German small and medium-sized enterprises (SMEs) continue to face challenges in accessing bank loans, according to new research from KfW. In the third quarter of 2025, only 19.5 percent of SMEs reported entering loan negotiations with banks, marking the lowest level since late 2023. This is despite a decline in average interest rates to around 3.5 percent, which is about two percentage points lower than the peak recorded in October 2023.
The anticipated boost in credit demand following the Federal Government’s fiscal package has not materialized so far. More than one-third of SMEs who engaged in loan talks said they encountered restrictive attitudes from banks. While this figure dropped for the first time after six consecutive increases, barriers remain high—especially for retail sector SMEs, where nearly half reported difficulties obtaining loans.
Banks’ cautious lending practices are likely influenced by risk factors. The proportion of non-performing loans among SMEs rose above four percent during the second quarter of 2025, and business insolvencies remain at elevated levels.
Large enterprises also experienced some easing in lending policies; 20.4 percent reported restrictive approaches from banks—a decrease of 1.1 percentage points compared to previous periods.
“We don’t expect lending conditions to ease noticeably until the hoped-for economic recovery effectively takes hold and economic uncertainties decrease,” said Stephanie Schoenwald, economist at KfW Research.
“Until that happens, banks will remain cautious and credit demand will remain subdued.”
Further information and the full study are available at: