Switzerland has unveiled its “Covid-19 Refinancing Facility” (CRF), designed to provide cash-strapped businesses with emergency loans to weather the coronavirus crisis. Loans of up to CHF 500,000 ($ 510,000) will be interest free while businesses will pay 0.5% on larger loans of up to CHF 20 million.
This content was published on March 25, 2020 – 4:15 PM
The facility will be up and running on Thursday, giving businesses access to cheap cash to pay their bills immediately. All non-essential shops and services on Main Street have been ordered to close while some manufacturing activities have also been affected by the pandemic.
Economists warn of an inevitable recession due to the extraordinary measures.
Last week, the government increased its emergency funding from 10 billion francs to 42 billion francs. Some 14 billion francs will pay the salaries of short-time workers, 20 billion francs being offered in the form of guaranteed loans and more funds intended for specific industries.
The Swiss state will guarantee all loans up to CHF 500,000 and 85% of larger amounts, with commercial banks assuming the remaining 15% of the risk. The Swiss National Bank (SNB) will provide cash that companies can access through a online application processExternal link.
“The companies concerned can ask their banks for bridging loans representing a maximum of 10% of their annual turnover and a maximum of 20 million francs,” said the press release. the government saidExternal link. âCertain minimum criteria must be met. In particular, the company must declare that it is suffering substantial declines in its turnover due to the Covid-19 pandemic. ”
The Swiss Business Federation welcomed the creation of the loan facility, saying it would âprevent a negative chain reactionâ of failing companies.
Credit Suisse issued a statement saying it “does not want to derive any income from this program. However, if it does, we will donate any net profit generated to projects to support struggling Swiss companies.”
Abuse will be punished
Finance Minister Ueli Maurer said on Wednesday he was confident business owners would not abuse the cheap loan facility. But he warned of possible fines of CHF 100,000 for anyone who improperly takes advantage of the offer.
Maurer also said that additional financial support would be considered for large companies.
The SNB also recommended a temporary suspension of the counter-cyclical capital bufferExternal link which forces banks to set aside billions of francs against possible mortgage defaults. This is to allow banks to free up more capital to issue in the economy.
Bank Credit Suisse released a report on Wednesday concluding that “the coronavirus crisis will not bring the Swiss real estate market to its knees.” This is largely because the government has pledged to cover much of the lost household income due to the pandemic crisis.
“While there is certainly damage, it will be largely limited to the commercial real estate segments, particularly the retail space market and the hospitality industry,” the report said.
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