At the end of March, the interest rates for Covid-19 loans will be reviewed by the Federal Council. Many expect a further increase after 2023. The hospitality industry could be one of the industries that would be particularly affected by higher Covid loan interest rates.
The year 2020, the year of the pandemic outbreak: Between March 26th and July 31st, 137,870 Covid-19 loans worth around 17 billion francs were granted. Around 23 percent of all companies in Switzerland received a Covid-19 loan. As of February, there are 3,035 Covid loans granted in the canton of Schwyz with a total amount of 369,717,305 francs. Of these, 1,140 loans were repaid. Everyone else is affected by the letter from the State Secretariat for Economic Affairs (Seco), which was recently in the mailbox of business associations and chambers of commerce. “Advance information regarding any interest rate adjustments for Covid-19 loans as of the end of March 2024,” it says.
The interest rates are reviewed annually on March 31st and adjusted if necessary to reflect market developments. The Federal Council could therefore adjust the current interest rates of 1.5 percent for Covid-19 loans up to 500,000 francs and 2 percent for those over 500,000 francs. The last time this happened was in 2023. Entrepreneurs in the region also expect that interest rates will rise rather than fall as of March 31st.
Trade association reacts
The Cantonal Schwyz Trade Association is an important point of contact for traders and entrepreneurs with questions about economic matters and political decisions. President Heinz Theiler said: “We in the canton of Schwyz have not yet received any inquiries from the secretariat.” He then explains the Seco options that can now follow. “The Federal Council has linked the adjustment of the Covid loan interest rates to the key interest rates of the Swiss National Bank (SNB) on March 31st by means of a regulation. This results in two possible scenarios: Either the SNB leaves its key interest rate of 1.75 percent, which was decided in June 2023, unchanged, which means that the Covid-19 interest rates will rise by 0.25 percent, as this increase has not yet been passed on to the Covid loans became. Or, due to signs of stabilization or slowdown in the German economy, it decides to reduce its key interest rate by 0.25 percent, which would result in interest rates remaining unchanged. How do you react now? “The Cantonal Schwyzerian Trade Association supports the Swiss Trade Association in its request to intervene with the Federal Council. There are many arguments against increasing interest rates on Covid loans. There is no need for an interest rate increase because domestic inflation has recovered surprisingly strongly,” said Theiler. He does not expect any business closures in the canton of Schwyz due to an interest rate increase. “But if companies and companies get into difficulties due to the increase in interest rates for Covid-19 loans, they can seek support from the guarantee organizations.” Sectors particularly affected For Heinz Theiler, considerations about increasing interest rates at Seco are understandable, as the market environment has changed. “The loans were granted in a crisis situation and under the direct responsibility that the state took on as a result of the company closures it had mandated in order to cushion the loss of sales. On the other hand, the same market economy conditions should apply to all companies and any distortions of competition caused by excessively low interest rates for Covid-19 loans should be avoided. Theiler doesn’t think that the initial idea of supporting companies in times of need is now turning into an additional burden (threatening their existence). The Seco has no interest in companies and commercial enterprises getting into existential difficulties due to an interest rate increase. When asked which sectors would be particularly affected by the interest rate increase, he says: “If so, then they are the same sectors that were already severely affected by the closure measures and have still not recovered well, for example tourism, the hospitality industry, the event industry and retail.”
Industry associations on the move
Peter Reichmuth, department secretary of the Schwyz Economics Department, explains the situation: “As of March 31, 2023, the federal government increased the interest rates on Covid loans for the first time. A further adjustment will be examined at the end of March. The letter from the federal government to the business associations and chambers of commerce is preliminary information.” The Federal Council has not yet passed a resolution in this regard. “Since the federal government has the lead here, it is to be expected that industry associations will approach the federal government on this issue and ask it to forego an interest rate increase.” “Industry punished twice” One of the associations in question is Gastro Schwyz or Gastro Suisse. In a statement it says: “The interest rate increases are based on the general development of interest rates. What is forgotten is that the SNB’s interest rate increase is also a reaction to inflation.” The hospitality industry, with its comparatively moderate margins, is feeling the effects of inflation strongly and can only partially pass on the price increases. “The industry is being punished twice as much.” Gastro Suisse therefore expects the federal government to carefully examine the effects of the interest rate increases and reduce the interest rates again.
Last year, after the first rate increase, a petition was submitted, supported by Gastro Suisse and the Fédération Suisse des Professionnels de l’Événementiel, among others. Just over 1,800 companies called for the 0 percent interest rate on SME Covid loans to be maintained. The motion will now be discussed in the National Council on March 6th. If it is accepted, this also applies to any upcoming increase. That would take her off the table.
2024-03-15 00:29:43
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