The Swiss economy is severely affected by the consequences of the coronavirus pandemic. In order to overcome the challenges posed by this exceptional situation and prevent an economic crisis, the availability of credit to private companies and a liquid banking system are essential. The Federal Council, the Swiss National Bank ("SNB") and the Swiss Financial Market Supervisory Authority ("FINMA") have therefore joined forces with the Swiss banks to put together a package of measures to enhance liquidity supply.


On 25 March 2020, the Federal Council adopted an emergency ordinance addressing the issue of liquidity assistance for Swiss SMEs (the "Ordinance"). The measures outlined within the Ordinance aim at mitigat- ing the economic consequences of the coronavirus epidemic and should give companies rapid and non- bureaucratic access to loans for the purpose of bridging liquidity bottlenecks caused by the effects of the coronavirus pandemic. The bridge loans were made available by the commercial banks and PostFinance AG and guaranteed by the Swiss Confederation. The Ordinance entered into force on 26 March 2020.

Bridge loans are intended to provide companies with sufficient liquidity so that they can cover their current fixed costs despite coronavirus-related sales losses. The Federal Council has also enacted measures in the area of short-time work and COVID-19 loss of earnings compensation to help cover wage costs. In order to implement the liquidity support measures set out in the Ordinance, the Finance Delegation of the Swiss Federal Assembly (FinDel) approved a funding commitment totalling CHF 20 billion on 23 March 2020. On 3 April 2020, the Federal Council decided to increase the available guarantee amount by CHF 20 billion to a total of CHF 40 billion. Upon request by the Federal Council, the FinDel on 7 April 2020 recognised CHF 10 billion of the additional amount as urgent and in the extraordinary parliamentary session held on 4 – 6 May 2020, the additional guarantee was approved by parliament.

Federal Council liquidity support

Types of loans

Two types of bridge credit facilities (the "COVID-19 Bridge Facilities") are made available. Both are limited by a Borrowing Base (as defined below) and a maximum amount:

  1. "COVID-19-CREDIT": A loan up to CHF 500,000 with an interest rate of 0.0% fully guaranteed by the Swiss Confederation (indirectly through loan guarantee cooperatives)
  2. "COVID-19-CREDIT-PLUS": If the COVID-19- CREDIT is fully utilised, an additional loan up to a maximum amount of CHF 19.5 million (for a maximum aggregate amount of COVID-19 Bridge Facilities of CHF 20 million per applicant with the extraordinary option of increase in case of hardship), of which (i) 85% is guaranteed by the Swiss Confederation (indirectly through loan guarantee cooperatives) with an interest rate of 0.5%, and (ii) the residual 15% is not guaranteed, with an interest rate to be agreed with the bank granting the loan (market expectations are currently that the unguaranteed tranche will have an interest rate of between 2% and 3%, resulting in an average overall interest rate for a COVID-19-CREDIT-PLUS of approx. 0.9%).

The borrowing base (the "Borrowing Base") is a maximum of 10% of the turnover of the applicant according to its (definitive or provisional) financial statements (standalone basis, not consolidated group figures) for the 2019 business year (or, if not yet available, its definitive financial statements for the 2018 business year), except for 'Start-Ups'. The Borrowing Base for a 'Start-Up' is 10% of three times its net salary bill (Nettolohnsumme) for one financial year, with a floor of CHF 100,000 and a maximum net salary bill of CHF 500,000 (for a COVID-19-CREDIT between CHF 10'000 and 50'000).

The term of COVID-19 Bridge Facilities is five years with the option to extend by another two years in cases of hardship. Both the borrower and the bank have the right to terminate a COVID-19-CREDIT at any time with immediate effect, although the bank may only exercise this right for limited reasons (e.g. in case of violation of regulatory provisions such as AML rules or in the event of a breach of the credit agreement). Furthermore, a right of the banks to introduce mandatory prepayments (Amortisationen) or partially cancel the maximum amount of the credit facility (Limitenreduktion) remains reserved. For facilities made available under COVID-19-CREDIT-PLUS, the banks may define further terms and conditions.

The interest rates of 0.0%/0.5% as determined by the Ordinance can be adjusted by the Swiss federal treasury department annually, for the first time on 31 March 2021, in line with market conditions.

The intention was that COVID-19-CREDITs should be paid out more or less instantly upon receipt by the bank of a fully completed standard loan agreement. The bank would only examine whether the agreement form was completed correctly. However, a COVID-19-CREDIT- PLUS required a credit risk assessment by the bank in a simplified, fast-track procedure with limited scope of review. In general, the timeline from application to payment of the loan was expected to be faster in cases where there was an existing client relationship with the bank given that KYC requirements continued to apply which in practice often cause delays in opening new bank relationships.

Eligibility criteria

Any sole proprietorship (Einzelunternehmen), partnership (Personengesellschaft) or legal entity (juristische Person) that is domiciled in Switzerland and has been established before 1 March 2020, including Swiss domiciled entities that are part of an international group of companies, could file an application for a COVID-19 Bridge Facility with a participating bank, starting from 26 March until 31 July 2020, if it was significantly affected by the COVID-19 pandemic.

Entities with a turnover exceeding CHF 500 million were not eligible to apply.

Conditions of and representations in relation to a COVID-19 Bridge Facility

A COVID-19-CREDIT was subject to the following conditions and each applicant had to give the following representations and warranties:

  1. the applicant was established before 1 March 2020;
  2. the applicant is not in bankruptcy or composition proceedings nor in liquidation at the time of filing the application;
  3. the applicant is significantly impacted by the COVID-19 pandemic, in particular regarding its turnover; and
  4. the applicant has not already secured liquidity, at the time of the submission of the application, under the emergency regulations referring to the fields of sport or culture.

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