The Investitionsbank Berlin will be asking all freelancers and small businesses who received Soforthilfe in the Spring whether they needed it or not. If they didn’t really need it or didn’t need all of it, they should pay some or all of it back.
IHK Berlin has reported in their latest Corona newsletter that the IBB will send notifications from 4.12.2020 to all recipients of Soforthilfe II asking them to check their income/expenses for the period in which they received Soforthilfe, to see if they actually needed it to cover a liquidity shortage.
We don’t yet know exactly how they expect freelancers and small businesses to check our finances to see if we needed it.
Some examples of how it might work (warning! These are purely speculative!)
Example 1
Let’s say you got Soforthilfe approved on 01.05.2020 (so, Bundesmittel for a 3-month period) and you’re a freelancer with no employees. Your average monthly revenue is 2,500 EUR and your running costs are 500 EUR monthly. This means your average revenue for 3 months would be 7,500 EUR and your average expenses for 6 months would be 1,500 EUR, which would leave you with a healthy profit of 6,000 EUR. In Spring, your income took a major fall so you applied for and received 1,500 EUR of federal funding to cover your business expenses from May til July. This was to ensure you don’t have a liquidity shortage. A liquidity shortage is when you don’t have the funds available to pay your expenses.
So, what actually happened? In May, you had no revenue. You made 200 in June and 600 in the second half of July.
The liquidity shortage lasted the whole 3 months. You definitely needed Soforthilfe, and you probably needed ALGII as well.
Example 2
Let’s have a look at what happened if your revenue flowed in differently.
In May, you had no revenue. June was OK, you made 1,200 revenue. You made 1,000 in July.
From June, you didn’t actually have a liquidity shortage anymore. The revenue that you made in June was enough to cover your business expenses in July. Yes, you earned less than expected, but you had enough revenue to cover your business expenses. In this case, you might pay back 500 EUR – the money you received to cover your business expenses in July.
Disclaimer: I have no idea how the IBB will do this. They might ask to see Profit and Loss statements and then they’ll figure out how much you should pay back. Just be prepared for the letter and have your bookkeeping sorted so that you can react promptly.
Will this apply to those who received Soforthilfe before 06.04.2020?
This was state funding intended for your loss of income as well as just your business expenses, and the period was 6 months, not 3. I don’t know yet. But if yes, here is my guess on how they might calculate this:
Example 1
Let’s say you got Soforthilfe approved on 31.03.2020 and you’re a freelancer with no employees. Your average monthly revenue is 1,400 EUR and your running costs are 200 EUR monthly. This means your average revenue for 6 months would be 8,400 EUR and your average expenses for 6 months would be 1,200 EUR, which would normally leave you with a healthy profit of 7,200 EUR or 1,200 EUR per month. In Spring, your income took a major fall so you applied for and received 5,000 EUR of state funding to cover your loss of income from 29.03.2020 until 29.09.2020.
So, what actually happened? In May, June and July, you had no revenue. Definitely less than normal. Things picked up a bit. You made 500 revenue in August, 500 revenue in September and 1,000 revenue in October. Of course, you still had to pay your business expenses.
Since the state funding was allegedly intended to cover your loss of income as well as your expenses, let’s look at your total profit. Instead of a profit of 1,000 EUR a month, you made a profit of 233 EUR per month. Your loss of income was 4,602 EUR. Will the IBB ask you to pay back 398 EUR? I don’t know and somehow, I doubt it.
Example 2
Let’s have a look at what happened if your revenue flowed in differently.
In May, your revenue was only 200 EUR. In June, 500. July 700. August 1,000. In September, you made 1,200 of revenue and in October, you made 1,400 revenue – back to normal.
Your revenue was 5,000 and you got 5,000 EUR Soforthilfe = 10,000 EUR revenue altogether. Your expenses were 1,200 EUR, leaving you with an average profit of 8,800 EUR, or 1,466 EUR per month. This results in an “Überschuss” – you now have more money than you needed. You might be asked to pay back 1,596 EUR.
Disclaimer: I have no idea how the IBB will do this. They might ask to see Profit and Loss statements and then they’ll figure out how much you should pay back. Just be prepared for the letter and have your bookkeeping sorted so that you can react promptly.
Warning: you are reading speculative examples given by a stranger on the internet with no background in finance or banking.
Second warning: math was never my strong suit. I have checked the examples a few time, but I’m still making no claim that they’re right or even close to being feasible. Math nerds out there feel free to correct my calculations and I’ll change them.
Have I put in enough caveats? Anyway, good luck, and as usual, if you need help communicating in German by phone or email or post, book Life Admin and we’ll take care of it.
Kathleen
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