In 2024, there were roughly 1.14 million active enterprises in the Czech Republic (Czechia). 99.9% of these firms were SMEs with less than 250 employees each. Micro-firms dominated the business landscape, comprising 96% of all SMEs in 2024. The total number of SME employees has been continuously slightly increasing since 2021, reaching 2.66 million in 2024. The unemployment rate remained the lowest in the European union at 2.6%.
In 2024, SME investment can be still assessed as favorable for established companies due to high bank liquidity. Banking and non-banking institutions offer a wide portfolio of financial products. The year 2024 marked a turn from the sharp decline in new business loans compared to previous years. The ECB´s SAFE Survey 2024 stated that 68% of SMEs that applied for a bank loan obtained the whole requested amount in Czechia, which is in line with EU-wide estimates. This is a decline from 2022, when the reported level was at 80%. SME interest rates in 2024 declined to reach 2022 levels; however, rates are still high in comparison to the pre-COVID period, reflecting the unstable geopolitical and economic situation.
SMEs are more vulnerable in terms of financing than large firms and banks have a higher perception of financial risk towards them which explains more frequent rejections of loan applications. Although the situation in this area was improving until 2021, it reversed in 2022 in reaction to geopolitical and economic turmoil. According to the SAFE Survey by ECB, the share of SMEs in Czechia which mention the access to finance being number one obstacle, decreased from 10% in 2020 to 5% in 2024. In terms of access to common methods of financing, Czechia is above average in several indicators showing the quality of SMEs' access to finance. The most important direct sources of external financing for SMEs are credit lines or overdrafts (50%), bank loans (45%) and leasing (56%). So far, equity financing remains used by only 2% of SMEs. In terms of the use of financing between 2022 and 2024, investment in the development of new products or services has slightly increased from 22% to 24%. Most sources of finance are intended to finance either fixed investments or inventories and working capital.
Alternative sources of financing include venture capital, angel investments, bond issuance, crowdfunding and state support. However, Czechia is characterized by a weaker investment environment, which undermines the establishment of new companies and the financing of new SME projects. While crowdfunding has become a popular tool for obtaining the necessary financial resources, capital financing was underdeveloped compared to similarly sized EU economies for a long time. There has been a lack of willingness to invest in the early stages of business development (pre-seed, seed, start-up and later stage venture), as investments in these entities are high risk for investors and banks. This is mainly due to the absence of relevant corporate history, lack of collateral or lack of information to assess their credit risk or valuation of their intangible assets. The situation had changed drastically after three venture capital funds with public investments were established between 2018-2021, and the venture capital supply in the Czech market was comparable to that of the other similarly sized EU economies. Unfortunately, two of these funds were closely linked to the 2014-2020 programming period and their operation ceased. That manifested already in 2022, with a 60% drop in venture and growth capital supply, which was further exacerbated in 2023, when capital investments decreased by 80%. The market for angel investments is small and fragmented, and the situation for innovators in the idea or start-up phase is still complicated. Consequently, the Czech government established one of the 3 planned pre-seed and spin-off co-investment funds in 2024.
The SME Support Strategy in Czechia for the period 2021-2027 (SME 2021+) aims to increase the productivity and competitiveness of SMEs and, at the same time, to strengthen their international position, inter alia in research and innovation and the use of advanced technologies and skills. The Strategy represents the key strategic document for the preparation of the European Union (EU) cohesion policies over the 2021–27 programming period in the area of enterprise development. The Strategy recently underwent a thorough mid-term evaluation in co-operation with the OECD. Based on the results, a revision of the Strategy will be carried out to have it adapted to the current geopolitical and economic environment. The Strategy is implemented mainly through two financial arms: the Operational Programme Technologies and Applications for Competitiveness (OP TAC), with a total allocation of CZK 77 billion, and the National Recovery Plan (NRP), established in 2021, which draws on the Recovery and Resilience Facility. The NRP offering originally CZK 191 billion to finance post-pandemic recovery was lately topped up with further CZK 30 billion. Government support for SMEs and entrepreneurs primarily consists of measures in the areas of research and innovation support, green and digital transition, export support, and collaboration with research institutions.