After the package of measures for the €2 billion aid package for startups was approved at the beginning of May, KfW has now announced that Pillar II of the aid is now also in place. However, this does not mean that startups that are not financed by venture capital firms can already apply for the funds.
The KfW Banking Group is providing the state promotional institutions with global loans with liability exemptions to finance startups and small and medium-sized enterprises. This now also provides access to Pillar II of the federal government's aid, which Federal Minister Peter Altmaier and Federal Finance Minister Olaf Scholz announced on April 1 to overcome the coronavirus crisis. Pillar I of the aid, the so-called Corona Matching Facility, has already been in place since May 14, 2020 live. VC funds can supplement their startup financing from the Corona Matching Facility through KfW Capital or the European Investment Fund (EIF) under the same conditions.
Pillar II provides support for startups that are not financed by venture capital firms and therefore cannot access the Corona Matching Facility. Through these global loans, which come with liability exemptions, the state funding institutions can refinance funding instruments tailored to the respective federal states. The specific funding structure varies from state to state and has yet to be clarified in detail.
Jörg Kukies, State Secretary in the Federal Ministry of Finance, explains:
"After the first pillar of our €2 billion rescue package for startups with access to venture capital investors was launched in mid-May, we have now completed the second pillar of the rescue package. We are pleased to now be able to address the urgent needs of small and medium-sized startups and medium-sized companies without access to venture capital investors. In conjunction with the well-received first pillar, this second pillar ensures tailored support for this promising and future-proof industry through the integration and close networking of the state development institutions, taking into account the federal structure of our state."
Applying for funds from Pillar II
To apply for the funds, startups must contact the responsible State funding institutes or intermediaries In the case of Munich-based startups, the LfA Förderbank Bayern is working with BayBG and Bayern Kapital. However, it will be several weeks before this actually happens, as the actual implementation of Pillar II has not yet been finalized. BayBG expects that applications for aid will not be available until the beginning of July. Bavaria Capital explains on its website:
"For the launch of Pillar II of the federal government's aid program for startups and SMEs, numerous details still need to be finalized between KfW and LfA Förderbank Bayern, the Bavarian state development agency. Specific contact persons can be identified in approximately 2-3 weeks."
The support of up to €800,000 is provided as individual mezzanine or equity financing. Pillar II financing is available to companies that were not in financial difficulty by December 31, 2019, and that have demonstrable financing needs. A further prerequisite for applying is that the companies can demonstrate a connection to Germany.
