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Press Release from 2017-07-06 / Group, KfW Research

Credit environment for businesses cools off slightly but remains very positive

  • 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

The credit environment for businesses has deteriorated slightly for the first time since 2011 despite a healthy business cycle, businesses’ high self-funding capacity and improved ratings. In a historic comparison, however, businesses continue to regard the credit environment as extremely positive. These are the findings of the 2017 Business Survey which KfW conducted among nearly 2,100 enterprises together with the Federation of German Industries, the Federation of German Wholesale, Foreign Trade and Services, the German Retail Federation, the German Confederation of Skilled Crafts and other leading business associations. The proportion of enterprises reporting greater difficulties in accessing credit rose by 2 percentage points to 16.7%. The share of businesses reporting an improved credit environment increased by a mere 0.8 percentage points to 12.5%.

Young and small businesses in particular reported a more restricted credit environment. Of the small enterprises with an annual turnover of up to EUR 1 million, 26.8% reported greater difficulties in accessing credit. That rate was around seven times higher than among enterprises with a turnover in excess of EUR 50 million. Young enterprises less than six years old reported difficulties in obtaining a loan even more often (28.7%). Large enterprises are also reporting problems more often than last year, at 3.8%, although only to a slightly higher degree.

Credit ratings, that is, assessments of borrowers by lending institutions, have improved on a broad front. Improved ratings were reported by 30.9% of businesses. Only 9.3% reported having received lower ratings. The generally favourable development is presumably due to the healthy business cycle in Germany which is positively affecting ratings through the key financial indicators and business expectations.

The Chief Economist of KfW, Dr Jörg Zeuner, commented the findings of the Business Survey 2017 as follows: ‘The first deterioration in the credit environment in years is much too small to put the brakes on the generally very good cyclical development. Business ratings have justifiably received yet another boost given the performance of our economy. We therefore expect credit demand to pick up in the near term as well. The banks’ adjustment to tighter lending restrictions may be one reason the environment has stopped improving. Flat yield curves, the ECB’s negative deposit rates and digitalisation are also driving many banks’ margins down. That has shifted the focus on the cost of lending, so the size of loans counts more.’

The Business Survey 2017 also shows that bank loans remain an important source of funding. Last year, 55.0% of businesses conducted loan negotiations. However, that share dropped by 4 percentage points on the previous year.

The survey was conducted for the 16th time among enterprises of all size classes, sectors, legal forms and regions. Nearly 2,100 businesses from 18 trade and regional associations took part. It was conducted between mid-December 2016 and mid-March 2017.

The KfW Business Survey is available for download at
www.kfw.de/unternehmensbefragung.

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Portrait Wolfram Schweickhardt