The conflict in the Middle East has driven energy prices higher across Europe, raising rates and adding fresh strain to a credit environment for businesses.
5 November 2026
The European Central Bank's (ECB) latest data shows a net 46% of euro area firms reported increases in interest rates on bank loans in the third quarter of 2026, up from 26% in the first quarter.[1],[2] The overall financing gap — the ECB's measure of the difference between firms' need for bank loans and their ability to access them — also has also widened over the course of the year.
Europe's banks are still lending, but not evenly. While loan availability improved for large companies earlier in the spring, it has consistently been declining for small and mid-sized enterprises (SMEs), the firms with the least cushion against an energy shock. To add to the challenge, the conflict in the Middle East has pushed energy prices higher across Europe. In the previous quarterly survey, firms had stated that they expect non-labor input costs, including energy, to rise by 5.2% over the next 12 months. European industrial electricity already carries a roughly 140% premium over the US.[3]
The European corporate sector has already been showing signs of distress. In Germany, corporate insolvencies climbed to 24,064 in 2025 — the highest level since 2014 — after insolvency filings rose by more than 22% in each of the previous two years.[4]
For businesses dealing with tighter bank credit, rising costs, and a regulatory environment that has not moved fast enough to relieve the pressure, there is a risk that liquidity could dry up precisely when it is needed most to ride out volatility. Alternative credit, including private credit funds and share-backed loans, offers one route for businesses in need of liquidity.
Beyond the bank loan
Non-bank lending accounted for just 12% of corporate financing in Europe in 2025, compared with 75% in the US.[5] Only 10% of European businesses use capital market finance, compared with over 25% in the United States, and most European SMEs primarily turn to bank loans.[6] As banks pull back according to the dictates of risk management committees, this gap needs to be bridged.
If not, European businesses, and the shareholders and executives behind them, will have to compete on the global market with less capital than they need.
The capital isn't missing, but it is difficult to access. EU households hold some €35 trillion in savings, spread across 27 member states and often invested abroad.[7],[8] Former European Central Bank chief Mario Draghi even published a famous reform blueprint two years back calling for common borrowing standards and a joint capital markets union to move those savings from deposit accounts to corporate balance sheets. But progress has been slow.[9]
Until the reforms materialize, alternative credit may well be the faster route to getting capital for many firms. Equity-backed finance, where shareholders borrow against an ownership stake instead of selling or diluting it, is increasingly how some European companies are securing liquidity, whether for rescue financing or to fund acquisitions.
For example, insiders at ABO Energy, a German solar and wind developer, pledged some 1.86 million shares in April as security for credit transactions of the company.[10] In a more high profile example, Leonardo Maria Del Vecchio sought to secure a €10 billion financing package to buy out the stakes of his siblings, Luca and Paola, in order to increase his shareholding in the family holding company, Delfin S.à r.l., which owns a significant stake in Ray-Ban manufacturer EssilorLuxottica.[11]
The same structure is available to founders and leading shareholders of European listed businesses if they would rather borrow against their stake than sell it.
The legacy of crisis
The credit squeeze that many European businesses now face has been building for more than a decade. After the 2008 financial crisis and the sovereign debt crisis that followed, European regulators rebuilt the banking system around higher capital requirements. That made it safer, but it also made lending to smaller and riskier borrowers more expensive as banks needed to hold more capital on their balance sheets to extend credit.
For years, cheap money masked the consequences of these restrictions. The ECB held its deposit rate below zero from 2014 to 2022, so financial institutions were keen on extending credit to businesses to achieve a return on holdings.[12]
Then came inflation. The energy shock that followed Russia's invasion of Ukraine pushed prices up, and the ECB raised rates from –0.5% to 4% in just 14 months.[13] Companies that borrowed in an era of low interest rates now have to refinance in a different one.
The structural fix was supposed to be the Capital Markets Union (CMU), an initiative launched in 2015 to give European companies more alternatives to bank loans.[14] But a decade on, CMU has yet to take off and efforts to develop it have seen less integration than hoped. The European Commission has since folded it into a broader savings and investments union.[15]
As a result, the new shock of higher energy costs due to the Middle East conflict landed on a system that was already short of shock absorbers.
Right now, nearly 9,000 European companies are listed on major public stock exchanges across Europe (including the UK).[16] As interest rates climb (evidenced by surging government bond yields[17]), European businesses can consider turning to alternative forms of credit to stay competitive, get the funding they need to meet elevated operational costs, and hopefully stave off an early end to their business legacy.
This decade has been challenging for European businesses, but the continent has the savings it needs to rebuild. Exploring how to obtain working capital from the widest possible range of sources will help companies ride out the storm.
[1] https://www.ecb.europa.eu/stats/accesstofinancesofenterprises/pdf/ecb.safe202607.en.pdf
[2] https://www.ecb.europa.eu//press/pr/date/2026/html/ecb.pr261026~bde7b6d11a.en.html
[3] https://events.economistenterprise.com/custom-events/cso-leaders-club-lcaw/
[4] https://www.destatis.de/DE/Presse/Pressemitteilungen/2026/03/PD26_085_52411.html
[5] https://www.spglobal.com/market-intelligence/en/news-insights/articles/2026/3/private-credit-outlook-in-europe-tempered-by-rising-global-risks-100017896
[6] https://www.europarl.europa.eu/RegData/etudes/BRIE/2022/739274/EPRS_BRI(2022)739274_EN.pdf
[7] https://group.bnpparibas/en/news/savings-and-investment-in-europe-trends-in-2026-and-their-impact-on-economic-competitiveness
[8] https://www.reuters.com/world/europe/eu-faces-last-chance-compete-with-rivals-says-summit-report-author-2024-04-17/
[9] https://www.reuters.com/commentary/reuters-open-interest/eu-risks-becoming-sick-man-world-if-it-doesnt-reform-quickly-mike-peacock-2026-10-05/
[10] https://www.ad-hoc-news.de/boerse/news/unternehmensnachrichten/founders-pledge-their-own-shares-as-abo-energy-races-friday-s-bank-deadline/69896610
[11] https://www.bloomberg.com/news/articles/2026-04-27/ray-ban-heir-s-10-billion-buyout-of-siblings-approved-radiocor
[12] https://currencythoughts.com/2022/07/21/ecb-negative-deposit-rate-ended/
[13] https://fastforward.com.cy/finance/european-central-bank-hikes-deposit-rate-highest-euros-1999-introduction
[14] https://www.bruegel.org/blog-post/europes-capital-markets-union-and-new-single-market-challenge
[15] https://www.mondaq.com/ireland/commoditiesderivativesstock-exchanges/1600868/savings-and-investments-union-commission-outlines-its-plans
[16] https://www.marketscreener.com/stock-exchange/shares/europe/
[17] https://www.reuters.com/business/finance/why-are-world-bond-markets-selling-off-again-2026-10-01/
disclaimer
Past performance does not guarantee future returns, and individual returns are not guaranteed or warranted.
This Document is intended solely for accredited investors, sophisticated investors, professional investors, or otherwise qualified investors, as may be required by law or otherwise, and it is not intended for, and should not be used by, persons who do not meet the relevant requirements. The content provided herein is for informational purposes only and is general in nature and not targeted to any specific objective or financial need. The views and opinions expressed in this Document have been prepared by third parties and do not necessarily reflect the views and opinions of EquitiesFirst. EquitiesFirst has not independently examined or verified the information provided herein, and no representation is made that it is accurate or complete. Opinions and information herein are subject to change without notice. The content provided does not constitute an offer to sell (or solicitation of an offer to purchase) any securities, investments, or any financial products (“Offer”). Any such Offer shall only be made through a relevant offering or other documentation which sets forth its material terms and conditions. Nothing contained in this Document shall constitute a recommendation, solicitation, invitation, inducement, promotion, or offer for the purchase or sale of any investment product by Equities First Holdings, LLC or its subsidiaries (collectively, “EquitiesFirst”), nor shall this Document be construed in any way as investment, legal, or tax advice, or as a recommendation, reference, or endorsement by EquitiesFirst. You should seek independent financial advice prior to making an investment decision about a financial product.
This Document contains the intellectual property of EquitiesFirst in the United States and other countries, including, without limitation, their respective logos and other registered and unregistered trademarks and service marks. EquitiesFirst reserves all rights in and to their intellectual property contained in this Document. The Document should not be distributed, published, reproduced or otherwise made available in whole or in part by recipients to any other person and, in particular, should not be distributed to persons in any country where such distribution may lead to a breach of any legal or regulatory requirement.
EquitiesFirst make no representation or warranty with respect to this Document and expressly disclaim any implied warranty under law. You acknowledge that EquitiesFirst is not liable under any circumstances for any direct, indirect, special, consequential, incidental, or punitive damages whatsoever, including, without limitation, any lost profits or lost opportunity, even if EquitiesFirst has been advised of the possibility of such damages.
EquitiesFirst makes the following further statements that may be applicable in the stated jurisdiction:
Australia: Equities First Holdings (Australia) Pty Ltd (ACN: 142 644 399) holds an Australian Financial Services Licence (AFSL Number: 387079). All rights reserved.
The information contained on this Document is intended for persons located in Australia only and classified as a Wholesale Client only as defined in Section 761G of the Corporations Act 2001. The distribution of information to persons outside this criteria may be restricted by law and persons who come into possession of it should seek advice and observe any such restriction.
The material contained in this Document is for information purposes only and should not be construed as an offer or solicitation or recommendation to buy or sell financial products.
The information contained in this Document is intended to be general in nature and is not personal financial product advice. Any advice contained in the Document is general advice only and has been prepared without considering your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided and the nature of the relevant financial product having regard to your objectives, financial situation and needs. You should seek independent financial advice and read the relevant disclosure statements or other offer documents prior to making an investment decision about a financial product.
Forecasts are not guaranteed, and undue reliance should not be placed on them. This information is based on views held by Equities First Holdings (Australia) Pty Ltd as at the publishing date of this material.
Dubai: Equities First Holdings Hong Kong Ltd (DIFC Representative Office) at Gate Precinct Building 4, 6th Floor, Office 7, Dubai International Financial Centre (commercial license number CL7354) is regulated by the Dubai Financial Services Authority (“DFSA”) as a Representative Office (DFSA Firm Reference No.: F008752). All rights reserved.
The material contained in this document is for information purposes only and should not be construed as financial advice, including an offer or solicitation or recommendation to buy or sell financial products. The information contained in this document is intended to be general in nature and any advice contained in this document is general advice only and has been prepared without considering your objectives, financial situation, suitability of the financial products or your needs. Before acting on any information, you should consider the appropriateness of the information provided and the nature of the relevant financial product having regard to your objectives, financial situation and needs. If you do not understand the contents of this document, you should consult an authorised financial adviser.
This document relates to a financial product which is not subject to any form of regulation or approval by the DFSA. The DFSA has no responsibility for reviewing or verifying any documents in connection with this financial product. Accordingly, the DFSA has not approved this document or any other associated documents nor taken any steps to verify the information set out in this document, and has no responsibility for it.
Hong Kong: Equities First Holdings Hong Kong Limited is licensed under the Money Lenders Ordinance (Money Lender’s Licence No. 1493/2025) and to carry on the business of dealing in securities (Type 1 licence) under the Securities and Futures Ordinance (“SFO”) (CE No. BFJ407). This Document has not been reviewed by the Hong Kong Securities and Futures Commission. It is not intended as an offer to sell securities or a solicitation to buy any product managed or provided by Equities First Holdings Hong Kong Limited and is only intended for persons who qualify as Professional Investors under the SFO. This document is not directed to individuals or organizations for whom such offers or invitations would be unlawful or prohibited.
Korea: The foregoing is intended solely for sophisticated investors, professional investors or otherwise qualified investors who have sufficient knowledge and experience in entering into securities financing transactions. It is not intended for, and should not be used by, persons who do not meet those criteria.
United Kingdom: Equities First (London) Limited is authorised and regulated in the UK by the Financial Conduct Authority (“FCA”). In the UK, this Document is only being distributed and made available to persons of the kind described in Article 19(5) (investment professionals) and Article 49(2) (high net worth companies, unincorporated associations etc.) of Part IV of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (‘’FPO’’) and any investment activity to which this presentation relates is only available to, and will only be engaged in with, such persons. Persons who do not have professional experience in matters relating to investment or who are not persons to whom Article 49 of the FPO applies should not rely on this document. This Document is only prepared for and available to persons who qualify as Professional Investors under the Markets in Financial Instruments Directive.
