The Federal Ministry of Economics and the Federal Ministry of Finance have agreed to make it easier for German medium-sized companies to do business with other countries by providing loan guarantees. This will help the German economy to spread its export buyers more widely and reduce geopolitical risk.
Finance State Secretary Florian Toncar (FDP) said: “This offer finally closes a gap that has been known for years.” According to the joint paper of the two ministries, the new guarantees will help German medium-sized companies to secure the necessary liquidity in an increasingly difficult environment.
The loan guarantee works like this: If a German company sells goods abroad, the buyer often does not pay his bill directly. Instead, the German seller sets a deadline by which he must have paid for his goods. Formally, the German seller grants the buyer a loan. Companies can already have this loan secured by the state via a so-called Hermes guarantee in the event that the buyer does not pay.
The federal government wants to introduce new guarantees for exports by German medium-sized companies up to an order value of ten million euros by the end of the second quarter. The state guarantee for the banks should cover 80 percent of the loan and the banks always pay a premium to the federal government for issuing the guarantee.
State Secretary for Economic Affairs Franziska Brantner (Greens) said: “With the new instrument, we are helping small and medium-sized companies to use their full potential in international business.” The “forfaiting guarantee” will first be tested in a three-year pilot phase, for which the federal government will provide a total of 250 million euros for the guarantees.