In response to the first COVID-19-related lockdown, particularly small and medium-sized enterprises in Germany received easy access to extensive state aid in order to strengthen the liquidity position of cash-strapped firms. For the most part, this was done in a ‘whatever-it-takes’ fashion to rescue as many firms as possible from insolvency. Clearly, it has been necessary to support healthy companies whose financial difficulties have been the result of the pandemic and the associated measures. However, struggling companies whose existence would have been under threat even without the lockdown also received financial aid. Due to the urgency of the measures, they were implemented in an untargeted manner, which – in addition to generating direct costs in the billions – could also have negative consequences for medium-term growth opportunities and productivity development in Germany. As a recent study by ZEW Mannheim shows, the untargeted financial support has contributed to a backlog of corporate insolvencies. In particular, very small, financially weak companies, which under normal economic circumstances would have been highly likely to file for insolvency, were kept alive without the prospect of successful recovery.