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Corporate Financing
Analyses and survey findings on
- Types of financing and access,
- Development of the debt capital market and
- Equity capital market and quasi-equity financing instruments.
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Business Survey 2019 – Access to finance
Financing climate remains strong despite economic headwind
In cooperation with 17 trade associations, KfW Bankengruppe has conducted a company survey on banking behavior and financing for the 18th time.
The most important results are:
- The economic climate continues to be at an all-time high despite the economic slowdown
- The proportion of companies reporting difficulties in accessing credit has fallen by one-third compared to the year 2012
- Small businesses, however, continue to face significantly greater difficulties in accessing credit than large companies
- Personal contacts and their continuity are very popular with companies despite the trend towards digitization; however, the proportion of companies that value online offers is growing rapidly
At the start of the year, the corporate lending market was still booming in Germany. According to estimates by KfW Research, new lending growth was 6.4% on the previous year, almost as strong as in the final quarter of last year. It thus expanded well above average again.
This figure is surprising given the economic slowdown that has been observable since mid-2018. But apparently it was also driven by a special effect generated by the German automotive industry. This effect should fade soon. As economic momentum slows, the growth rate of new lending to businesses and self-employed persons is set to decrease noticeably.
PDF for download:
KfW Credit Market Outlook June 2019 (PDF, 191 KB, non-accessible)
Sentiment in the German private equity market continued to fall after the turn the year. In the first quarter of 2019, the business climate index of the German Private Equity Barometer dropped by 3.1 points to 64.7 balance points. At the same time, the VC business climate continued to be very good despite the decline, while the later-stage climate stabilised on what is still a “good” level. The market environment exhibited varying developments. The fundraising climate improved to just under its all-time high, while assessments of the level of deal flow rose to a new record. Furthermore, the pricing climate eased noticeably. On the other hand, exit opportunities deteriorated sharply and pressure on write-downs increased.
PDF for download:
German Private Equity Barometer 1st Quarter 2019 (PDF, 207 KB, non-accessible)
Bank loans were still in demand among German businesses and self-employed persons in the final quarter of 2018. At the end of the year the corporate loan market was, as expected, quieter than in the summer but new credit business, as estimated by KfW Research, expanded by 6.6% on the previous year at still above-average speed.
The slowdown of economic growth and increasing pessimism within companies will likely be increasingly reflected on the credit market in the next few months. We therefore expect the momentum in lending to slow down. The incentives generated by low interest rates and favourable financing conditions should, however, allow us to see further growth.
PDF for download:
KfW Credit Market Outlook March 2019 (PDF, 186 KB, non-accessible)
Focus on Economics
SMEs have traditionally maintained a close relationship with the banking sector. The ‘principal bank concept’ is widespread in the SME sector and 93% of all enterprises do business with a preferred credit institution. They have very long-lasting relationships that average 20 years. The special analysis conducted by the KfW SME Panel also found that enterprises seek face-to-face interaction even as the branch network shrinks. In 2017, around 65% of SME managers visited a bank branch at least once, on average once every quarter. In general, diversification in banking increases with the size of the enterprise. Large SMEs maintain more business relationships with banks and savings banks, visit local branches more often and focus less on their principal bank for their borrowing needs.
PDF for download:
German SMEs are very loyal to their principal bank (PDF, 225 KB, non-accessible)
Sentiment in the German private equity market continued to decline at the end of the year. In the fourth quarter of 2018, the business climate index of the German Private Equity Barometer fell by 4.2 points to 67.9 balance points. But although confidence was lower in the second half-year, 2018 was on average the year with the best business climate since 2003 when the German Private Equity Barometer was launched. But sentiment was divided at the end of the year. While the business climate set a new record in the venture capital segment, it cooled yet again in the later-stage segment.
PDF for download:
German Private Equity Barometer 4th Quarter 2018 (PDF, 204 KB, non-accessible)
Economics in Brief
Access to finance is a major prerequisite for micro, small and medium-sized enterprises in developing countries to be able to use investment and growth opportunities. It is also an enormous challenge for many MSMEs. This applies to Africa more than to any other region in the world. Here, access to finance is by far the main obstacle for MSMEs. Still, it is possible to identify positive developments in many African countries.
PDF for download:
Access to finance is main obstacle for SMEs in Africa (PDF, 366 KB, non-accessible)
Focus on Economics
Many businesses deplore that high costs, high risks and financing difficulties are making it hard for them to innovate. This study therefore examines whether differences exist in the financing of capital expenditure and innovation and whether these differences may be a sign of limited innovation finance opportunities. In fact, innovation finance is clearly distinct from investment finance. The findings confirm theoretical considerations that specific characteristics of innovation (such as uncertainty about success, difficulties in assessing projects and lack of collateral) are a barrier to external financing with bank loans in particular.
PDF for download:
KfW Research has calculated that new lending to businesses and self-employed persons in Germany grew by 9.6 % in the third quarter, another unusually strong increase on the same period last year. Short-term loans again played a key role. Looking ahead we see the credit market growing at a slower pace. Interestingly, this is likely to be the result of the stabilisation of the business cycle which we predict for the coming months.
PDF for download:
KfW Credit Market Outlook December 2018 (PDF, 179 KB, non-accessible)
Focus on Economics
In the current economic upswing, Germany's businesses are investing much less in their real capital stock than they are generating in financial resources. Their growing financial surplus is a key driver of the very high current account surplus for which Germany is facing broad international criticism. We are therefore taking a closer look at corporate decisions on savings and investment in order to identify starting points for correcting the current account imbalance.
Number of start-up founders increased to 108,000 in 2017
The number of start-up founders rose to 108,000 in 2017. They are of particular economic interest with 60,000 innovative or growth-oriented young companies – in particular the 12,500 start-ups who are both innovative and growth-oriented. The public image of start-up founders applies in many ways, if slightly distorted: They are often young, male and from an academic background and their start-ups are mostly internet-based, digital and international. These qualities stand for efficient marketing channels, higher scalability and larger markets. German start-up founders are often more business customer-oriented than other young entrepreneurs – they are therefore different to successful international start-ups. However, their B2B focus could be advantageous in the future.
The German private equity market was in good shape in late summer. The business climate fell slightly overall but remains very good. In the third quarter of 2018, the business climate index of the German Private Equity Barometer fell by 5 points to 72.1 balance points. The early-stage climate exceeded the previous quarter’s peak level again slightly, while the later stage segment took a breather from its record-breaking run. The signs of weakness in the market environment that appeared in the previous quarter have vanished.
PDF for download:
German Private Equity Barometer 3rd Quarter 2018 (PDF, 210 KB, non-accessible)
No sign of letting up: SMEs are on a path of growth in Germany and abroad
Germany’s SMEs continue to grow at a high rate. Employment in small and medium-sized enterprises has broken yet another record. Turnovers have grown at a rate not seen in years. International business also appears to have recovered from its slump. But profitability and productivity are unable to keep up. The investment upswing is consolidating but comes with greater concentration, as higher volumes are distributed across fewer investors. Micro-businesses in particular have stepped up investment and are using more long-term bank loans than ever. However, demand for credit to finance investment appears to have passed its zenith and companies are using more of their financial cushions. Should the financing climate become tougher, SMEs are in the best possible position thanks to record equity levels. Their outlook is therefore very positive. These and other findings are detailed in the new KfW SME Panel 2018.
KfW Research has calculated that new lending to businesses and self-employed persons grew at an unexpectedly high year-on-year rate of 8.3 % in the second quarter. The trend is likely to remain very dynamic in the second half-year as well.
Given the gradual cyclical slowdown, businesses’ financing requirements for investments alone do not explain the accelerated pace. Rather, high downward risks have probably prompted enterprises to secure interim financings and financial reserves with very attractive terms.
PDF for download:
KfW Credit Market Outlook September 2018 (PDF, 167 KB, non-accessible)
Digitalisation is gaining momentum
Together with 20 trade associations, KfW Group has carried out a business survey on bank behaviour and financing for the 17th time.
The most important findings on digitalisation are:
- More than half of businesses have firm plans to implement digitalisation projects.
- Large enterprises, manufacturers and companies of wholesale and foreign trade are at the forefront of digitalisation.
- Main motivation for investment is improving efficiency.
- Access to credit for digitalisation projects poorer than for other investments.
PDF for download:
Business Survey 2018 – Digitalisation (PDF, 35 KB, non-accessible)
The German private equity market has carried the momentum from the start of the year into early summer, with sentiment reaching a new record high. In the second quarter of 2018, the business climate index of the German Private Equity Barometer rose by 10.4 points to 77.1 balance points. Both the business situation and business expectations reached new highs. The business climate probably received its decisive impetus from the very positive development of demand for private equity. The fundraising climate and exit environment, however, are showing signs of a reversal. The business climate reached new record levels in both the early-stage and later-stage segment, with the later-stage segment crossing the 80-point mark for the first time.
PDF for download:
German Private Equity Barometer 2nd Quarter 2018 (PDF, 85 KB, non-accessible)
Credit market sentiment remains strong
Together with 20 trade associations, KfW Group has carried out a business survey on bank behaviour and financing for the 17th time.
The most important findings are:
- Financing climate amongst German businesses is again at an all-time high
- Share of businesses reporting problems with access to finance at a low
- Bank loans remain an important source of finance but: fewer businesses participate in loan negotiations
- Businesses are concerned about a shortage of skilled workers and a weakening economy
KfW Research has calculated that new lending to businesses and self-employed persons in Germany grew at a faster rate in the first quarter of this year than at any time since the third quarter of 2008. But now the economy has shifted down a gear. That should soon affect the momentum of new lending business as well.
PDF for download:
KfW Credit Market Outlook June 2018 (PDF, 76 KB, non-accessible)
The German private equity market remained in high spirits at the beginning of the year. In the first quarter of 2018, the business climate index of the German Private Equity Barometer rose by 2.4 points to 66.7 balance points. Both the business situation and expectations improved on the previous quarter. The business climate indicator and most of the other indicators remained very stable at the start of the year. Only the fundraising and innovation climates fell slightly but their general upward trend remains intact. The two segments of the private equity market experienced different trends. The business climate in the venture capital market cooled off again slightly. The business climate in the later-stage segment, on the other hand, recovered from its previous decline.
PDF for download:
German Private Equity Barometer 1st Quarter 2018 (PDF, 85 KB, non-accessible)
New lending to enterprises and self-employed persons gained momentum once again at the end of the year after developing vigorously in the preceding quarters. The result for the year 2017 is therefore positive as well. All in all, lending increased by 5 % last year.
The current upward trend should continue with stable growth rates in the first half of 2018. The continuing outstanding economic environment supports this expectation. Lately, however, the political risks to the global economy have risen significantly again. An escalation of protectionist measures would also not remain without consequences for the credit market.
PDF for download:
KfW Credit Market Outlook March 2018 (PDF, 82 KB, non-accessible)
Trend towards fewer innovators continues
The share of innovative SMEs has risen after falling almost continually for a good 10 years. However, it is questionable as to whether this encouraging recovery reflects a reversal of the long-term downward trend. The central results are:
• The innovator ratio has risen by 5 percentage points to 27 % but remains far from its peak
• The innovation decline negatively affects turnover with new products
• No need and a lack of ideas are the main reasons for not innovating
PDF for download:
KfW SME Innovation Report 2017 (PDF, 996 KB, non-accessible)
Regional faces of Germany’s SMEs: a state-by-state comparison
Germany's business landscape shows astonishing regional peculiarities. This is confirmed by the new KfW SME Atlas 2018, which provides previously unknown insights into the regional diversity of the SME sector. On the basis of the representative KfW SME Panel, the KfW SME Atlas presents the first comparative structural overview of the differences and commonalities of small and medium-sized business activity by federal state for the years 2012 to 2016. The KfW SME Atlas thus provides a comprehensive information resource for interested members of the business and research community and for economic policymakers.
Focus on Economics
New lending to enterprises has been increasing again in the euro area for just over a year, giving the economic recovery in the currency union a new quality. Nonetheless, significant differences are visible. While the credit market is booming in France and growing strongly in Germany, its momentum is clearly weaker in Italy and Spain. That is primarily because large enterprises there are increasingly funding their operations by issuing securities. But the credit channel is effective in those two countries as well.
PDF for download:
Credit markets in the euro area: heterogeneous but healthy (PDF, 203 KB, non-accessible)
Sentiment in the German private equity market fell slightly in the final quarter of 2017. At 66.1 balance points, the business climate index of the German Private Equity Barometer ended the year only 4.0 points below its third-quarter record level. The minor drop was evident among both early-stage and later-stage investors. But despite the decline, the business climate remained very good in both market segments. 2017 was a year of superlatives in the German private equity market. The assessments of the business climate, fundraising climate, exit conditions and promotional environment have never been better. The record year thus came exactly ten years after the outbreak of the financial crisis. On average for the year, sentiment in 2017 was clearly better than in the German Private Equity Barometer’s previously best year 2007. The downside of the good development, however, were higher entry prices for investments – a challenge investors will probably have to deal with for some time to come.
PDF for download:
German Private Equity Barometer 4th Quarter 2017 (PDF, 105 KB, non-accessible)
New lending from banks to businesses and self-employed persons rose by 3.9 % year-over-year in the third quarter. Although growth was not as strong as in the previous quarter, it remains clearly above average since the financial crisis. We expect momentum on the credit market for enterprises to remain high in the next quarters as investment picks up.
PDF for download:
KfW Credit Market Outlook December 2017 (PDF, 94 KB, non-accessible)
Focus on Economics
German SMEs’ internal funding capacity determines whether they conduct R&D and how much they spend on it. Credit rating, on the other hand, is not a factor. R&D funding thus differs fundamentally from capital expenditure funding. This is probably because R&D projects involve high uncertainty of success and little investment in tangible assets.
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Sentiment on the German private equity market improved once again in the third quarter. The business climate index of the German Private Equity Barometer increased by 4.9 points to 70.2 balance points in the third quarter of 2017, clearly beating its own record of the second quarter. The trend shows unprecedented confidence in the early-stage segment of the private equity market. The business climate in the later-stage segment remained very good and virtually unchanged. The renewed improvement in the business climate has generally come about on the back of a much better exit environment. Investors’ assessment of exit possibilities noticeably exceeded the previous record high of the first quarter of 2015.
PDF for download:
German Private Equity Barometer 3rd quarter 2017 (PDF, 105 KB, non-accessible)
Germany’s SMEs continue to break records – sectoral transformation poses new challenge
German SMEs presented themselves in top shape in 2016. As employers they are more important than ever, and their workforce has reached an unprecedented level. Sectoral structural transformation is making a clear imprint on SMEs, with most employment growth taking place in service industries in the past years. Germany’s transition to a service society, however, is slowing down productivity advances in the SME sector. Nevertheless, enterprises are growing at a fast pace, returns and profitability are good, and equity ratios are on record levels. Investments are also growing strongly again and the favourable financing environment has nurtured this trend. The signs remain promising. Strong domestic demand promises sustained high growth, a new employment record is foreseeable, and signs of stronger growth in corporate investment are emerging.
PDF for download:
Economics in Brief
The global market for green bonds has grown rapidly since 2013 and seen a considerable rise in the number and diversity of actors. The market in Germany is basically dominated by state promotional banks. Green bonds continue to make up only a small segment of the overall bond market. Further improving their quality and transparency through standardisation will be key to developing the market.
PDF for download:
New lending to businesses and self-employed persons in Germany has grown at the fastest pace since the financial market crisis. In the second quarter of 2017, it expanded at a rate of 4.8 % year-on-year. The revival is driven by Germany’s robust and sustained upturn, which is encouraging businesses to invest more as financing conditions remain favourable. The outlook for corporate lending business thus remains bright for the foreseeable future.
PDF for download:
KfW Credit Market Outlook September 2017 (PDF, 99 KB, non-accessible)
Focus on Economics
German banks have recently stepped up the rate of branch closures. The have closed around one fourth of all branches since the turn of the millennium: 10,200 locations across the country, 680 branches per year. That puts Germany's branch density in mid-range compared with the rest of Europe. The trend towards consolidation will likely continue. Importantly, digitisation has firmed its grip on the banking industry. Innovative technologies, new competitors and new customer demands generate pressures to make adjustments. Banks are responding to this. If the rate of closures continues, a good half of the branches that existed at the turn of the millennium will be closed by the year 2035.
PDF for download:
The German private equity market continued to smash records in early summer, with sentiment reaching a new high. The business climate index of the German Private Equity Barometer rose by 3.4 points to 65.2 balance points in the second quarter of 2017. The submarkets trended in opposite directions yet again. Confidence among early-stage investors fell slightly, while later-stage investors were more confident again. The only remaining stumbling block are the high company valuations and the associated high entry prices. Both early and later-stage investors have never been more dissatisfied with them. Start-ups initiate negotiations with investors with the corresponding degree of confidence, and SMEs are also aware of their quality. Entry prices reflect that.
PDF for download:
German Private Equity Barometer 2nd quarter 2017 (PDF, 65 KB, non-accessible)
Business Survey 2017
For the 16th time, KfW Group in cooperation with 18 trade associations has conducted a survey on bank behaviour and the financing situation of businesses.
The most important results:
- Financing climate for businesses worsens slightly, but remains positive in historical comparison
- Young and small businesses increasingly report greater difficulties accessing credit
- Ratings have improved again on a broad front
- Bank loans remain the most important source of funding
PDF for download:
Growth of new lending to enterprises and self-employed persons increased by an impressive 3.1 % year-on-year in the first quarter of 2017. Three factors contributed and continue to contribute to this positive development: the strength of the economy, the heightened probability of rising borrowing costs and reduced political risks. The credit market thus looks set to gain further momentum at the current juncture.
PDF for download:
KfW Credit Market Outlook June 2017 (PDF, 94 KB, non-accessible)
German private equity investors started the year with great confidence. In the first quarter of 2017 the business climate index of the German Private Equity Barometer stood almost unchanged at 61.8 balance points (-0.2 points). The indicator for the current business situation climbed moderately by 0.5 points to 65.1 balance points, while business expectations fell slightly by 1.0 points to 58.6 balance points. In the two sub-markets the mood among early-stage investors improved again but is now more settled among later-stage investors. The main factors of the market environment point to a successful VC year 2017.
PDF for download:
German Private Equity Barometer 1st quarter 2017 (PDF, 76 KB, non-accessible)
New lending to businesses and self-employed persons picked up in the final quarter of 2016. Banks made 2.6 % more loans to companies than in the previous year as the growing debate over rising borrowing costs boosted credit demand. This was aided by the interest rate reversal in the USA, an optimistic view of the economic trend, and the gradual normalisation of inflation. But the upturn in the credit market is not likely to be sustained. Amid large political risks, entrepreneurs will probably remain cautious with their investment decisions despite positive sentiment.
PDF for download:
KfW Credit Market Outlook April 2017 (PDF, 100 KB, non-accessible)
In the final quarter of 2016 the business climate in the German private equity market reached the highest level since 2007. The business climate index of the German Private Equity Barometer rose 2.5 points to 62.1 balance points. The indicator for the current business situation climbed 4.4 points to 64.6 balance points, while business expectations increased by 0.6 points to 59.5 balance points. Early-stage and later-stage investors rate the current business climate differently, however. While later-stage investors' sentiment was at record high the end of the year, the mood among early-stage investors remained good but dipped again.
PDF for download:
German Private Equity Barometer 4th quarter 2016 (PDF, 105 KB, non-accessible)
In Germany, new lending to enterprises and self-employed persons grew by 1.0 % year-on-year in the third quarter of 2016. That was the first increase since the spring of 2015. This is all the more pleasing as the Brexit vote had to be digested over the summer months. Looking ahead, the high level of business confidence in Germany may potentially bolster lending. However, muted investment activity and political uncertainties on both sides of the Atlantic have a dampening effect.
PDF for download:
KfW Credit Market Outlook December 2016 (PDF, 58 KB, non-accessible)
France, Germany, Italy, Spain and the United Kingdom
Venture Capital is important for financing innovative start-ups. In a joint study the National Promotion Institutions of France, Germany, Italy, Spain and the United Kingdom identify four main areas where further actions are paramount for boosting EU venture capital to the next level: Increasing the supply of funds for VC investments, reducing the fragmentation within the European VC markets, increasing quantity and quality of demand for VC and finally improving exit routes for VC investments. To build momentum in VC across Europe, activities in these fields on both the EU as well as the national level are needed.
PDF for download:
Building Momentum in Venture Capital across Europe (PDF, 951 KB, non-accessible)
The mood on the German private equity market has brightened significantly. The business climate index of the German Private Equity Barometer increased by 12.0 points to 59.6 balance points in the third quarter. Equity investors rated their current business situation much better than in the previous quarter and were significantly more optimistic about their expectations for the next six months. Sentiment on the VC market, in particular, surged in response to economic-policy decisions. It is nearly as good as a year ago, when it climbed to a record high.
PDF for download:
German Private Equity Barometer 3rd quarter 2016 (PDF, 102 KB, non-accessible)
Focus on Economics
Access to credit varies considerably depending on the purpose. Investment loans for machinery and equipment and for the acquisition of real estate are easiest to obtain. By contrast, accessing credit for digitisation and projects outside Germany is significantly more difficult. Even more difficult is obtaining loans to finance inventories, working capital and intangible assets. This ranking is determined by the degree of difficulty with which external lenders can assess the probabilities of a project's success and the possibilities of applicant enterprises to provide collateral from within the project to be financed.
PDF for download:
Access to credit varies considerably depending on the purpose (PDF, 108 KB, non-accessible)
According to estimates by KfW Research, new lending in Germany to companies and self-employed professionals fell only slightly in the second quarter of 2016. The sideways movement is likely to continue in the latter half of the year. On the supply side, potential for further improvements to financing conditions is largely exhausted. Fresh impetus is not coming from the demand side either as the Brexit vote dampens the propensity to invest. Furthermore, capital markets provide attractive funding alternatives for large companies.
PDF for download:
KfW Credit Market Outlook September 2016 (PDF, 92 KB, non-accessible)
Business sentiment is stabilising again
Sentiment on the German private equity market stabilised again in early summer. After the slump at the start of the year the business climate index of the German Private Equity Barometer of KfW and BVK rose slightly by 2.2 points to 47.6 balance points in the second quarter of 2016. Unlike the preceding quarter, market sentiment in the early-stage and later-stage segment is currently moving in opposite directions. After the business climate in the early-stage segment fell from its record high to below its historic mean within half a year, it recovered significantly in early summer. Market sentiment in the later-stage segment, in turn, has fallen slightly.
PDF for download:
German Private Equity Barometer: 2nd Quarter 2016 (PDF, 86 KB, non-accessible)
Focus on Economics
German SMEs have a great deal of catching up to do when it comes to digitalisation. Although over 80 % of SMEs have carried out digitalisation projects during the past three years, small companies in particular spend only moderate amounts on them. Only one in five companies is a digital pioneer. A third are still in the early stages of digitalisation. A shortage of IT skills within the workforce (67 %), data security and data protection (62 %) and inadequate internet connection speeds (58 %) represent key obstacles. Many companies do not currently recognise the benefit to their business of further digitalisation and baulk at the high costs (59 %). Thirty-two per cent of SMEs are hampered by the difficulties of financing digitalisation.
PDF for download:
KfW’s estimates indicate that new lending to businesses and self-employed persons in Germany remained in decline in the first quarter of 2016. On a positive note, the negative momentum has stabilised. Also, there was a markedly stronger investment activity between January and March, which raises confidence for the corporate lending market. But the higher uncertainty resulting from the Brexit vote is now likely to delay the hoped-for recovery in lending until around the end of the year.
PDF for download:
KfW Credit Market Outlook June 2016 (PDF, 75 KB, non-accessible)
Business Survey
This was the fiveteenth occasion on which KfW Group, in collaboration with 21 business associations, conducted a company survey on the subject of bank behaviour and financing.
The most important results:
• The financing climate is steady at an all-time high. Low interest rates, enterprises' enhanced self-financing capacity and good business performance have contributed
• Small and young enterprises, however, still face major constraints in accessing credit
• Credit remains difficult to obtain for innovation, digitalisation and international projects
PDF for download:
Labour market greatly lowers appetite for self-employment, innovative founders hold their own
The number of business founders in Germany fell significantly by 152,000 (-17 %) to 763,000 in the year 2015. The strong labour market led to an above-average decline of 28 % in the number of necessity founders. As necessity founders are more frequently full-timers, their lower number significantly impacted on the number of full-time founders. Economically important start-up groups held their own amid the strong decline. The number of opportunity founders dropped less sharply, by 15 %, while the number of innovative founders even saw a modest rise of 6 %. Digital founders were surveyed for the first time. They make up a good one fifth of start-up activity. They compete more often on international markets than other business founders, which makes them a driving force that strengthens Germany’s competitiveness.
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Market sentiment drops sharply
Sentiment on the German private equity market cooled significantly at the beginning of the year. German Private Equity Barometer's business climate indicator of KfW and BVK fell sharply to 45.4 balance points in the first quarter. The business climate in the later-stage segment remains very good despite the decline but slipped below its long-term average in the early-stage segment. Equity investors are more pessimistic about their current business situation and their expectations for the future. Based on a general assessment of the underlying conditions, the current market sentiment is worse than should be expected.
PDF for download:
German Private Equity Barometer: 1st Quarter 2016 (PDF, 102 KB, non-accessible)
Economics in Brief
Green bonds are variable or fixed-income securities issued by an entity that undertakes to use the issue proceeds to finance environmental and climate protection projects. Since the first bond was issued in 2007, the green bond market has grown significantly, especially in the last three years. Green bonds so far make up only a small segment of the overall bond market. As the market develops, further improving the quality and transparency of green bonds through standardisation will be crucial.
PDF for download:
Market for green bonds is taking root (PDF, 60 KB, non-accessible)
While banks enjoy solid increases in lending for housing, new corporate lending to the remaining segments of the real economy decreased in the final quarter of 2015. The outlook remains cloudy, despite the ECB's recent measures. KfW Research expects the decline on the corporate lending market to continue in the first half of 2016. Corporate loan demand for investment outside the housing sector will not strengthen until confidence in the global economy picks up in the course of the year.
PDF for download:
KfW Credit Market Outlook March 2016 (PDF, 96 KB, non-accessible)
Business climate remains very positive
The business climate on the German private equity market was generally unchanged at the end of the year. The overall business climate index of the KfW and BVK German Private Equity Barometer remained at 59.8 balance points in the fourth quarter. Sentiment in the early-stage and later-stage segments, however, developed rather differently. Whilst the early-stage financiers massively corrected their business climate assessment downwards again following the sharp rise in business expectations in the previous quarter, the later-stage financiers’ sentiment rose considerably. The basic conditions remain positive, especially the fundraising climate, which reached an all-time high.
PDF for download:
German Private Equity Barometer: 4th Quarter 2015 (PDF, 153 KB, non-accessible)
In the third quarter, new lending to companies and self-employed professionals fell for the first time in 18 months. This was caused by the structural weakness of credit demand. Favourable lending terms alone are apparently not enough to induce companies to consistently borrow more. Given the excellent financial position of the German business sector, a stable upward trend in new lending cannot be expected until investment activity picks up on a broad and sustained basis.
PDF for download:
KfW Credit Market Outlook December 2015 (PDF, 37 KB, non-accessible)
The KfW and BVK German Private Equity Barometer showed a continued rise in sentiment in late summer. The business climate indicator of the German private equity market increased by 2.0 points to 59.8 balance points in the third quarter of 2015. Private equity capital providers reported further improvement to the business situation overall, as well as increased business expectations. A glance at the market segments reveals that the business climate in the early-stage segment improved noticeably and in the late-stage segment stabilised on a high level. The climate indicators pertaining to fundraising, exits and write-downs reached record levels.
PDF for download:
German Private Equity Barometer: 3rd Quarter 2015 (PDF, 33 KB, non-accessible)
KfW SME Panel 2015
Growing optimism is overcoming weak investment trend
SMEs put an end to cautious investment in 2014 with trust in a sustainable upturn in Germany and Europe boosting enterprises’ confidence. This is confirmed by the KfW SME Panel 2015. The increase in investment is considerable. Loan demand is increasing – proof that monetary policy is making an impact. Turnover has only grown slowly, partly because SMEs recorded another decline in international sales. This brings productivity growth to a halt. Additionally, more enterprises are looking for successors than before. However, the outlook is positive: SMEs are coming out of hiding and are continuing to expand.
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New lending lost momentum in the spring. However, bank loans continue to be an attractive financing instrument for companies since, alongside the ECB’s monetary policy, more intense competition among the banks ensures favourable terms. If investment activity increases in the second half of the year, the demand for credit should also pick up again.
PDF for download:
KfW Credit Market Outlook September 2015 (PDF, 44 KB, non-accessible)
Focus on Economics
Business start-ups that are well-informed about financial matters are more competitive. They have fewer financial problems, use more favourable financial resources and are much less likely to abort their start-up projects early on. These correlations are shown for the first time in a special analysis of the KfW Start-Up Monitor 2014. Through deficits in financial literacy, Germany is losing valuable entrepreneurial potential – thus some projects in recent years would have been more successful with better financial knowledge. Entrepreneurs of today can benefit in the short-term from targeted coaching and training. Training programmes like these have a demonstrable impact. However, participation rates still leave room improvement. For the future potential of entrepreneurs, entrepreneurship training in schools is key.
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The business climate index of the KfW and BVK German Private Equity Barometer improved again in the early summer months, increasing by 7.6 points to 57.8 balance points in the second quarter of 2015. An improved assessment of business situation and more optimistic business expectations again stabilised the upward trend of the business climate. Equity investor sentiment improved, both in the early and late-stage segment. Assessments of the innovation climate are better than ever, whilst opinions on VC demand are currently restrained.
PDF for download:
German Private Equity Barometer: 2nd Quarter 2015 (PDF, 33 KB, non-accessible)
Focus on Economics
Innovative start-ups play an important role in the commercialisation of new ideas and technologies. As a result, they contribute directly to the economy. However, their innovative success is often difficult to assess, which is why start-ups are often faced with financing problems. For them, venture capital is an appropriate and important financing alternative. Germany’s venture capital market still lags far behind in an international comparison. In particular, the aim should be to close the gap in the market for start-up finance and large-volume growth finance. Only through this can start-ups successfully develop their ideas and innovations in Germany.
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Germany’s private equity market lacks venture capital (PDF, 102 KB, non-accessible)
Corporate demand for credit has finally picked up. Conditions are in place for this revitalised new lending business to continue in the months ahead. Despite only moderate growth in levels of corporate investment, low interest rates and favourable conditions make borrowing attractive.
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KfW Credit Market Outlook June 2015 (PDF, 122 KB, non-accessible)
Business Survey
This was the fourteenth occasion on which the KfW Group, in collaboration with 21 business associations, conducted a company survey on the subject of bank behaviour and financing.
The most important findings were as follows:
- Low interest rates, greater ability to self-finance and economic recovery push financing climate to all-time high
- Structural problems continue to hinder access to loans for small and recently-formed enterprises
- Room for improvement with regard to ratings communication
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KfW Start-up Monitor 2015
The number of start-ups in Germany rose again in 2014. As the KfW Start-up Monitor 2015 shows, around 915,000 took the plunge into self-employment last year – some 47,000 more than in 2013. The rise is a result of growth in the number of people starting up full-time businesses and a decline in part-time start-ups. Start-ups in the freelance sector were the driving force behind entrepreneurial activity. In contrast, there were fewer start-ups operating in the commercial sector than in 2013.
The KfW/BVK German Private Equity Barometer reveals a tentative start to the year, with the German private equity market Business Climate indicator falling 7.2 points to 50.2 balance points in the first quarter of 2015. The downturn can be attributed to a more pessimistic outlook. However, business climate remains strong overall. Sentiment in both the early-investor and later-investor segments is somewhat reserved but the fundraising climate and exit environment continue to improve. Higher business valuations make it more difficult to conclude new deals.
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German Private Equity Barometer: 1st Quarter 2015 (PDF, 37 KB, non-accessible)
Focus on Economics
580,000 SME owners in Germany are planning to hand over or sell their business to a successor between now and 2017. But the number of people willing to take over a business is declining. This makes it more difficult to find a successor. The KfW SME Panel reveals that 9 % of SME owners hope to pass their business on to a family member. A similar number plan to find a solution outside their family. Our surveys reveal that external succession arrangements tend to bring investment to a halt. And there is a risk of asset erosion. However, where a business is handed over to a family member, this is accompanied by noticeably higher levels of investment.
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New lending business has started the year without impetus. Enterprises will only gradually overcome their current investment weakness. Besides, they have enough internal funds to finance their investments themselves. Credit supply remains very good.
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KfW Credit Market Outlook March 2015 (PDF, 49 KB, non-accessible)
Focus on Economics
Demand among small and medium-sized enterprises (SMEs) for investment loans has risen recently. However, this is not evenly spread out – the variation in borrowing requirements is significant and increasing. Approximately half of the total annual volume of borrowing required is accounted for by only around one per cent of all companies seeking loans. These companies are thus the main players in total SME borrowing and their prominence is growing. Older and medium-sized companies are the best represented.
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SME borrowing: large loans in high demand (PDF, 116 KB, non-accessible)
The German Private Equity Barometer, calculated by KfW and the BVK, showed a rise in sentiment at the end of the year, with the business climate indicator for the German equity capital market increasing in the fourth quarter of 2014 by 9.6 points to 57.4 balance points. The business climate improved particularly in the early stage segment, with sentiment once again on par with the late stage segment. Equity investors’ assessment of the fundraising climate is better than ever. They do, however, appear to be dissatisfied with the current entry prices and deal flow quality.
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German Private Equity Barometer: 4th Quarter 2014 (PDF, 169 KB, non-accessible)
New lending of credit institutions to companies and the self-employed as estimated by KfW grew by 4.5 % in the third quarter of 2014 compared to the same quarter in the previous year. Low growth at best is expected in new lending for the coming year.
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KfW Credit Market Outlook December 2014 (PDF, 110 KB, non-accessible)
The German Private Equity Barometer published by KfW and the BVK indicates that the business climate on the German private equity market remains favourable. Although the indicator fell 8.2 points to 47.8 in the third quarter of 2014, it is still well above its historical average. The late-stage sector saw a more pronounced decline in the business climate, while in the early-stage sector it barely changed at all. The fundraising climate is the best it has been in a while thanks to the low prevailing interest rates, while high-profile IPOs have fuelled exit speculation among equity investors.
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German Private Equity Barometer 3rd Quarter 2014 (PDF, 128 KB, non-accessible)
KfW SME Panel 2014
SMEs feeling the impact of weak growth in Europe, and bracing for harder times ahead
In 2013 SMEs were unable to escape the conditions in Germany and Europe. This is shown by the 2014 KfW SME Panel. Turnover and employment are rising, but the momentum remains subdued. International activities in particular are experiencing a setback. Repeated increases in profits are being retained by companies. Despite large equity holdings, they are reluctant to invest. SMEs are playing a waiting game. A systematic, growth-oriented course for Europe would be important for generating confidence.
New lending to companies showed surprising growth of 0.7 % year-on-year in Germany in the second quarter. No further significant improvements are expected for the rest of the year.
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KfW Credit Market Outlook September 2014 (PDF, 241 KB, non-accessible)
The German Private Equity Barometer jointly calculated by KfW and BVK again shows improved sentiment after the subdued start to the year. The business climate indicator climbed 9.4 points in the second quarter of 2014 to 56.0 balance points. The business climate improved in both segments of the private equity market: opinions of the business situation improved for early-stage and later-stage financiers alike, while business expectations of private equity investors are now more optimistic.
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German Private Equity Barometer 2nd Quarter 2014 (PDF, 145 KB, non-accessible)
In spite of an upturn in business investment, new lending by banks to companies and the self-employed as estimated by KfW fell by around 1.1 % year-on-year in the first quarter of 2014. This continued decline was smaller than expected. We are not expecting an upturn yet in the second quarter, with new lending expected to remain 1.0 % below the previous year's level.
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The German Private Equity Barometer produced by KfW in conjunction with BVK reports a muted sentiment in the first quarter of 2014. The business climate indicator fell by 3.9 points to 46.5 at the start of the year. Looking more closely, the sentiments in the two segments of the private equity market differ. The climate cooled again in the early stage segment, particularly because of the adjustment to the current business situation, while sentiment in the later stage segment brightened up once more – fuelled by the current business situation in contrast.
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German Private Equity Barometer 1st Quarter 2014 (PDF, 46 KB, non-accessible)
Business Survey
In collaboration with 26 business associations, the KfW Group has conducted a business survey on banking relations, loan terms and usual financing practices for the thirteenth time. In addition, companies this year were asked about locational factors and energy efficiency
Key results:
- Upturn boosts returns on sales
- Few difficulties gaining access to credit, except for small, young companies
- Potential for investments in area of energy-efficiency, especially for small enterprises
- 60 % of companies satisfied with their region as a place to do business
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Business Survey 2014: Financially strong, energy-conscious, location-sensitive (Summary)
Focus on Economics
The German debate about Southern European economies suffers from premature conclusions on the basis of analogies to the German ex-perience of the 2000s. However, the causes of Italy’s weak growth differ from both Germany’s troubles and other peripheral economies’ problems. The main break on faster economic growth in Italy is in deficiencies of the public sector. Moreover, important factors in the crisis are systemic effects stemming from membership in the Eurozone. In particular, Italy suffers from a credit crunch caused and magnified by adverse feedback loops in a currency union.
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Italy is different: Beyond labour market reforms (PDF, 185 KB, non-accessible)
KfW Start-up Monitor 2014
New entrepreneurs are tackling more promising projects in Germany than in recent years. In 2013 more than half of all new entrepreneurs launched their business project due to a specific business idea. Almost three times as many new entrepreneurs launched novel products and services onto the transregional market compared to 2009, facilitated by easier access to financing. Capital expenditure amounted to just under EUR 10 billion in total.
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The volume of new lending by banks to enterprises and the self-employed in Germany fell by 3.6 % in the fourth quarter of 2013 compared with the previous year. However, this is not as severe as feared. New lending will ease in the first quarter of 2014. Even so, it may still be around 1.9 % below the previous year's level.
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KfW Credit Market Outlook March 2014 (PDF, 95 KB, non-accessible)
Focus on Economics
SMEs have to rely heavily on their internal financing capability if they wish to finance innovations. Since the special features of innovation projects make it difficult to obtain external financing, 79 % of innovation financing is generated from internal funds. Bank loans – which are otherwise the most important source of external financing in Germany – play a minor role, making up a mere 7 %. This dependency on internal sources means that small companies and firms with technologically demanding projects in particular are unable to fully develop their innovative strength.
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KfW SME Panel 2013: How German SMEs finance their innovations (PDF, 192 KB, non-accessible)
Economics in Brief
Seen as a whole, lending in Italy, Spain and Portugal declined to the same degree. However, a closer look at the figures reveals some differences. Sole proprietors have more to contend with than larger companies; and the outlook for Spain and Portugal is better than it is for Italy.
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SME loans in southern Europe – are the lean times over? (PDF, 235 KB, non-accessible)
Focus on Economics
The banking landscape in Germany is changing. Since 2003, more than one out of every ten bank branches has been closed down. Increasing digitalisation and the elimination of overcapacities are key factors. At present, this is not a problem in terms of credit supply to SMEs. At the same time, changes in branch networks reflect regional economic structures: rural and economically weaker regions are harder hit by branch closures. These cut-backs are likely to continue. Advisory-intensive services must still be available to companies going forward.
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The network of Germany's bank branches is dwindling (PDF, 613 KB, non-accessible)
The German Private Equity Barometer produced by KfW in conjunction with BVK reported a significant improvement in sentiment in the fourth quarter of 2013. The business climate indicator gained 19.7 points to close the year at a two-year high of 51.1 points. Sentiment improved in both private equity market segments, albeit with a different emphasis in each segment. In the early stage segment, the current business situation sub-index underwent a marked improvement, while the later stage segment saw a pronounced rise in business expectations.
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German Private Equity Barometer 4th Quarter 2013 (PDF, 117 KB, non-accessible)
Focus on Economics
Debt and deficits are usually seen as negative – the result of poor financial management. Yet they are market economy instruments and essential to the existence of their counterparts: assets and savings. These instruments allow money to flow from sectors with savings to sectors wishing to invest. So, it is difficult to praise surpluses and assets while at the same time condemning deficits and debt. This Focus on Economics looks at the key relationships.
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Should we feel bad about debt? (PDF, 182 KB, non-accessible)
New lending in hibernation.
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KfW Credit Market Outlook December 2013 (PDF, 181 KB, non-accessible)
Sentiment in the later-stage segment of the GPEB was down in the third quarter of 2013 for the second time in a row.
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German Private Equity Barometer 3. Quarter 2013 (PDF, 199 KB, non-accessible)
KfW-Mittelstandspanel
The trend in the German SME sector was positive but muted in 2012. The weakness of the economy is now having an impact. The warning signals are becoming louder. Growth is required.
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Banks set to see a 6.8 % decline in new lending business with enterprises and self-employed professionals in the third quarter.
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KfW Credit Market Outlook September 2013 (PDF, 125 KB, non-accessible)
Mixed sentiment on the investment market.
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German Private Equity Barometer 2. Quarter 2013 (PDF, 200 KB, non-accessible)
Economics in Brief
Germany and KfW support Spain in fighting the credit crunch.
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With a little help from a friend (PDF, 172 KB, non-accessible)
Lending business: Decline in new lending continues.
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KfW Credit Market Outlook June 2013 (PDF, 36 KB, non-accessible)
Papers and Proceedings on Economics
Bank loans are the most frequently used financing source for young innovative enterprises. However, enterprises have higher R&D intensity on average if they do not use credit financing.
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Business Survey
Despite the present economic uncertainty and the Eurozone crisis, the overall financing situation for companies in Germany remains good. This is the key finding of the 2013 business survey, which was undertaken in collaboration with 26 business associations.
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KfW-Start-up Monitor
The KfW Start-up Monitor 2013 gives a broad overview over start-up activity in Germany in 2012 including the number of new entrepreneurs and the employment effect of new enterprises.
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KfW Start-up Monitor 2013, Tables and Methodology (PDF, 351 KB, non-accessible)
Strong brightening of the business climate in the German equity market.
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German Private Equity Barometer 1. Quarter 2013 (PDF, 263 KB, non-accessible)
Papers and Proceedings on Economics
The minimum expected return that private equity companies have on their portfolios, has decreased in the past decade. Almost all types of private equity companies show such a decline.
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New lending business in subdued mood after weak ending to the year.
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KfW Credit Market Outlook March 2013 (PDF, 108 KB, non-accessible)
Focus on Economics
The remuneration scheme of VC funds creates significant conflicts of interest between investors of VC funds and fund managers. This article discusses what these conflicts look like, what their consequences are and how they can be addressed.
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Corporate investment: Gradual recovery.
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KfW Investment barometer Germany (PDF, 41 KB, non-accessible)
KfW-Start-up Panel
Analysis of development of young enterprises during their first five to seven business years for the areas human resources and financing behavior as well as determinants of business start-up survival.
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KfW/ZEW Start-up Panel 2012 - summary (PDF, 156 KB, non-accessible)
KfW-Mittelstandspanel
SMEs are continuing their course of stabilisation and growth following the economic and financial crisis. The SMEs were also the "job engine".
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KfW-Mittelstandspanel 2012 – Strong Performance – Increasing Risks (PDF, 386 KB, accessible)
