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13 May 2020
The COVID-19 pandemic is affecting the economic activity of all businesses. Among the most severely affected are young and innovative companies (ie, start-ups). Not only is the general market downturn affecting their sales, growth prospects and ability to attract financing from business angels and venture capitalists, but – until now – such businesses seem to have been only marginally considered by the emergency measures put in place by the federal government.
Following the widespread outbreak of COVID-19 in Switzerland, the Federal Council implemented several emergency measures to mitigate the virus's economic impact. Among other things, the Federal Council has:
Unfortunately, so far these measures have been of limited benefit to most start-ups. The COVID-19 guaranteed bridge loan requirement linking the loan amount to a company's turnover (the disbursed amount is capped at 10% of the preceding business year's generated sales) has been particularly unfavourable to start-ups. As many start-ups are not operative or do not yet have a marketable product, such a sales-based requirement has meant that they have only limited or even no access to the emergency facilities. Further, there are signs in the market that fundraising from business angels and venture capitalists is becoming more challenging, as the latter concentrate on their portfolio companies and – if they invest at all – price the increased risk in their calculation, thereby lowering the valuation of companies.
On 22 April 2020, after weeks of pressure from the growing Swiss start-up ecosystem, the Federal Council acknowledged that start-ups had little or no access to the existing emergency aid and, considering their importance for the economy as a whole, stated that it would devise a liquidity support programme specifically designed for innovative start-ups. On 4 May 2020 further details of this programme were communicated to the public.
The scheme encompasses the following points:
At the time of writing, 12 cantons have confirmed their participation in the new scheme. However, several 'start-up rich' cantons such as Zurich, Zug and Bern, which had already put in place their own emergency support measures for start-ups, have not decided yet. If they do, they will have to coordinate the efforts with their own pre-existing measures. It remains to be seen whether the two-tier decision-making process mentioned above proves to be too cumbersome and – given the somewhat unclear requirements – arbitrary for start-ups in dire need of additional financing.
For further information on this topic please contact Alexander Vogel or Marco Fusi at Meyerlustenberger Lachenal by telephone (+41 44 396 91 91) or email (email@example.com or firstname.lastname@example.org). The Meyerlustenberger Lachenal website can be accessed at www.mll-legal.com.
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