Willingness to Use Bank Loans Keeps Falling: Small SMEs Especially Reluctant (KfW)

Summary

• Only 27% of German SMEs would currently consider a bank loan for investment financing, compared with 66% in 2017.p.1
• 43% of SMEs would rely on internal financing and 34% on leasing as alternatives to a bank loan.p.1
• 30% of SMEs would consider shareholder loans or deposits and 19% would consider public grants.p.1
• A majority of SMEs (59%) name only a single alternative financing instrument.p.1
• 30% of SMEs cite excessive disclosure of company information as a reason to forgo a loan, up from 17% in 2023.p.4
• The analysis is based on a special survey within the KfW SME Panel in which 13,079 SMEs took part.p.5

Key insights

1. Among small SMEs, the share considering a bank loan stands at 23%.p.2
2. Avoiding debt (63%) and not seeking external financing at all (50%) are dominant motives among smaller SMEs.p.3
3. High interest rates and weak growth prospects raise liquidity concerns and lead firms to avoid new debt.p.3
4. About a third of SMEs (34%) see leasing as an alternative to loan financing.p.4
5. Around 17% of mid-sized firms cite the effort of loan applications as a reason to forgo credit.p.4