value-added tax (VAT) payments and social security payments due at the end of March for companies operating in areas affected by the outbreak and which shut down for at least 10 days.

  • The Government will also encourage employers to consider work-from-home initiatives and adjust shifts to help contain the outbreak.

Furthermore, a new EUR 500 million scheme in collaboration with the European Investment Fund (EIF) could address the financing gap faced by SMEs, which is expected to grow in the context of the coronavirus.286

On 18 March, a refundable advance payment was provided to businesses affected by the crisis and whose loans are performing, on the basis of turnover reduction or other factors. The advance will be a fraction of loss in turnover and can over five years following a one-year grace period and at a low interest rate (EUR 2 billion).

On 30 March, the government announced EUR 6.8 billion in further measures focusing on supporting companies that suffer from the outbreak, including tax relief and wage support. The measures include:287

  • a EUR 1 billion refundable advance to cover wage costs;

  • the government will cover interest expenses on business loans for April, May and June, which may be extended to August;

  • the government will fund a guarantee for loans to affected companies for working capital;

  • businesses that are shutdown will pay 60% of the property rent for March and April;

  • businesses will be able to pay the Easter salary bonus (one month of salary) later in the year and the government will cover the unpaid amount;

  • suspension of VAT and tax payments that were due between March 11 and April 30, and social security contributions that were due by the end of March until August 31 for businesses, self-employed persons and sole proprietorships affected by the coronavirus crisis;

  • immediate repayment of all pending tax refund claims up to EUR 30 000 that are under audit;

  • economic support in the form of a training voucher of EUR 600 for six scientific sectors (economists/accountants, engineers, lawyers, doctors, teachers and researchers, 180,390 beneficiaries).

On 3 April, a scheme for the support of the economy through the issuance of guarantees by the Hellenic Development Bank has been approved under the E.U. temporary framework for state aid. The scheme will partially guarantee eligible working capital loans, with the total exposure of the Hellenic Development Bank capped at 40% of the volume of loans issued by a financial intermediary. Solvent SMEs will receive grants of up to EUR 800 000 per company to cover interest on fixed-maturity loans, bonds, or overdrafts. The total size of the scheme will amount to EUR 2 billion.

The government also installed a support scheme for self-employed, which was approved by the European Commission mid-May. The scheme will provide a one-off payment of EUR 800 per self-employed person, including self-employed managers of companies that employ less than 20 employees in sectors severely affected by the coronavirus outbreak. The measure aims at partially compensating the eligible beneficiaries for the potential loss of income due to the coronavirus outbreak.288

The government also launched a digital solidarity initiative (www.digitalsolidarity.gov.gr), a platform where large tech corporations provide free online marketing and account management training to SMEs.289

 Hong Kong, China

On 25 February, the Financial Secretary announced a reduction of the profits tax by 100% (subject to a cap) and low-interest loans for SMEs, with government guarantees as part of a wider package worth HKD 18.3 billion (USD 2.3 billion).290 A key highlight of the measures was a full government guarantee on loans of up to HKD 2 million for every small and medium-sized enterprise, under a financing guarantee scheme and involving HKD 20 billion in total.291

On 8 April, the government expanded on the measures by introducing a set of new enhanced terms for the 80 percent, 90 percent, and special 100 percent guarantee loans available for SMEs. Under the Enhanced 100 Percent Loan Guarantee Scheme, the guarantee commitment has been increased to HKD 50 billion (USD 6.5 billion). Eligible SMEs will receive a maximum loan amount of HKD 4 million (USD 520,000) and can benefit from the principal moratorium arrangement for the first 12 months. Eligibility for the loan requires that enterprises have been operating for at least three months, as at the end of December 2019, and have suffered at least 30 percent decline in sales turnover – in any month since February 2020. SMEs from all sectors are eligible to apply, particularly those most affected by the coronavirus outbreak – such as retail outlets, travel agencies, restaurants, cinemas, entertainment facilities, and transport operators. The total loan amount guaranteed by the government is HKD 20 billion (USD 2.6 billion).292

Some banks have come forward with liquidity relief (USD 3.9 million) for businesses affected by the outbreak. In September, a bank introduced a scheme under which SMEs could make interest-only payments for six months (one year if the loan is secured by property) since September. This was recently extended to taxi and public light bus operators as a response to the crisis. Moreover, SMEs that have opted for trade finance have the option to convert part of their loan facility into an overdraft facility for six months in order to help with their working capital needs. The bank also announced it would extend the waiving of handling fees until the end of December and would subsidise guarantee fees for SMEs applying to the government’s SME Financing Guarantee Scheme until the same date.293

 Hungary

On 16 March, the Central Bank announced emergency steps to shore up the economy, widening the range of collateral it accepts from banks and imposed a moratorium on repayments on loans extended under its Funding for Growth Scheme that provides small businesses with cheap loans.294

On 18 March, the government announced a package of further measures:295

  • Loan repayments are suspended until the end of 2020 for all private individuals and businesses who took loans out before 18 March;

  • Short-term business loans are prolonged until 30 July;

  • The annual percentage rate (APR) of new consumer loans has been maximised at the central bank prime rate plus 5 per cent;

  • Sectors that were severely hit by the pandemic (tourism, film industry, restaurants, entertainment venues, gambling, sports, cultural services, passenger transportation) will be exempted from paying social security contributions, and;

  • Employment regulations will be made more flexible to facilitate agreements between employees and employers in the current situation.

On 23 March, the government announced further measures to support small business. These include: 296

  • More than 80 000 small businesses and individual entrepreneurs will receive an exemption from the flat-rate tax of small businesses (kata) until after the crisis, as will media companies that suffer from falling advertising revenue, and;

  • Evictions will be suspended, for people and small companies who fell behind on mortgage repayments or failed to pay rent on state housing.

On 6 April, the government announced further measures of relevance to SMEs:

  • Job preservation through wage support within a short-time work programme, where the state assumes 70% of wage costs for companies that have lost 15-50% of their activity as a result of the COVID-19 epidemic.

  • Job creation through a HUF 450 billion programme to support investment projects

  • Relaunching the hardest hit sectors, including tourism, health, food production, agriculture, construction, transport, film and creative industries.

  • Funding for businesses with more than HUF 2 000 billion in loans with interest subsidies and guarantees.

On 8 April, the Central bank announced a HUF 3 000 billion package, HUF 1 500 billion of which available for financing SMEs through the Funding for Growth Scheme Go! It will include 500 billion forints that has not been used under the earlier launched FGS fix programme. FGS Go! will operate with the same conditions as earlier FGS phases: the NBH will continue to provide refinancing loans to banks at 0 percent, and interest to be paid by SMEs will be capped at 2.5 percent. Investments loans, including leases, will still be available, but the maximum maturity of refinancing loans will be set at 20 years in order to secure financing for protracted investment projects with a slower payback period.297

 Iceland

On 11 March, the Central Bank lowered the policy rate by 50 basis points to 2.25%, the sixth reduction within 10 months. The parliament is preparing legislation on paid leave during quarantine.

On 21 March, the government announced a USD 1.6 billion support package, which includes:298

  • The government will take on up to 75 percent of salaries;

  • State-backed bridging loans for companies;

  • Deferral of tax payments;

  • Financial support for tourism sector;

  • Access to third-pillar pension savings (private pension savings);

  • Refund of VAT for construction projects, and;

  • Public projects accelerated – investment in technical infrastructure.

Community platforms have been set up to support small businesses.299

 India

The Reserve Bank of India has gradually reduced interest rates from 5.15% in February to 4% on 22 May.

On 19 March, media reported that India is considering offering easier loan repayment terms and tax breaks for small-and medium-sized companies to weather the onslaught of the coronavirus, which would include extending loan tenors and relaxing bad-debt norms for small firms.300 On 20 March, media reported that the State Bank of India will open a special credit facility for SMEs, which aims to address liquidity concerns of SMEs who have seen business disruptions due to the crisis.301 India was reportedly pushing its banks to approve USD 8.1 billion of loans by the end of March.

An INR 1.7 trillion (about 0.8% of GDP) package was announced on March 26, mostly focusing on low-income people, farmers and health workers. It includes:

  • an insurance cover of INR 5 million per health worker fighting COVID-19;

  • the provision of food (rice, wheat and pulse) for 800 million poor people for the next three months;

  • an INR 500 per month cash transfers for 200 million women Jan Dhan account holders;

  • an increase in wage for workers engaged in the rural public employment programme (MNREGA) to INR 202 a day from INR 182 to benefit 136.2 million families;

  • the frontloading of cash transfers for farmers (INR 2,000) under the PM Kisan Yojana programme to benefit 87 million farmers;

  • a Building and Construction Workers Welfare Fund to provide relief to construction workers.

To alleviate liquidity constraints on the firms, the last date for filing income tax returns for FY 2018-19 was extended from March 31 to June 30, 2020. Similar extension applies for the Goods and Services Tax.

On 12 May, the government announced a further INR 20 trillion (USD 266 billion) support package, with the specific objective to support the availability of credit to SMEs and microenterprises. This includes measures from the reserve Bank of India as well as fiscal policy. The package includes INR 3 trillion for collateral free loans to MSMEs of four-year tenure with no payments due for one year. It also allocates INR 20 trillion for subordinate debt aimed at helping currently stressed MSMEs, and INR 50 trillion in equity funds for MSMEs.302 The measures include a move to bail out 200 000 ailing small and medium sized companies.303 Furthermore, the package includes the following:

  • Eligible firms can access an emergency credit line of 20% of their outstanding credit, with 100% government credit guarantee and a moratorium of 12-months on principal repayment. The government expects that 4.5 million firms will benefit from this scheme.

  • Stressed firms requiring equity support will be given access to a INR 200 billion subordinate debt scheme with partial loan guarantee. The government will provide INR 40 billion to the 200 billion fund. About 2 million firms may benefit from this scheme.

  • To provide equity funding for firms with growth potential, a fund of funds of INR 500 billion will be set up with a INR 100 billion corpus.

  • Global tenders are now excluded from government procurement of up to INR 2 billion to protect firms from foreign competition.

  • Receivables from government and central public sector enterprises to be released in 45 days to help firms manage their cash flows.

On 14 May, the government announced credit facilities for small, informal businesses and street vendors. These include a 2% interest subsidy on micro loans for a period of 12 months for loans up to INR 50 000 under the existing MUDRA scheme and a special lending programme for street vendors of up to INR 10 000 to finance their working capital, targeting about 5 million street vendors).

On 17 May, the government announced a reform of the Insolvency and Bankruptcy Code. The minimum threshold to initiate insolvency procedures is raised by hundred times to INR 10 million; initiation of insolvency proceedings is suspended up to one year; COVID-19 related debt is excluded from the definition of default that would trigger insolvency.

Some actions have also been taken at the state level. As an example, the state government of Bihar announced it will bear the entire expenses incurred on the treatment of the coronavirus patients and will pay a compensation for family in the case of death due to coronavirus. Union Territory of Delhi announced (March 20) that pensions for the elderly and widows will be doubled, food will be provided for the homeless, and 7.5 kg free ration will be provided to 7.2 million beneficiaries. Kerala introduced a INR 200 billion package largely focused on people, including: INR 5 billion health package; 2 month welfare pension, INR 20 billion each for loans and employment guarantee programme ; direct handout for subsistence for families not eligible for welfare pensions; free food grains through ration shops for needy families.

Through a variety of initiatives, start-ups and SMEs are included in developing innovative solutions to COVID-19 challenges.304

 Indonesia

On 25 February, the government announced a USD 725 million package with financial incentives to support tourism, airlines and property industries, in addition to further subsidies and tax cuts.305

On 13 March, Indonesia announced a further IDR 120 trillion (USD 8.1 billion) stimulus package, representing 0.8% of GDP, including exempting some manufacturing workers from income tax and reducing corporate tax payments for manufacturing companies. As part of the state's non-fiscal response, rules will be relaxed governing restructuring of bank loans to small and medium-sized companies, certification processes for exporters will be simplified and the government will make it easier to import raw materials.306

Since the start of the crisis, Bank Indonesia has cut interest rates on 20 February (to 4.75%), 19 March (to 4.5%) and on 18 June (to 4.25%). The Bank also lowered the rupiah reserve requirement ratio by 50 bps for banks involved in financing small and middle businesses and other priority areas after a 50 bps cut last month to support trade activities.

A total of IDR 438 trillion (2.8% of GDP) was made available on 31 March to cushion the socio-economic impact of the crisis. The first two packages includes rebates and relief on personal and corporate income taxes, VAT rate reduction, assistance programmes for vulnerable households, and support to the tourism sector; the third, worth IDR 405 trillion, includes SMEs’ credit restructuring, aid to poor and vulnerable households, and tax incentives and credit for businesses. Provincial governments, notably Central Java, have announced additional interventions.

Furthermore, the following measures have been put in place:

  • A purchasing power stimulus for MSME /cooperative products providing government funds as a 25% discount for purchasing goods online, and a pilot project to provide a discount voucher of IDR 1 million for 2 million people who register an e-commerce platform.

  • An unconditional Cash Transfer Program (Bantuan Langsung Tunai/BLT) for ultra micro and micro enterprises.

  • Providing Unconditional Cash Transfer (BLT) as income substitute to ultra micro and micro enterprises affected by covid-19.

  • Credit restructuring and interest subsidy for micro enterprises: Providing credit restructuring options through banking and finance company to micro enterprises credit.

  • Coop credit restructuring trough Revolving Fund Agency (LPDB): Providing restructuring and subsidizing credit interest to cooperatives affected by covid-19, in addition to providing liquidity assistance to cooperatives with light interest and easy mechanisms.

  • Tagline “Shopping at the neighbor’s shop”: Utilizing the warung (stall/shop) data connected with e-commerce, establish partnerships with 9 BUMN (Indonesia State-Owned Enterprises) food clusters. Take advantage of exposure from young influencers to encourage people to shop at their neighbor’s shop.

  • Pre-Employment Card Program: Conduct assessment of validated Micro and Small Enterprises from the pre employment card database, then register to be training participant at https://prakerja.go.id and obtain stimulant fund.

Indonesia tries to boost SME exports through virtual business match making events.307

A large Indonesian tech company, announced on 5 May a financial support scheme for SMEs affected by the pandemic.308

 Ireland

On 6 March, the Bank of Ireland announced a range of support measures for businesses impacted by the outbreak, including emergency working capital and payment flexibility on loans.309

On 9 March, the Irish government announced an increase in sick pay for workers affected by the virus. These payments will also be available to the self-employed.310 A support package for businesses was also announced, including:

  • A EUR 200 million working capital scheme implemented by the Strategic Banking Corporation of Ireland and targeting firms that are considered to be significantly impacted, with loans up to EUR 1.5 million;311

  • A Credit Guarantee Scheme supports loans of up to EUR 1 million in collaboration with major banks in the country;

  • The maximum amount for loans offered to sole traders and firms with up to nine employees as part of microfinancing facilities was increased from EUR 25 000 to EUR 50 000.

  • Enterprise Ireland and Údarás na Gaeltachta clients are eligible for grants for accessing consultancy services for immediate finance reviews, as well as for innovating, diversifying markets and supply chains;

  • Local Enterprise Offices are providing vouchers worth between EUR 2 500 and EUR 10 000 with match funding for innovation, productivity and business continuity preparedness.312

Furthermore:313

  • Revenue Commissioners are open to discussing deferring tax payments for business;

  • The government intends to refund employers who keep paying partial salaries;

  • Rescue and restructuring scheme packages through Enterprise Ireland for vulnerable but viable companies;

  • Flat rate pay of EUR 203 per week for six weeks for the self-employed who have lost business and those who have lost employment;

On 13 March, Irish Revenue announced the suspension of interest on late payments by SMEs.314

On 24 March, the government announced a new COVID-19 Income Support Scheme, including:315

  • A temporary wage subsidy of 70% of take home pay up to a maximum weekly tax free amount of EUR 410 per week to help affected companies keep paying their employees;

  • Workers who have lost their jobs due to the crisis will receive an enhanced emergency unemployment payment of EUR 350 per week (an increase from EUR 203). Self-employment are eligible for this as well;

  • The COVID-19 illness payment will be increased to EUR 350 per week, and;

  • Enhanced protections for people and small companies facing difficulties with their mortgages, rent or utility bills under the Supply Suspension Scheme.316

On 8 April, the government announced a further set of measures:317

  • Expansion of two SBCI Loan Schemes by EUR 450 million to provide an extra EUR 250 million for working capital and EUR 200 million for longer-term loans, bringing the total allocation to support liquidity in companies affected by the COVID-19 crisis to EUR 650 million. The first of these schemes - the Irish Liquidity Scheme - is designed to support lending to SMEs only and is not available to larger firms. Loans under the Irish Liquidity Scheme can be provided to SMEs to fund future working capital requirements in order to mitigate the impact of the pandemic. The Loans will be available through Allied Irish Banks, p.l.c., Bank of Ireland and Ulster Bank in amounts of between EUR 25,000 and EUR 1,500,000 per eligible enterprise, with a maturity of between one and three years. In addition, the loans will bear a fixed rate of interest negotiated with the lending bank, subject to a maximum of 4% per annum. For loans of up to EUR 500,000, no security will be required; however, any Loans in excess of this amount will require collateral to be posted. The Government has announced that the Irish Liquidity Scheme will receive a further EUR 250,000,000 in funding, bringing the total amount available to EUR 450,000,000. 

  • The second SBCI fund is the Future Growth Loan Scheme which is available to all SMEs and businesses in the primary agriculture and seafood sector to support long term investment. The Future Growth Loan Scheme benefits from a guarantee from the EU under the European Fund for Strategic Investments. Loans range from EUR 100,000 (EUR 50,000 for farmers) to EUR 3,000,000 per eligible business, with unsecured loans available up to EUR 500,000. The Future Growth Loan Scheme will receive an additional EUR 200,000,000 that will be released in tranches to provide longer-term loans to firms that have been impacted by the pandemic. The introduction of the Future Growth Loan Scheme (and the expansion of the Irish Liquidity Scheme outlined above) will bring the total amount that the Strategic Banking Corporation of Ireland can offer by way of financial supports to companies through the main Irish retail banks in Ireland to EUR 650,000,000;

  • EUR 180 million Sustaining Enterprise Fund (Enterprise Fund) for firms in the manufacturing and international services sectors. The Enterprise Fund will be administered by Enterprise Ireland and will provide a EUR 180,000,000 financial support package to Irish companies affected by the pandemic. The purpose of the Enterprise Fund is to sustain companies who have experienced a 15% or greater reduction in actual or projected turnover or profit, and/or have significant increase in costs as a result of Covid-19. The Enterprise Fund is available to eligible companies that: (1) employ 10 or more full-time employees; (2) are operating in the manufacturing or internationally trade services sectors; and (3) have applied for funding from a financial institution, including through the Irish Liquidity Scheme and the Future Growth Loan Scheme. Businesses qualifying under the Enterprise Fund will be offered a repayable advance of up to EUR 800,000 under the following terms, with a 3-year grace period, annual administration fee of 4%; and repayment in full by the end of year 5, on successful achievement of the project objective.

  • Expansion of Microfinance Ireland (MFI) funding. The maximum MFI Business Loan available from Microfinance Ireland has been increased from EUR 25,000 to €50,000 as an immediate measure to specifically deal with exceptional circumstances that micro-enterprises – sole traders and firms with up to 9 employees – are facing in order to alleviate the financial pressures arising from Covid-19. In addition, the terms of the MFI Business Loan include a six-month interest free period and a repayment moratorium of up to six months, with the loan then repayable over the remaining 30 months of the 36-month loan period at an interest rate of between 4.5% and 5.5%. Funding to enable Microfinance Ireland offer MFI Business Loans has recently been increased by EUR 13,000,000 to EUR 20,000,000

  • Extension of supports for online trading to EUR 7.6 million;

  • Free mentoring, free online training for all businesses.

The government has also extended its Digital Trading Online Voucher scheme by an additional EUR 3.3 million, by which micro-enterprises can get a EUR 2 500, and have expanded free online training to entrepreneurs.318 In June, support for the vouchers was further extended by EUR 14 million.319

On 2 May, the government announced a further set of measures for business worth EUR 6.5 billion, including:320

  • Commercial rates will be written off for three months.

  • A 2 billion euro credit guarantee scheme for small and medium sized businesses. The government will provide an 80% guarantee on lending to SMEs, for terms between three months and six years, for loans between EUR 10 000 and EUR 1 million against lower interest rates.321

  • Ireland’s sovereign wealth fund mandated to invest EUR 2 billion directly into bigger firms.

  • A EUR 10 000 restart grant for micro and small businesses.

On 7 May, Enterprise Ireland announced a specific Sustaining Enterprise Fund to help small enterprises during COVID-19. The fund will provide between EUR 25 000 and EUR 50 000 in a short-term funding injection to eligible smaller companies to support business continuity and strengthen their ability to return to growth. To be eligible for the funding, a company must have suffered, or be projected to suffer, a 15% or more reduction in actual or projected turnover or profit as a result of the COVID-19 outbreak.322

A digital platform announced it would allow Irish SMEs to sell their products online for free during the COVID-19 pandemic.323

 Israel

On 8 March, the Finance Ministry announced it opened a special loan facility for struggling companies to receive support from the State Guarantee Fund for Small Businesses.324 The facility is primarily aimed at SMEs that were experiencing cash flow difficulties as a result of the virus outbreak. It provides working capital loans of up to 5 years to a maximum of NIS 500 000 or up to 8% of the last annual turnover, with possibilities to defer payment for half a year. Banks are expected to provide credit approval within nine working days.

On 11 March, the government announced a further NIS 10 billion support package, doubling the amount available under the loan fund.

On 16 March, the government announced further measures of importance to SMEs, which include (next to measures to enhance access to loans already announced):325

  • Advance of payments to small and medium government suppliers;

  • Extension of deadline for VAT payments to state treasury for all businesses;

  • Postponement of National Insurance payments for the month of April, and allowing payments in instalments;

  • Postponement of self-employed, small and medium business mandatory payments;

  • Postponement of council tax (municipal tax) payments and provision of financial assistance to weak local government, and;

  • Special aid grant for self-employed - intended for self-employed with small businesses in anticipation of projected losses due to the decline in economic activity.

Furthermore, a number of other policy measures are currently in place:

  • Reducing the level of collateral for businesses (while increasing government guarantees at the same time) in the Small and Medium Business Fund from 25% to only 10% for any business that submits a signed statement regarding damages from the Coronavirus. The fund's credit line will be increased to four billion NIS.

  • A support package of NIS 10 billion to SMEs, mostly through the State guarantee Fund to SMEs, to finance working capital in view of cash flow difficulties:

    • State guarantees increased to 85% of the loan amount

    • Reduced collateral up to 10%

    • Longer repayment period up to 5 years

    • Shortened loan approval at the bank – up to 9 working days

    • Loan up to 500 000 NIS or 8% of the annual revenue (the highest between the two)

  • Postponement of VAT, water, social security and health insurance payments.

  • Flexible payments for electricity bills.

  • By order of the Minister of the Interior, municipal taxes will be postponed until May 2020 through a government support for authorities that will be affected by the pandemic.

  • Israel’s five largest banks, which account for about 99% of overall banking activity, declared a deferment of mortgage and loan payments (with a waiver of deferred payment fees) for the next three months. Israel’s largest mortgage bank, bank Mizrahi Tefahot, will postpone payments for four months. The same applies for state-funded mortgages.

  • As directed by the Accountant General of the Ministry of Finance, the government pays its suppliers within a few days, while the maximum amount of time to refund businesses was reduced from 45 to 30 days.

  • Freezing enforcement actions, including new foreclosures and the postponement of outstanding foreclosures.

  • Reducing the enforcement of by-laws within certain local administrations vis-à-vis businesses.

  • Increased flexibility in the employment market by extending unemployment benefits to employees who are sent on unpaid leave for 30 days or more.

  • Promoting local procurement: encouraging residents to buy from local SMEs by local authorities, through investments in marketing within the community.

  • Creating a network of local authority’ representatives, for peer learning and communicating “field” knowledge to the Ministry of Economy, and vice versa.

On 29 March, media reported the government prepares a further package which would bring support towards NIS 80 billion, including a NIS 5 billion fund for small business.326

On 1 April, the government announced a NIS 650 million stimulus plan for the tech sector, via the Israeli Innovation Authority.327 NIS 50 million will be used for innovation for combatting the COVID-19. A package of measures to boost “growth engines” once containment measures are eased, including the acceleration of public investment projects (NIS 1.1 billion), support for SMEs in the high-tech sector (NIS 1.5 billion), and further measures to boost economic activity (NIS 5 billion).

On 2 April, the government approved a grant scheme for self-employed.328 Under this scheme, self-employment receive a payment of NIS 6 000 to help them weather the pandemic. Late April, the government approved a plan to provide the self-employed with a second grant of 70% of their regular income up to a maximum of NIS 10 500.329

On 24 April, grants for small businesses (up to NIS 20 million turnover) up to NIS 400 000 to cover fixed expenses were announced.

On 24 May, the government has expanded the loan fund for SMEs from NIS 8 billion to NIS 14 billion.330 The government guarantees 85% of each loan but guarantees are limited to 15% of overall losses on all loans. Loans have a maturity of up to 5 years, with lower collateral requirements (5%). The first year is interest rate free. The time required for banks to provide credit approval is reduced to 7 working days.

On 16 June, a further package was adopted of NIS 5.5 billion, through which businesses are stimulated to bring back workers that had been paid on unpaid leave. The measure will provide up to NIS 7,500 for each employee who returns to work in the month of June, and NIS 3,500 for each worker who came back in May.331

On 8 July, the government announced a grant scheme for small business where SMEs can get a NIS 1000 grant to acquire a fibre optic internet connection.332

Non-profit initiatives have been set up to support credit to SMEs.333

 Italy

Since the outbreak of the crisis, the government announced several measures to support the economy. In early March, measures were announced to help sectors such as tourism and the logistics and transport industry, which have been heavily impacted by the virus.334 Also support to regions was pledged, totalling EUR 900 million. Backed by the Government, the Italian Banking Association announced an agreement with various business associations to set in place a large-scale moratorium on debt repayments, including mortgages and repayments of small loans and revolving credit lines. It would concern loans subscribed by companies until 31 January 2020.335

On 16 March, the Italian government announced details of a EUR 25 billion (1.4% of GDP) bill. Decree-law no. 18 of 17 March 2020 (“Healing Italy” Decree) consists of an extensive (127 articles) package of measures aimed at strengthening the healthcare system and providing economic support to households, workers and businesses.336 Policy responses addressing employees and self-employed include, among other:

  • Micro-enterprises and SMEs of all types, including freelancers and sole proprietorships, can benefit from a moratorium on a total volume of loans estimated at around EUR 220 billion. Current account credit lines, loans for advances on securities, short-term loan maturities and instalments of loans due are frozen until 30 September. Part of these is made up of sums already disbursed which should have been repaid, representing in practice a new loan from the bank until 30 September, whereas the other part is made up of new financing which the company can obtain by using the credit line which is frozen. Banks or other lending institutions can activate a public guarantee covering 33% of the lent amount.

  • A EUR 1.5 billion increase in the appropriation of the Central Guarantee Fund for SMEs (Italy’s main national credit guarantee facility), including for the purpose of renegotiating existing loans. Adding together existing and new loans, the objective is to allow guarantees for more than EUR 100 billion in total financing to businesses from the Central Guarantee Fund.

  • In addition to increasing the financial endowment of the Central Guarantee Fund for SMEs, standard regulations on the functioning of the Fund have been temporarily modified as follows:

    • Ceilings for guarantees to be provided for a single company have been raised from EUR 2.5 million to EUR 5 million;

    • Guarantees are provided for free, fees otherwise due to the Fund are suspended; o Debt rescheduling operations are eligible for the public guarantee;

    • Automatic extension of the guarantee in the event of a moratorium or suspension of funding because of the coronavirus emergency;

    • Extension to private entities of the faculty to contribute to increasing the endowment of the Fund (previously limited to banks, regions and other public bodies);

  • Incentives for banking and industrial companies to sell their substandard or impaired loans by converting their deferred tax assets into tax credits. The intervention frees up new liquid resources for companies and allows banks to grant new credit for an estimated amount of up to 10 billion.

  • EUR 200 million in measures to support the troubled airline, Alitalia, and Air Italy;

  • Redundancies for “justified objective reasons" banned for the next two months;

  • A redundancy fund boosted by EUR 5 billion to provide 9 weeks’ salary for workers not covered by other social safety nets. Administrative processes are simplified.

  • Temporary suspension of mortgage payments for first-time homebuyers, including self-employed who have lost more than one-third of their turnover during the last quarter.

  • A fund for last resort income support (appropriation of EUR 300 million for 2020) is established for employees and self-employed workers who ceased, reduced or suspended their employment relationship or business due to the pandemic.

  • Self-employed workers (spanning from freelance professionals to collaborators with contractual forms other than employment) will receive a tax-free one-time allowance of EUR 600 for March 2020.

  • Self-employed, freelance professionals and businesses whose revenues are lower than EUR 2 million can defer payments to the cashier to settle withholding taxes. Deferrals also apply to annual and monthly VAT, as well as social security and insurance. Payments are deferred to 31 May and they can be paid in a single solution or in up to five monthly instalments.

Furthermore, to address liquidity shortages and ease access to finance by SMEs, Cassa Depositi e Prestiti (CDP), National Promotional Institute and Development Finance Institution, have increased the limit for funding to the banking system from EUR 1 billion to EUR 3 billion. The funds are intended to grant subsidised loans to SMEs and mid-caps to sustain cash flow and investments.

To support export activity, the Italian export credit agency (SACE) has announced a EUR 4 billion package to help SMEs address cash flow needs and diversify export markets. In addition, the Italian Agency for the promotion of business internationalisation (ICE) has cancelled the costs already incurred by companies for participation in fairs and events, also proposing alternative visibility solutions.

On 4 April, the government announced it intends to extend its takeover shield for SMEs.337

On 6 April 2020, the Council of Ministers approved the so-called "Liquidity Decree", disclosing its main components pending publication, bringing the total of support to EUR 400 billion.338 Decree-law no. 23/2020 was published in the Official Gazette on 8 April 2020 and entered into force on the following day, providing for a vast set of measures aimed at supporting access to credit for SMEs:339

  • State guarantees through SACE: public guarantees amounting to EUR 200 billion will be granted by SACE (a public company specialising in the export insurance-financing sector) in favour of banks providing loans to companies of all sizes. In particular, the guarantee will cover between 70% and 90% of the amount financed, depending on the size of the company, and is subject to a number of conditions including the impossibility for the beneficiary company to distribute dividends for the following twelve months. Specifically, companies with less than 5 000 employees in Italy and a turnover of less than EUR 1.5 billion benefit of a coverage of 90% of the loan and a simplified procedure is provided for access to the guarantee. Coverage falls to 80% for companies with more than 5 000 employees and a turnover of between EUR 1.5 billion and EUR 5 billion, and to 70% for companies with a turnover of more than EUR 5 billion. The amount of the guarantee may not exceed 25% of the turnover in 2019 or twice the personnel costs incurred by the company. EUR 30 billion are reserved for SMEs, including sole proprietorships and freelancers, and access to the guarantee issued by SACE will be subject to the condition that they have exhausted their capacity to use the credit issued by the Central Guarantee Fund.

  • Enhancement of the Central Guarantee Fund for SMEs: new loans for a maximum duration of 6 years to SMEs and freelancers, for a maximum amount of EUR 25 000 and in any case not exceeding 25% of the beneficiary's income, are admitted to the Fund with 100% coverage and without a credit merit evaluation. The repayment of the capital does not start before 18 months after the disbursement of the loan. The Fund may now also grant guarantees free of charge up to a maximum amount of EUR 5 million to enterprises with fewer than 499 employees. The guarantee from the Fund itself is 90% of the amount. Finally, for enterprises with revenue of up to EUR 3.2 million, the 90% guarantee granted by the Fund may be combined with another guarantee from a third party to obtain loans with a 100% guarantee on loans of up to EUR 800 000 (but not exceeding 25% of the beneficiary's revenue).

  • Export support: the Decree also introduces a co-insurance system under which 90% of the commitments deriving from SACE's insurance activity are assumed by the State and the remaining 10% by the company itself, thus freeing up to a further EUR 200 billion of resources to be allocated to the strengthening of exports. The aim is to enable SACE to meet the growing demand to insure operations deemed to be of strategic interest to the national economy, which the company would otherwise not have the financial capacity to cover.

Beyond support of liquidity, other measures included in the above Decree include:

  • Measures to ensure business continuity: the Decree provides for a series of measures aimed at ensuring the continuity of companies, with particular regard to those that were healthy before the emergency. The reduction or loss of share capital will not any lead to company dissolution. Bankruptcy regulations and other insolvency proceedings have been loosened.

  • Protection of strategic sectors: extension of the scope of application of the “golden power” discipline, to protect sectors of strategic importance such as energy, transport, water and health, food safety and others.

  • Deferral of tax obligations by workers and companies (e.g. VAT, withholding tax and social contributions), in addition to those already provided for with the "Cura Italia" Decree.

On 29 April, media reported that a non-banking financial institution was allowed to provide SME finance under the government guarantee scheme.340

On 13 May, the Council of the Ministers approved a new major package of measures to support businesses, workers and economic sectors (“Recovery decree-law”), of EUR 55 billion. The package includes the following measures of relevance to SMEs:

  • Non-repayable contributions: 6.2 billion euros are allocated for grants to companies, self-employed and freelancers with turnover not exceeding EUR 5 million, provided that their turnover in April 2020 decreased by 33% compared to April 2019. The amount is calculated as a share of reported losses:

    • 20% for firms whose revenues are lower than EUR 400 000;

    • 15% for firms whose revenues are between EUR 400 000 and EUR 1 million;

    • 10% for firms whose revenues are between EUR 1 million and EUR 5 million.

  • The minimum contribution, which will be paid in June and is exempted from income taxes, is EUR 1 000 for individuals and EUR 2 000 for legal entities.

  • Fiscal incentives for equity investment: 20% deduction, up to EUR 2 million, for equity investments in companies with a turnover between EUR 5 million and EUR 50 million that suffered a 33% decrease in turnover. In addition, these companies can benefit from a tax credit by 50% of incurred losses.

  • Recapitalisation of companies: appropriation by EUR 45 billion by Cassa Depositi e Prestiti, the Italian national investment bank, for equity investment and convertible loans to non-financial joint stock companies whose turnover is above EUR 50 million.

  • Cancellation of corporate income tax: SMEs that suffered from losses will not pay the balance of the corporate income tax due for 2019 and the first instalment of the advance payment due for 2020. EUR 4 billion are allocated for this purpose.

  • Rental subsidies: Companies with a turnover below EUR 5 million reporting severe losses will benefit from a tax credit equal to 60% of monthly rentals for business use. In the case of hotels, the tax credit is granted irrespective of the turnover. The appropriation amounts to EUR 1.5 billion.

  • Reduction of bill charges: EUR 600 million are allocated to reduce the cost of electricity bills for small businesses for May, June and July 2020.

  • Settlement of late payments by public administration: appropriation of EUR 12 billion to ensure that regions and the autonomous can settle their late payments towards firms.

  • Incentives for sanitisation: tax credit of 60% of the expenses incurred in 2020 to ensure safety in offices, the purchase of personal protective equipment and other devices designed to ensure the health of workers and users, up to a limit of EUR 80 000 euros per beneficiary.

  • Extension of the national redundancy fund for micro-firms introduced with the “Cura Italia” decree-law for nine more weeks (additional appropriation of EUR 16 billion), and simplified procedure to facilitate its disbursement.

  • Extension of grants for the self-employed introduced with the “Cura Italia” decree-law. The subsidy will amount to EUR 600 for April and will be increased to EUR 1 000 for May, provided that the concerned self-employed reported a drop by at least 33% in revenues, compared to 2019.

  • Extension of ban on dismissals up to five months.

  • Exemption from the real estate tax for hotels: the exemption applies to the first instalment of 2020. To compensate lower income for municipalities, a fund of EUR 122.5 million is set up.

  • Exemption from the tax for the occupation of public space by restaurants, bars and other firms with outdoor tables in the food and beverage sector.

  • Business and cultural institutions emergency fund: appropriation of EUR 225 million to support bookshops, the entire publishing industry, museums and other cultural institutions.

  • Support to high-tech start-ups: the endowment of the main national subsidised finance programme for innovative start-ups is increased by EUR 100 million. EUR 10 million are allocated to incentivise start-ups to use services by business incubators and accelerators. The thresholds for the national investor visa scheme for foreign citizens financing SMEs and start-ups are halved. An additional tax credit for start-up equity investor is set up.

    On 7 July, the government launched a package of measures to reduce red tape, which aims to support post COVID-19 recovery.341

The Ministry of Innovation and Digitalisations launched an initiative called “Digital Solidarity”. This includes a portal where companies (in particular SMEs and self-employed) can register to access without costs digital services from large private sector companies regarding smart/tele-working, video conferencing, access to mobile data, cloud computing etc., to enable them to cope with restrictions to movement and work. Also, banks have set up programmes to support their SME clients.

Several Italian regions have taken measures related to SMEs. 342

 Japan

On 13 February, the government announced measures to support financing of local micro, small and medium enterprises and others in tourism and other sectors, by securing a total of JPN 500 billion for emergency lending and loan guarantees at the Japan Finance Corporation and other institutions.343

The government on 29 February announced a further package of measures of JPN 270 billion (USD 2.5 billion), with an emphasis on health measures.344

On 10 March, the government announced a further package of JPN 430 billion (USD 4.1 billion), with several measures directed at SMEs:

  • An expansion of the amount of the special loans offered to SMEs (to JPN 1.6 trillion) with zero-interest loans with no collateral to SMEs. Japan Finance Corp will join this programme.345

  • A specific guarantee programme for firms affected by the outbreak and whose sales and other profits are declining. The Japan Federation of Credit Guarantee Corporations (JFG) will guarantee the full loan amount for such SMEs, under a new framework (No. 4 Safety Nets for Financing Guarantee).346

  • Subsidies to support teleworking in SMEs (including encouraging firms to adopt IT solutions and develop e-commerce sales channels), and

  • SMEs facing more than a 15% decrease in sales can claim compensation of interests and can borrow without collateral.347

Japan also considers extending its programme for property tax breaks for small firms.348 On 21 March, media reported the government planned a corporate tax refund, mainly directed to SMEs.349

On 26 March, the government announced to extend employment adjustment subsidies:350

The subsidy rate for leave allowances will be raised to 80% for SMEs, which can be extended up to 90%, if no employees are fired, and;

In addition to raising the subsidy rate, the requirements will be relaxed.

On 8 April, the government announced an additional package of economic measures of JPN 86.4 trillion (16.4% of GDP), including additional public spending of JPN 29.2 trillion (5.4% of GDP). It includes the following measures of relevance for SMEs:

  • Cash benefits for households and small and medium sized business owners who face a significant decline of their earnings, and tax measures including one year moratorium for tax and social security charges imposed on small and medium sized business owners: JPN 22.0 trillion (4.1% of GDP);

  • Post-Covid-19 support for business including travel voucher: JPN 3.3 trillion (0.6% of GDP)

  • Support for teleworking, online schooling and reshoring of factories: JPN 10.2 trillion (1.9% of GDP)

  • Funds to prepare for unforeseeable circumstances: JPN 1.5 trillion (0.3% of GDP)

On 30 April, a supplementary budget was approved, including a new subsidy program for enterprises struggling to sustain operations, with cash grants of up to JPN 2 million yen for companies with less than JPN 1 billion in capital seeing declines of 50% or more in year-on-year monthly revenue. Sole proprietors, including freelancers, will also be eligible for a maximum of JPN 1 million in subsidies.351

Furthermore, media reported that the government will use a public and private sector fund to financially support larger SMEs hit by the pandemic. The plan is to funnel JPN 1 trillion to qualifying companies via the fund starting by the middle of May, with each getting approximately JPN 100 million. The targets of the funding initiative are companies that cannot presently survive on bank financing alone, but can be expected to recover once the threat of the virus recedes. One main criterion is that they employ at least 50 people and have sales of JPN 1 billion or more annually. Companies that were already in financial difficulties before the crisis hit will not be eligible.352 The Bank of Japan is considering further support to SMEs as well through a new scheme that would reward financial institutions for lending to SMEs.353

On 8 May, media reported that the government intends to launch a rent support scheme for small businesses. Under the proposal submitted to Prime Minister Shinzo Abe, the government will shoulder two-thirds of rent for up to six months if small businesses, irrespective of sector, experience revenue drops. The maximum cap for relief will be set at JPN 500 000 yen a month and JPN 250 000 yen for the self-employed. Smaller businesses that are eligible to receive rent relief need to have logged either a revenue fall of over 50% from a year ago or of over 30% within the past three months.354

On 22 May, the Bank of Japan provided a further JPY 30 trillion in support for SMEs.355 To encourage lenders, the central bank will pay 0.1% interest on the loans made to small and midsize companies while pledging to extend the purchase period of corporate bonds and commercial paper until the end of March from the initial plan through late September.356

On 27 May, decided on a second supplementary budget for FY 2020 of JPY 31.9 trillion (5.8% of GDP), in order to multiply its effort to sustain the economy.357 The proposals include a number of measures of relevance to SMEs, including:

  • A rent subsidy to help both large corporations and SMEs facing a significant sales decline;

  • Further enhancement of the subsidy for special paid leaves due to business closures;

  • Off-budget measures such as enhanced emergency loans and credit guarantees.

The Bank of Japan, which had earlier indicated it stood ready for further measures358, advanced its Monetary Policy meeting to 16 March, when it decided to strengthen its monetary easing measures. The Bank accelerates the ETF and J-REIT purchases, which has been kept at the annual pace of JPY 6 trillion (1.1% of GDP) and JPY 90 billion (0.2% of GDP), to up to JPY 12 trillion and JPY 180 billion, respectively. In addition, it set an additional purchase limit of JPY 2 trillion (0.4% of GDP) for CP and corporate bonds, with which the Bank increases the asset purchases through September. In addition, the Bank introduced a special operation to provide interest-rate free loans putting up corporate loans as collateral. To help private financial institutions to increase lending to help businesses whose sales are declining, a new funding framework with a 0% interest rate until the end of the month has been established.

Fintech companies in Japan have launched initiatives to support credit to SMEs.359 On 4 April, it was announced that private lenders would provide interest free loans to small firms.360 Furthermore, maker of office equipment are supporting SMEs with digitalisation.361

 Korea

Between 7 February and 3 March, the financial sector (from both state-invested banks, private banks and credit card companies) provided financial support directed at SMEs worth EUR 2.1 billion.

The Central Bank of Korea has gradually lowerd interest rates. On 17 March, the rate was lowered to 0.75% and on 28 May it was reduced to 0.5%.

On 4 March, the Ministry of SMEs and Start-ups announced its plan to provide support worth EUR 1.2 billion as supplementary budget, including the following measures:

  • An Emergency Fund, providing direct financial support to SMEs and self-employed, aimed at encouraging these firms to keep their employees;362

  • Government guarantees, and insurance on loans.363

  • Sanitary support for the reopening of SMEs that closed due to exposure to infected patients;

  • Encouraging brick-and-mortar shops to open their business online.

  • Simplification of procurement processes by limiting on-site inspections.364

Priority is given to regions that were affected the most.365

On 19 March the Government announced a further USD 39 billion package including:

  • Emergency financing for small businesses and other stimulus measures;

  • Loan guarantees for struggling small businesses with less than USD 78 000 in annual revenue to ensure they can easily and cheaply get access to credit.366

On 23 March, the government announced a further support package of USD 80 billion, with the following measures for SMEs:367

  • The package includes KRW 29.1 trillion in loans to small- and medium-sized companies, while another KRW 20 trillion will be used to buy corporate bonds and commercial paper of companies facing a credit crunch.

On 25 March, the Ministry of Employment and Labour announced a plan to temporarily increase employee retention support for SMEs to cover up to 90% (from 75%) of their employees’ “suspension period allowance” incurred during their temporary business closure between April and June. The budget increased from KRW 100.4 billion (EUR 74 million) to KRW 500.4 billion (EUR 371 million).368

On 31 March, the government announced an emergency relief payment plan of KRW 9.1 trillion (USD 7.4 billion) to address the virus outbreak. The government plans to pay relief checks to households in the bottom 70 % income bracket (around 14 million households), of up to KRW 1 million (USD 820) per household. For this, a second supplementary budget bill will be submitted to the National Assembly soon. The government also decided to expand social security contribution relief with three-month payment deferrals and 30 % contribution rate deductions for small business and low-income households.

On 8 April, the government announced a further package of KRW 53.7 trillion. KRW 36 trillion is allocated to trade finance. The government will extend the maturity of trade insurance and guarantees within a ceiling of KRW 30 trillion. Also emergency liquidity worth KRW 5 trillion is available to help local companies expand overseas activities. The measures also include advanced payments of public investments.369

On 5 May, the government announced it was working on a further support package including an emergency loan programme worth KRW 10 trillion to support small business owners. The affected business owners will be able to borrow loans of up to KRW 10 million from six commercial banks. Those who have already drawn from the emergency fund in the previous round in March are not qualified to apply. Interest rates are expected to be 3-4%, higher than in the first round of emergency loans, to avoid that loans are used for non-business purposes.370

On 12 May, media reported that the Korea Development Bank (KDB) successfully sold local currency-denominated social bonds worth total 1 trillion won (USD 815.9 million) to major local institutional investors with an aim to use the proceeds to help small businesses and dismal job market hit by COVID-19.

On 3 June, the government announced the third 2020 supplementary budget of KRW 35.3 trillion (USD 40 billion, 1.9% of GDP) to mitigate the pandemic’s impact. The supplementary budget will strengthen social safety nets, revive consumption and help ailing businesses. The following measures are of particular relevance to SMEs:

  • Providing emergency loans to struggling small merchants, SMEs and large businesses (KRW 5 trillion)

  • Spending KRW 5.1 trillion this year on big data platforms, artificial intelligence and fifth-generation telecommunication services, so called “New Deal projects”, on which the government, on 1 June, pledged to invest KRW 76 trillion over the next five years.  

On 11 June, the government published an overview of economic measures undertaken.371

On 16 June, Korea’s state-run Industrial Bank of Korea (IBK) offered foreign currency-denominated social bonds worth USD 500 million to raise funds to SMEs struggling to recover from the COVID-19 fallout.372

On 3 July, media reported that the government intends to extend its support measures for small businesses to beyond September.373

Domestic commercial banks and savings banks will also allow loans to be rolled over for small businesses if they cannot afford payment when due.

Examples are reported in Korea of SMEs that have received support in recovering from the crisis and now offer support to others.374 Virtual banks have expanded their activities for SMEs during the crisis.375

 Latvia

On 20 March, the government has announced the following measures:376

  • The government will cover 75% of the costs of outbreak-induced sick leaves or workers’ downtime, or up to EUR 700 per month;

  • A postponement of tax overdue for up to three years if the overdues are an effect of the outbreak.

  • Simplification and speeding-up of tax refunds for entrepreneurs and forego personal income tax advances in 2020.

  • Deferral of tax payments in crisis-affected sectors for a period of up to three years. Expected cost- EUR 196 million.

  • State and local government authorities will release firms from rent obligations. They will also be allowed not to impose late interest and contractual penalties in case of overdue payments, except for on those paid for consumed services and utilities- electricity, thermal energy, water supply, and other property maintenance services.

  • Liquidity measures for firms in all sectors: refund of approved amount of VAT to all taxpayers within 30 days after VAT return has been submitted, as well as a VAT refund that has been carried forward in previous periods (expected cost- EUR 60 million); Personal Income Tax (PIT) taxpayers will be exempt from advance payments for the taxation year 2020 (expected cost- EUR 35 million).

  • Loans for up to 3 years for companies to finance new working capital (up to EUR 200 million). Loans will have significantly reduced collateral requirements and reduced/subsidized interest rate, with a grace period of the principal amount up to 12 months.

  • Loan guarantees (up to EUR 715 million), so that an enterprise facing short-term cash flow problems can postpone the payment of the principal until the situation is resolved.

The National Finance Institution Altum provides guarantees for SMEs:

  • Individual guarantees of up to EUR 5 million per beneficiary, offering 50% guarantee for a maximum of two years, and;

  • Working capital loans of up to EUR 1 million per beneficiary, for 18 months.

Fintech initiatives are being developed to support SME finance in the context of the crisis.377

The government supports a hackathon among small firms to find solutions to the crisis.378

 Lithuania

The government launched a EUR 5 billion support plan in the week of 16 March, which includes EUR 500 million for maintaining business liquidity and EUR 1 billion for speeding up investment. The measures include:379

  • immediate tax loans, deferred payments or payment in instalments in accordance with the agreed schedule without interest;

  • stopping recovery actions on the basis of criteria of reasonableness;

  • exemption of taxpayers from fines and penalties;

  • possibility to defer payment of personal income tax;

  • to increase the guarantee limit for the Agricultural Credit Guarantee Fund and INVEGA by EUR 500 million and to extend the terms of the guarantee provision;

  • to allow businesses deferment or payment in instalments of payments for the electricity and natural gas consumed from UAB Ignitis.

  • it is also recommended that municipalities exempt businesses from the commercial real estate and land taxes, and recommended that municipalities be allowed to defer or schedule instalment payments for utilities and heating energy.

  • the Economic and Financial Action Plan provides for accelerating investment programmes by accelerating payments and increasing the intensity of funding. It plans to reallocate EU investment funds to health, employment and business, accelerate the use of public budget funds for running costs, to use all funds from the Climate Change and Road Maintenance and Development Programs and to accelerate renovation of apartment buildings.

  • a recommendation to the Bank of Lithuania to increase the lending potential of banks by EUR 2.5 billion.

Furthermore, the following measures of relevance to SMEs have been put in place:

  • Subsidising wages: The state will contribute to maintaining jobs with subsidies. During downtime, employees are paid at least the minimum wage, but only if the employment contract stipulates a full working time rate. Subsidies vary between 70% and 90% from the employee's accrued salary, up to a specified limit. Employers who have benefited from the subsidies are obliged to keep at least 50% of the jobs in their firm for a period of at least 3 months after the end of subsidy payments.

  • Postponement of the payments date of tax arrears for the affected tax payers.

  • Exemption from fines and default interest for failure to comply with tax obligations on time.

  • Postponement of submission (and payment of) personal income tax returns and advanced corporate income tax returns.

  • Relief from import duties and VAT exemption on importation granted for goods needed to combat the effects of the COVID-19 outbreak pursuant to Commission's decision.

  • Possibility for business customers to defer or arrange the payments in instalments to the public provider of electricity and gas.

  • Recommendation for the municipalities to offer the possibility of deferring or arranging the payment of public utility charges and payments for heat in instalments.

  • Allocation of EUR 1.3 billion to the firms facing liquidity and financial problems: EUR 287 million for loans; EUR 145 million for risk capital investment; EUR 23 million for compensations of loans and leasing contracts interests (during the payment holiday up to 6 months); EUR 100 million for a Business Support Fund, and EUR 50 million for payable invoices loans.

  • A new borrowing instrument enables SMEs to apply for soft loans on the condition that they have run out of working capital due to disruptions in settlements with purchasers whose activities have been terminated or restricted due to quarantine. The maximum loan amount will be up to EUR 100 thousand.

  • Starting from 24 April young firms (SMEs established less than 3 years ago) may get soft loans under the measure "Loans to the businesses most affected by COVID-19". Loans under this measure are easier to apply for, and are available to companies that have lost 30% or more of their turnover due to the COVID-19 outbreak. The maximum loan amount per firm has increased tenfold and now may reach up to EUR 1 million.

  • Allocation of EUR 1.3 billion to the firms facing liquidity and financial problems: EUR 851 million for state guaranties

  • The guarantee limit for the Agricultural Credit Guarantee Fund and ceiling for INVEGA (promoting the development of small- and medium-sized enterprises) guarantee are set to increase by EUR 500 million.

On 14 April the government approved the temporary provision of rental subsidies to business. The subsidies are to be paid during the quarantine period and the two months thereafter. The total amount available for rental subsidies is estimated up to EUR 100 million.

 Luxembourg

The Luxembourg Ministry for the Economy has set-up a hotline and website with information for enterprises, which includes a FAQ on existing measures for companies, including SMEs (financial support and partial employment).380

A bill was adopted on 11 March to provide financial aid for SMEs facing financial difficulties as a result of exceptional events such as acts of terrorism, eruptions of a volcano or pandemics like the current outbreak. The government emphasised that SMEs experience more challenges related to liquidity than large companies as a result of such events. The granting of aid through the bill is subject to three conditions:

  • That an event has been recognised as having a harmful impact on the economic activity of certain undertakings during a given period;

  • That the company is experiencing temporary financial difficulties, and;

  • That there is a causal link between these difficulties and the event in question.

The costs eligible under the new aid scheme are limited to the loss of income observed. The aid will take the form of a repayable advance.