German SMEs Face Tighter Bank Lending, Turn to Alternatives

Access to bank loans for small and medium-sized enterprises (SMEs) in Germany is becoming more difficult, while the need for financing remains high.

According to the KfW-ifo Credit Hurdle survey, around 37.8 percent of SMEs experienced restrictive lending practices in the fourth quarter of 2025, the highest figure since the survey began. Reasons for this include the weak economy, structural problems in the economy, and external risks, which are prompting banks to adopt a more cautious lending policy.

Record-high lending restrictions push SMEs toward faster, alternative financing despite higher costs and stricter approval rates

The demand for short-term liquidity remains strong. Fabian Platzen, General Manager Germany at SME financier Iwoca, estimates that small and medium-sized enterprises in Germany require annual financing volumes of around 70 to 100 billion euros. He told Table.Briefings that many firms are increasingly relying on external funding to manage working capital needs. Companies are using this financing to build up larger inventories in advance or to bridge temporary liquidity gaps.

This trend reflects a broader shift in corporate strategy, as businesses seek to secure supply chains and reduce exposure to procurement disruptions. As a result, inventory levels are being kept higher than in the past, with firms prioritising stability and resilience over just-in-time efficiency.

The growing need for short-term credit highlights ongoing pressure on cash flow management across the SMEs sector in Germany, particularly in an environment marked by uncertainty in global trade and supply conditions in the coming years.

Small and medium-sized enterprises (SMEs) are therefore increasingly turning to alternative lenders

According to information from Table.Briefings, Iwoca has expanded refinancing for its German business to €350 million, thus doubling its credit line compared to 2024. Iwoca’s managed loan portfolio in Germany increased to more than €275 million within a year.

In the first two months of this year alone, the provider disbursed almost €100 million to new and existing customers. Platzen, Iwoca’s general manager, expects the current refinancing line to be fully utilized as early as the third quarter.

Iwoca’s business model relies on fast loan decisions at a higher price. “We grant loans directly based on up-to-the-minute account information and don’t wait for annual financial statements,” said Platzen.

Many medium-sized businesses (SMEs) only prepare their financial statements in the spring. For this speed, however, companies often pay higher interest rates than with traditional bank loans. Iwoca does not disclose specific interest rates. According to the company, its approval rate is below 50 percent, and its default rate is in the mid-single-digit percentage range.

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(Featured image by Jakub Zerdzicki via Unsplash)

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First published in Table.Briefings. A third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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