KfW Research: Credit access is becoming harder for SMEs

• SMEs’ demand for fresh money remained sluggish in the second quarter
• Banks are cautious about lending to SMEs
• Lending terms for large enterprises have eased

Small and medium-sized enterprises are finding it increasingly difficult to access loans, with credit access for SMEs continuing to tighten in the second quarter of 2025. Challenging loan negotiations were reported by 35.2 per cent of businesses, an increase of 1.4 percentage points on the previous quarter. That was the third consecutive increase, marking the highest level since the beginning of the time series in 2017.

These are the results of the recent analysis 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.

The stricter requirements of banks affected all sectors except the main construction industry. Here, the share of enterprises that viewed banks’ policies as restrictive fell to 26.8 per cent (- 2.8 percentage points). The sector has likely benefited from the German Government’s infrastructure package.

The situation is different for large enterprises, however, with only 21.5 per cent encountering relevant obstacles to obtaining credit in the second quarter. That was a drop of 2.1 percentage points. Large enterprises thus found it easier to borrow from banks again.

At the same time, the share of large enterprises interested in borrowing increased to 30.3 per cent (+3.1 percentage points). This was likely due in part to the fact that large enterprises are preparing for rising trade barriers and more public spending on infrastructure and defence. Only a disproportionately low 20.9 per cent of small and medium-sized enterprises were in loan negotiations (+1.0 percentage points).

“A significant improvement of credit access for small and medium-sized enterprises will not fall from the sky”,

said Stephanie Schoenwald, economist at KfW Research.

“This will require trade uncertainty to ease on a sustained basis, along with a tangible economic upswing. Only then would the so far modest recovery of new lending to businesses gain momentum.”

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

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