Borrowing became more expensive for euro area businesses in the second quarter of 2026, while smaller firms found it increasingly difficult to access credit, according to the European Central Bank’s latest Survey on the Access to Finance of Enterprises (SAFE).

Higher interest rates, tighter lending standards and modestly rising financing needs continued to weigh on businesses, even as inflation expectations remained broadly stable. The survey also suggests companies are adapting to a more challenging environment by relying on internal funding, reshaping supply chains and becoming more selective about investment.

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Borrowing Costs Continue To Climb

Businesses reported a further tightening in bank lending conditions, driven primarily by higher borrowing costs. A net 42% of firms said interest rates on bank loans had increased, up sharply from 26% in the previous quarter. Companies also continued to report higher fees, commissions and collateral requirements, although both measures eased slightly compared with the first quarter.

Demand for financing edged higher, with a net 2% of firms reporting increased demand for bank loans. Overall access to credit, however, remained broadly unchanged.

SMEs Feel The Pressure Most

Beneath the stable headline figures, the survey revealed a widening gap between large companies and smaller businesses.

Large firms reported improving access to bank loans, posting a net positive balance of 4%. SMEs, by contrast, saw financing conditions deteriorate further, with a net balance of minus 4%.

That divergence pushed the bank loan financing gap slightly wider, highlighting that tighter monetary conditions continue to affect smaller businesses more severely than larger firms.

Economic Uncertainty Still Weighs On Credit

Although businesses became slightly less pessimistic about future financing conditions, the broader economic outlook remains the biggest obstacle to accessing credit.

A net 29% of firms identified the general economic environment as a limiting factor, up from 26% in the previous survey. Businesses also became somewhat more cautious about their own prospects, with more firms expecting weaker sales and profitability to weigh on future access to external finance.

At the same time, banks appeared marginally more willing to lend, with the share of firms reporting improved bank willingness to provide credit edging higher.

Inflation Pressures Continue To Ease

The survey points to gradually easing price pressures across the euro area. Businesses lowered expectations for selling prices, non-labour input costs and wage growth over the next 12 months. Longer-term inflation expectations, however, remained broadly stable, suggesting firms continue to expect inflation to stay close to current levels over the coming years.

Companies Adapt To Geopolitical Risks

Rather than pulling back from international markets, many businesses are adjusting their operations to manage geopolitical uncertainty.

More than one-third of firms said they are seeking alternative suppliers, while nearly one-third are looking for new energy providers. Others reported investing in energy efficiency, increasing inventories and reviewing insurance or trade finance arrangements to strengthen resilience.

Large companies were generally better positioned than SMEs to implement these measures, reflecting their greater ability to diversify supply chains and absorb external shocks.

AI Investment Relies Mostly On Internal Funding

When it comes to artificial intelligence, businesses overwhelmingly expect to finance investment with their own resources.

Nearly three-quarters of firms said they plan to rely on internal funds, while only a minority expect to use bank loans, grants, leasing or equity financing. Debt securities remain the least popular source of funding for AI-related investment.

A More Cautious Business Environment

The ECB’s latest SAFE survey, conducted between May 21 and June 26 among 5,087 euro area firms, paints a picture of businesses operating in an environment where credit remains expensive despite signs that inflation pressures are easing.

Smaller firms continue to face the greatest financing challenges, while companies across the euro area are increasingly relying on their own balance sheets to fund investment and adapting their operations to a more uncertain economic and geopolitical landscape.