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Press Release from 2018-07-12 / Group, KfW Research

Credit market sentiment still remains strong

  • Funding climate once again at all-time high
  • Proportion of enterprises reporting difficulties in accessing credit at record low
  • Bank loans remain the main funding source, but less businesses negotiate loans with banks
  • Enterprises are concerned about skills shortage and economic downturn

The funding climate of companies in Germany improved again last year and reached an all-time high. In the 2018 Business Survey conducted by KfW with national, specialist and regional economic associations in Germany, just 12.5 % of the businesses surveyed reported difficulties in accessing credit (-2.6 % compared to previous year). This is the lowest figure recorded since 2012. By contrast, 54.3 % of businesses indicated that accessing credit was ‘easy’. However, young and small enterprises are still much more often affected by difficulties in accessing credit than large enterprises. Of the small enterprises with an annual turnover of up to EUR 1 million, 24.4 % reported difficulties in accessing credit. That rate was around 14 times higher than among enterprises with a turnover in excess of EUR 50 million. Young enterprises less than six years old report difficulties in accessing credit even more often, at 25.9 %.

Bank loans remain the main funding source. Last year, 52.2 % of businesses negotiated loans with banks. But this share has dropped in the past years. Highest in demand, at 49.6 %, were loans for capital goods such as machinery, plant, vehicles and equipment. Real estate loans (40.3 %) and working capital loans (32.9 %) were in second and third place.

”Access to credit has never been easier for businesses in Germany as it is right now. However, there is no cause for concern over high levels of business debt in Germany as there is in other countries. When compared on an international scale, enterprises in Germany have a low level of debt but a high credit standing. The main thing standing in the way of an investment drive is the high degree of political uncertainty,” says KfW's Chief Economist Dr Jörg Zeuner, explaining the results of the 2018 Business Survey.

The overall very positive funding climate is reflected in company ratings that have again improved broadly. A good 32 % of enterprises reported higher ratings, while 7.3 % reported lower ratings. The balance (improved ratings minus lower ratings) increased by four points on the previous year. This is yet another positive outcome, as credit institutions use company ratings as a basis for their lending decisions and terms.

Despite the good funding climate, enterprises are also concerned about negative effects on business activity from the looming skills shortage (79.6 %) and the slowing economy (52.0 %). Large enterprises and manufacturers, on the other hand, fear growing protectionism, international crises, unfavourable exchange rates or trade sanctions much more than a worsening of financing conditions.

The Business Survey 2018 was conducted for the 17th time among enterprises of all size classes, sectors, legal forms and regions. Nearly 2,200 businesses from 20 umbrella, trade and regional German business associations took part in the survey. It took place between mid-December 2017 and mid-March 2018. The Business Survey 2018 is available to download at https://www.kfw.de/KfW-Group/Service/Download-Center/Research-(EN)/Business-Survey/.

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Portrait Wolfram Schweickhardt