German SMEs have felt the burden of the pandemic, but generally they have come through the crisis years with few bruises. Rapid adjustments to business models and, above all, strong growth in digital sales of products and services have often proved to be lifesaver and prevented worse outcomes (KfW, 2021[1]).
Despite all the coronavirus worries, 2021 was a very good year for SMEs. Seemingly unimpressed by the pandemic, sales and employment returned and employment returned to pre-crisis levels.
At the start of 2022, businesses confronted the current crisis on a solid foundation (KfW, 2022[2]). Even as the burdens from the pandemic are easing, the economic situation has worsened as a consequence of Russia’s war of aggression against Ukraine. The escalation of the conflict has led to enormous uncertainty.
The impact of the war, in combination with directly and indirectly perceivable consequences of sanctions (such as loss of export markets, energy price increases, rising inflation, supply chain disruptions and production losses), has been afflicting many businesses (KfW, 2022[2]). Despite all stress factors, the damage to SMEs is still moderate.
However, the economic outlook for 2024 is muted, prospects for investment and turnover are dim and, not least, businesses are feeling the implications of tighter monetary policy (KfW, 2023[3]).
It became apparent already at the end of the last year that the situation in the credit market was becoming more difficult for businesses. They reported that banks were taking an increasingly restrictive position in loan negotiations (KfW, 2023[3]).
To some extent, this reflects the now higher interest rate environment, which companies might perceive as more restrictive lending. But banks are also applying more conservative lending criteria, reflecting the current economic uncertainty. There is, however, no sign of a credit crunch, and banks have sufficient surplus capital and enough lending capacity to finance German SMEs.
The task now is to support SMEs in the transformation to more sustainability and climate protection, which requires massive investments in the decarbonisation of our economy. For this purpose, the differentiated range of funding from the ERP Special Fund is available and is constantly being further developed.