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Press Release from 2021-06-18 / Group

Coronavirus crisis is affecting the financing environment for businesses

  • Share of enterprises reporting difficulties in accessing credit in spring has doubled
  • Expansion of businesses’ equity base since the turn of the millennium has stopped for now
  • Besides loans, financing tools that bolster companies’ equity base will become more important after the crisis
  • Coronavirus crisis is dampening investment

The financing situation of enterprises in Germany deteriorated noticeably up to the spring, especially in sectors hardest hit by the pandemic, such as services and retail. In this year’s Business Survey, which KfW conducts annually together with umbrella organisations as well as professional and regional business associations in Germany, more than one in four surveyed enterprises reported difficulties in accessing loans. This share has more than doubled compared with the previous year. At the same time, demand for bank loans rose significantly last year, with 62.2% of businesses conducting loan negotiations – an increase of around 7.4 percentage points on the previous year. This rise reflects the increased cash needs of many businesses as a result of the coronavirus crisis, particularly in the first half of 2020. Highest in demand were long-term loans, which were used to build up liquidity buffers.

The expansion of businesses’ equity base that could be observed since the turn of the millennium is not likely to have continued last year. Thus, 39.5% of the surveyed enterprises reported a decline in their equity ratio. Only 29.7% of businesses reported an improvement. Accordingly, the coronavirus crisis has also put pressure on the credit ratings of many enterprises. Only 16% of the surveyed businesses were able to improve their ratings, while 34.5% reported a downgrade.

The survey findings also suggest that the current crisis is influencing the financing instruments that will be attractive and accessible to businesses in the future. They revealed that enterprises may be more inclined to use financing forms that preserve or increase their equity ratios. These include, above all, internal funding, deposits from family or shareholders, and leasing. But respondents reported that debt capital instruments such as short-term and medium-term bank loans will also become increasingly important. In contrast, instruments that have been less used so far, such as equity capital, mezzanine capital, factoring as well as bonds, could probably temporarily lose importance due to their specific financing function.

Despite the severity of the crisis, around two thirds of the surveyed enterprises invested in their business last year, although less than the year before. At the same time, around 46% of enterprises reported that at least one planned investment could not be carried out, most often because of the unfavourable economic situation (30.7%). These findings suggest that many enterprises may not have been able to implement originally planned projects but replaced them with (smaller) investment projects that helped them better adapt to the crisis situation. Most businesses are cautiously optimistic about their investment plans for the current year. Around seven in ten surveyed enterprises plan to invest in their business. Some 40% of enterprises even plan to increase their investment expenditure compared with the previous year.

The Chief Economist of KfW, Dr Fritzi Köhler-Geib, commented on the findings of the Business Survey as follows: “The coronavirus crisis has depleted much of the financial reserves of companies in Germany. Along with great economic uncertainty, that has clearly affected the financing environment in recent months. Nevertheless, there are growing signs of a recovery. Enterprises are cautiously optimistic about investing this year in particular. Indeed, with a view to the necessary transition to a digital and climate-neutral economy, an investment surge is urgently needed.”

About the Business Survey:
The survey was conducted for the 20th time among enterprises of all size classes, sectors, legal forms and regions. Nearly 1,600 businesses from 18 umbrella organisations, trade and regional associations participated. It was conducted between mid-December 2020 and the end of March 2021. The Business Survey 2021 entitled “Coronavirus crisis is putting pressure on businesses – financing environment is becoming more difficult” is available for download at www.kfw.de/unternehmensbefragung.


Portrait Wolfram Schweickhardt


Wolfram Schweickhardt

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