KfW Research: Access to credit is becoming more and more challenging for SMEs

• Record share of small and medium-sized enterprises is unhappy with banks’ restrictive practices
• Large enterprises are slightly better off
• Demand for loans is falling

Accessing credit became more difficult for SMEs yet again in the first quarter of 2025. A restrictive approach to loan negotiations by banks was perceived by 33.8 per cent of small and medium-sized enterprises in Germany. That was the highest percentage recorded since the survey began in 2017.

“One of the causes is the feeble and uncertain economic situation, which is making banks more cautious in their lending. Another cause is likely to be the selection effect. Enterprises that are in a difficult financial situation are requesting more loans and being rejected by credit institutions because of their low credit standing,”

explained Dr Jenny Körner, credit market expert at KfW Research.

For large enterprises, on the other hand, the situation improved in the first quarter. Restrictive loan negotiations were reported by 23.6 per cent of them, 8.3 percentage points fewer than in the previous 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.

Businesses in the main construction industry experienced the worst deterioration in credit access. A share of 29.6 per cent of small and medium-sized enterprises deplored challenging access to loans, 4.8 percentage points more than in the previous quarter. Large enterprises even recorded an increase of 5.3 percentage points, with the share now reaching 33.3 per cent.

There was a larger share of businesses with no interest in taking up any loans at all. The share of SMEs requesting loans fell by 1.2 percentage points to 19.9 per cent. Among large enterprises, 27.2 per cent were interested in loans, 0.8 percentage points fewer than in the previous quarter.

“Even though key interest rate cuts have already begun, there is no end in sight to the weakness in demand for business loans. Credit demand recently faced headwinds from the renewed rise in longer-erm loan interest rates,”

said Dr Jenny Körner. This was exacerbated by the worsened outlook resulting from trade uncertainty, which will now deteriorate further due to Trump’s most recent tariff hit.

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

Where does the German economy stand today? What does the country need to become future-proof? KfW Research explores these questions in the position paper “Managing the transition, strengthening growth”, with analyses of the current situation and recommendations for action in five policy areas. The paper is available for download at Papers and Proceedings on Economics | KfW