Status: 10/24/2022 12:16 p.m
Looming recession and fears of bankruptcies: companies report that negotiations for new loans are becoming more difficult. Small companies and the self-employed are suffering most from the reluctance of the banks.
In view of an impending recession and the feared wave of bankruptcies, German companies are finding it more difficult to obtain new loans. Currently, 24.3 percent of the companies that are currently negotiating loans report reluctance on the part of the banks. This is the result of a survey published by the Munich ifo Institute. This is the highest value since 2017.
“The currently unfavorable economic development is making the banks more cautious,” said Klaus Wohlrabe, head of the ifo surveys. “For some companies, economic survival could become difficult without new loans.”
Small businesses rely on credit
In concrete terms, there are 28.8 percent of the loan-seeking companies that report that the banks are reluctant to offer service providers. 8.4 percent of companies looking for credit in the chemical industry and 22.4 percent of car manufacturers complain that new loans are no longer so easy to obtain. In retail, on the other hand, it was just under 15 percent of the companies.
The micro-enterprises and the self-employed are hardest hit. Around every second loan-seeking company reported that it was difficult to borrow fresh money. “Other forms of financing such as bonds are hardly usable for micro-enterprises,” said Wohlrabe. “They are therefore often dependent on bank loans.”
Recession and turnaround in interest rates are making lending more difficult
Also because of the turnaround in interest rates, the financial institutions are much stricter when it comes to lending. “When a bank receives an inquiry, they examine the potential borrower very carefully and consider whether they can afford the more expensive interest and principal payments in the future,” explained Christina Bannier, Professor of Banking & Finance at Justus-Liebig -University of Gießen, after the historic increase in interest rates by the European Central Bank (ECB) in September. Especially in the current times, in which a recession threatens, the institutes are more cautious.
The Bundesbank already sees Germany on the threshold of an economic downturn due to the energy crisis. “The persistently high inflation and the uncertainty about the energy supply and its costs are having a significant impact on the German economy,” says the current monthly report. Already in the past summer quarter, the gross domestic product could not have grown any more, but stagnated. In the winter half-year that has just begun, it will probably “decrease significantly”, the Bundesbank emphasized the danger of a recession. She understands this to mean a clear, broad-based and long-lasting decline in economic output.