Banks and other lenders are now tightening their credit assessments for SMEs

Krea's latest SME finance approval index demonstrates an evident drop from the peak point of 85% in Q4 2021 to 70% in Q3 2022. Expressed differently, 3 out of 10 companies requesting finance through Krea are not presented with any offers for a business loan, factoring and real estate loans.

​​​Companies performing low on credit scores are seemingly the most affected, with an average approval rate of only 37.5% during the last quarter, compared to 67.5% in Q4 2021. However, although banks are more careful in their credit assessments, the overall lending situation is still comparably better than at the beginning of the covid-19 pandemic. 

“Banks and lenders that are active on Krea have gradually adjusted their risk appetite, starting in Q1 2022 with the invasion of Ukraine and the succeeding increase in fuel prices. Today, the impact is largest for companies and industries that had low profitability from the onset and therefore are more adversely affected by increasing input prices.” says, Carsten Leth, CCO at Krea.

In Sweden, the largest share of funding to small businesses is provided by banks and credit market companies, often collectively referred to as “bank”. The bank that approved most credit requests through Krea had an approval rate of only 24%, implicating that they rejected more than 3 out of 4 requests. This is not unanticipated considering that each lender, particularly those specialising in a certain industry or loan segment, has individual requirements and lending criteria. 

What can SME businesses do to improve their financing options? 
With an increasing uncertainty and banks tightening their credit assessments, it is evident that the landscape of credit financing has grown increasingly complex. Nevertheless, there are some factors to consider as an SME owner, to improve the chance of receiving external financing. 

• Make sure to support your loan application with relevant, additional information. It becomes increasingly important to demonstrate the latest financials in order for banks and lenders to understand how the company is currently performing. 
• Provide comprehensive information about collateral structure, e.g. real estate pledge, other liquid assets or personal guarantor.
• Apply for financing through a loan broker. Banks and lenders focus on different customer segments that they are mostly interested in, including industry and size. By applying with several lenders, you can increase the likelihood of getting your credit request approved and can choose the best possible rate. Krea’s data shows that companies applying through a loan broker are three times more likely to get a loan paid out, compared to directly approaching the bank. 

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For more information, please contact:

Carsten Leth, Chief Commercial Officer at Krea 

Mail: carsten.leth@krea.se

Phone: +46 72 719 66 59

Krea is the natural place for small businesses to realize their growth potential by getting instant access to the best credit.

Krea’s digital comparison platform makes it easy for SMEs to find credit to the best possible terms. We have supported more than 20 000 Swedish companies to find financing by providing a market comparison of 30+ lenders. The service is digital and enables companies to find, compare and close financing up to 30 million Swedish crowns without hassle.