New KfW Data Highlights Falling Loan Appetite Among Small Businesses and Rising Reliance on Internal Funding

New KfW Data Highlights Falling Loan Appetite Among Small Businesses and Rising Reliance on Internal Funding

(IN BRIEF) A new survey from KfW reveals that only 27 per cent of SMEs in Germany are currently willing to use debt financing for investments, the lowest level in ten years. The decline is driven largely by micro-businesses and service-sector companies, many of which are prioritising financial independence and avoiding debt due to economic uncertainty. While some businesses report having sufficient internal funds, concerns about strict bank requirements and risk aversion are also influencing the trend. Although this cautious approach reflects improved financial stability for some, experts warn that limited access to external capital could hinder necessary investments and impact long-term growth across the SME sector.

(PRESS RELEASE) FRANKFURT, 14-Apr-2026 — /EuropaWire/ — KfW has released new findings highlighting a sharp decline in the willingness of small and medium-sized enterprises (SMEs) in Germany to finance investments through borrowing. According to the latest KfW SME Panel survey conducted in January 2026, only 27 per cent of SMEs are currently open to taking on bank loans, marking the lowest level recorded in the past decade.

This represents a significant drop compared to previous years, with 42 per cent of businesses considering debt financing in 2023 and as many as 66 per cent in 2017. The results point to a growing preference among businesses for financial independence and stability, particularly amid ongoing economic uncertainty.

Dirk Schumacher explained that the current economic environment has led many companies to adopt a cautious approach, with a strong focus on avoiding additional financial risk. A majority of surveyed businesses—63 per cent—identified the desire to avoid incurring debt as a key reason for not seeking loans, a notable increase compared to previous survey periods.

In addition, around half of the respondents indicated that they are fundamentally not interested in borrowing, reflecting a broader shift in attitude toward external financing. At the same time, 36 per cent of SMEs reported having sufficient internal resources to fund their investments, suggesting improved capital reserves among some businesses. However, concerns about administrative burdens also play a role, with 30 per cent of companies citing stringent information requirements from banks and savings institutions as a barrier to borrowing.

The decline in borrowing interest is particularly pronounced among micro-businesses with fewer than ten employees, which make up a large share of Germany’s SME landscape. Only 27 per cent of these smaller enterprises are considering debt financing, compared to 69 per cent in 2017 and 41 per cent in 2023. In contrast, larger SMEs with more than ten employees have maintained a relatively stable appetite for loans, with around 56 per cent still open to borrowing.

Sectoral differences are also evident, with the services sector experiencing the most significant drop. Currently, just 21 per cent of service-based businesses are considering loans, a sharp decrease from 73 per cent in 2017 and 39 per cent in 2023. While the trend is visible across all sectors, the magnitude of decline varies depending on business size and industry.

Despite the increased reliance on internal funding, concerns remain about the long-term implications of reduced borrowing activity. While some companies are better positioned to finance investments independently, the broader need for capital across the SME sector remains substantial. Without access to external financing, there is a risk that critical investment projects could be delayed or not undertaken at all, potentially affecting future growth and competitiveness.

The brief analysis can be found at Focus on Economics | KfW

Media Contact:

Nina Luttme
+49 69 7431 41336
nina.luttmer@kfw.de

SOURCE: KfW