KfW Research: SMEs are finding it increasingly difficult to access loans

• More SMEs than ever before complain about banks’ restrictive lending practices
• Accessing credit remains challenging for large enterprises as well
• Businesses are showing slightly more interest in loans, but demand remains below-average

Small and medium-size enterprises in Germany face increasing obstacles in accessing loans. In the fourth quarter of 2024, 32% of SMEs that were interested in debt capital complained about banks’ restrictive behaviour. That was the highest level since the new survey methodology was introduced in 2017. A record-high share of large enterprises in Germany had already reported difficult loan negotiations three months ago. That share fell again slightly by 2.6 percentage points to 31.9% in the fourth quarter.

These are the findings of the KfW ifo Credit Constraint Indicator. Every quarter, KfW analyses the data collected in the economic surveys of the ifo Institute by size classes and economic sectors.

Among SMEs, unusually strict bank lending standards were reported by wholesalers (+11.9 percentage points to 36.7%), manufacturers (+2.2 percentage points to 33.4%) and retailers (+3.6 percentage points to 37.2%).

“Businesses in these sectors are operating in a poor trading environment and have weak sales expectations. Many are therefore planning to cut jobs”,

said Dr Jenny Körner, financial market expert at KfW Research.

Falling interest rates caused SMEs and large enterprises to become slightly more interested in taking up loans. Nonetheless, credit demand remained significantly below the long-term average in the fourth quarter as well. Only 21.1% of SMEs and 28% of large enterprises wanted to take up loans.

“It is obvious that the restrictive financing conditions of banks continue to weigh on credit demand. But an even weightier factor is probably that businesses are reluctant to lock themselves into long-term loan agreements because of the ongoing phase of economic weakness, political uncertainty and pessimistic business expectations”,

said Dr Jenny Körner.

The current edition of the KfW ifo Credit Constraint Indicator is available at:

KfW ifo Credit Constraint Indicator

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