They make up an important part of the German corporate landscape: small businesses. A recent study has found that these companies are not only more optimistic about the future, but are also investing more.
Small business owners often use a traditional bank loan when it comes to investments.
Mark Bowden / Getty Images / iStock (subject image with model)
In 2021, the Federal Statistical Office (Destatis) counted around 3.1 million small and medium-sized enterprises (SMEs). They thus make up the vast majority of German companies. 2.6 million of these companies are classified as micro-enterprises. After a long, crisis-related dry spell and few positive reports of success, the owners and managing directors as well as freelancers belonging to this group with an annual turnover of up to six million euros are once again seeing a ray of hope on the horizon.
Dissatisfaction with economic policy
55 percent of the approximately 300 small businesses surveyed by the cooperative VR Smart Finanz together with the Research Center For Financial Services at Steinbeis University rate the current economic situation as “good” or “very good”.
However, only 35 percent attribute this to a positive influence of the economic policy framework. 34 percent rate the economic policy environment as “average”, 31 percent give it the grades “poor” or “very poor”. However, companies increasingly perceive legal requirements as a burden. For 28 percent of small businesses, these are among the greatest challenges. A year ago, only 13 percent said this.
Struggle with liquidity bottlenecks remains
Compared to the autumn survey in 2023, the development of orders and sales in particular has improved for over 40 percent of companies. “In an environment of high costs and taxes, however, the development of profits lags behind. Only a quarter report increased profits, while almost 40 percent report declining profits,” say the study authors. Almost every second owner or managing director (47 percent) also complains about liquidity bottlenecks. In October 2023, the figure was 44 percent and in April last year, 46 percent. Currently, the number is even three times as high as in 2019.
But the outlook for the future is optimistic: As a result of the improved order situation, 35 percent of all respondents expect demand to increase in the next twelve months. A good half (55 percent) expect demand to remain the same. Overall, almost 90 percent expect their company’s economic development to be positive or stable. Only ten percent expect demand to fall.
Greater willingness to invest again
In contrast to the previous surveys in spring and autumn 2023, in which high costs and uncertain economic conditions significantly impacted the willingness to invest, the current survey paints a somewhat more positive picture here too. Many small business owners not only want to make up for most of the investments that have been postponed. More than two-thirds plan to invest primarily in their business equipment in the next two years. Digitization and automation also play an important role here.
In addition, sustainable optimizations are becoming increasingly relevant. 52 percent of respondents are planning corresponding projects in the next twelve months. That is ten percent more than in autumn 2023. Specifically, this concerns green energy or e-mobility and thus projects aimed at better energy efficiency. Eight out of ten respondents are also of the opinion that a sustainable business setup will have a positive impact on the company’s success in the long term. A year ago, 66 percent said this.
Bank loan most important form of financing
Regardless of the form of investment, small businesses rely on capital from the bank (32 percent), current account lines (30 percent), leasing (20 percent), subsidized loans (19 percent) and hire purchase (12 percent) for financing. In addition to low interest rates, the respondents’ main priorities are flexibility and speed of decision-making and payment, as well as trust in the lender. Almost half of those surveyed attach particular importance to completing the financing online.
Overall, the study shows a significantly increased affinity for digital banking or purchasing products with a mouse click. 90 percent of respondents said they use online banking for their company’s financial matters. More than four fifths have already purchased digital financial products from their institution in the past or can at least imagine doing so.