German banks have further tightened credit availability for small and medium-sized enterprises (SMEs), as revealed by the latest KfW-Ifo credit hurdle report. In the fourth quarter of 2024, 32% of SMEs seeking loans reported restrictive lending practices, marking the highest level since the current survey methodology began in 2017.
In contrast, large enterprises experienced a slight easing, with the proportion of companies facing difficult loan negotiations decreasing by 2.6 percentage points to 31.9%. Three months prior, this figure had reached a record high.
The situation for SMEs in wholesale trade deteriorated significantly, with the percentage of firms reporting restrictive lending rising by 11.9 percentage points to 36.7%. Retail and manufacturing sectors also saw increases, with complaints rising to 37.2% and 33.4%, respectively. KfW finance market expert Jenny Körner noted that companies in these sectors are struggling with poor business conditions and weak sales expectations, leading many to consider job cuts.
Despite falling interest rates, demand for loans remained weak, with only 21.1% of SMEs and 28% of large companies seeking credit. This is well below the long-term average. Körner stated that the ongoing tight financing conditions from banks are dampening loan demand, compounded by businesses' hesitance to commit to long-term loans due to persistent economic weakness, political uncertainty, and pessimistic business outlooks.