European firms face tighter bank lending conditions, ECB survey finds

Euro area businesses faced tighter bank lending conditions and rising borrowing costs in the third quarter of 2026, with banks making loans less available relative to companies’ financing needs, according to the European Central Bank’s (ECB) latest Survey on the Access to Finance of Enterprises. The survey found that firms reported a further net increase in bank loan interest rates, while more businesses also faced higher collateral requirements and expected external financing to become less available over the following 3 months. A net 46 per cent of firms reported an increase in bank loan interest rates, up from 42 per cent in the previous quarter. Large companies reported increases more frequently, with a net 55 per cent indicating higher rates, compared with 41 per cent in the second quarter. Among small and medium-sized enterprises (SMEs), the corresponding figure fell to a net 38 per cent from 43 per cent. Other financing costs, including charges, fees and commissions, also increased, with a net 27 per cent of firms reporting higher costs, down from 31 per cent in the previous quarter. Meanwhile, a net 14 per cent reported an increase in collateral requirements, up from 10 per cent previously, indicating that businesses were being asked to provide more security when borrowing. Bank loan availability deteriorated more sharply than companies’ financing needs, widening the gap between the amount of credit businesses wanted and what they could obtain. A net 5 per cent of firms reported that bank loan availability had declined in the third quarter, compared with a net 1 per cent in the previous quarter. Both SMEs and large companies reported tighter availability, although the deterioration was particularly pronounced among larger businesses. For SMEs, the net share reporting a decline in availability stood at 5 per cent, compared with 4 per cent in the second quarter. Among large firms, the figure reached 6 per cent, reversing the previous quarter’s net 4 per cent reporting improved availability. At the same time, a net 2 per cent of firms reported a decrease in their need for bank loans, compared with a net 2 per cent increase in the previous quarter. Developments differed according to company size, with SMEs reporting broadly unchanged financing needs, at a net 1 per cent compared with 2 per cent previously. Large firms, however, reported a net 6 per cent decrease in their need for bank loans, reversing a net 3 per cent increase in the previous quarter. The resulting bank loan financing gap indicator stood at a net 2 per cent, down from 3 per cent in the previous survey round. The indicator measures the difference between changes in firms’ demand for bank loans and the availability of such financing, with a positive reading signalling that availability is deteriorating relative to needs. Looking ahead, more firms expect the availability of external financing to decline over the next 3 months. Businesses continued to identify the general economic outlook as the main factor restricting access to external finance, with a net 31 per cent reporting a negative impact, up from 29 per cent in the previous survey round. Large companies were more pessimistic than SMEs, with net shares of 35 per cent and 29 per cent respectively saying the economic outlook was constraining their access to finance. The impact of firms’ own business prospects, measured through sales and profits, remained negative, although the net share reporting this effect eased to 9 per cent from 10 per cent in the previous quarter. By contrast, companies’ capital positions and creditworthiness continued to have a positive impact on their access to external financing. The ECB also cautioned that significant changes to the survey sample make some of the latest results more difficult to interpret, particularly those relating to firms’ expectations for selling prices, input costs and inflation. First-time respondents accounted for the majority of the sample in this round, making comparisons with previous results less straightforward. Among firms that participated in both the latest survey and the previous round, the increase in expectations for selling prices was limited. However, selling price expectations rose significantly when the full sample was considered. A similar pattern emerged in inflation expectations, with median expectations remaining broadly unchanged among businesses that participated in both rounds, but increasing significantly across the full sample. Firms’ assessment of the risks surrounding their inflation outlook over the next 5 years remained broadly unchanged. The report presents the main findings of the 40th round of the Survey on the Access to Finance of Enterprises in the euro area. The survey was conducted between August 26 and October 2, 2026, and covered 12,822 enterprises. Of these, 11,917, or 93 per cent, had fewer than 250 employees. Around half of the firms were asked about changes in financing conditions and other developments between July and September 2026, while the remainder were asked to assess changes over the longer period from April to September. Businesses were also asked about their expectations for euro area inflation, selling prices and other costs. The findings point to continuing pressure on companies’ access to credit, as higher borrowing costs and tighter lending conditions coincide with concerns about the economic outlook, although the ECB said changes in the composition of respondents should be considered when interpreting the latest expectations data.