Business Survey 2016: Financing situation for companies better than ever

• Financing climate remains at all-time high
• Conversely, small and young companies continue to face significant hurdles in obtaining credit
• Access to credit also remains difficult for innovation, digitalisation and international projects

The financing situation for companies has never been as good as it is now. The proportion of companies reporting greater difficulties in gaining access to credit fell by 2.6 percentage points to 14.7%. 11.5% of companies signaled an improvement in the financing climate, which was virtually unchanged from the previous year. The principal reasons for this are low interest rates, a high capacity for self-financing among companies and solid business development. This was the result of the KfW Business Survey, which has been conducted in collaboration with professional and regional business associations since 2001.

Small and young companies, on the other hand, continue to experience difficulties in gaining access to credit far more frequently than their larger counterparts. In skilled trades, however, the situation has improved. 22.4% of small companies and 19.9% of young companies reported increased difficulties in gaining access to credit, compared to 3.3% of large companies. Structural reasons are behind this, as small and young companies have greater difficulty in providing sufficient collateral for loans, for example.

Overall, credit ratings improved across the board as a result of positive business performance and rising equity ratios. This was reported by a third of companies, with only 11.3% signalling a deterioration in their rating. Despite the high capacity for self-financing, bank loans remain an important source of financing, with 58% of companies conducting credit negotiations in the past year. In particular demand were investment loans for plants, machinery, vehicles and facilities.

Access to credit differs significantly according to the financing needs of the company. Investment loans for plants and machinery, real estate and takeovers and equity investments present the fewest obstacles to companies, while the financing of digitalisation projects and international activity pose greater challenges. Access to credit for the financing of investments in intangible assets, such as patents and trademark rights, proves the most difficult.

Dr Jörg Zeuner, Chief Economist of KfW, commented: “Intangible assets are often very difficult to assess adequately and are hardly accepted as collateral. This makes credit financing difficult. The same also applies to projects such as the digitalisation of a business model, which involves considerable intangible investment. New approaches involving collateralisation and qualified personnel to appraise digital projects are the best way to improve the financing of investments in the future such as these.”

The survey was conducted for the fifteenth time among companies of all sizes, industries, legal forms and regions. A total of 21 specialist trade and regional business associations took part in the survey. It was conducted in the first quarter of 2016.

The Business Survey 2016 is available (only in german language) to download at: www.kfw.de/unternehmensbefragung.