Financing SMEs and Entrepreneurs 2026: Czechia
Table of contents
In 2024, there were roughly 1,14 million active enterprises in 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 favourable 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. Nonetheless, this share represents 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. 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 characterised by having a weak 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 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.
Czech SMEs are currently navigating an exceptionally turbulent period marked by overlapping crises. The Russian large scale aggression against Ukraine has disrupted traditional trade routes, increased energy and raw material costs, and created uncertainty in key export markets. These challenges come on top of the lingering effects of the COVID-19 pandemic, which triggered a global economic downturn and exposed vulnerabilities in supply chains. Czech entrepreneurs are also grappling with high interest rates, a shortage of skilled labour, and the volatility of global energy markets.
In addition, SMEs must adapt to long-term structural shifts, including the green and digital transitions driven by climate change and EU policy. These transformations, while necessary, demand significant investment and innovation, further straining already limited resources. The cumulative effect of these pressures represents the most extensive set of threats to entrepreneurship since the founding of the independent Czech Republic in 1989. Despite support measures from the government and business associations, the resilience and competitiveness of Czech SMEs remain under significant strain.
According to the 113th survey held in February 2025 by the Association of Small and Medium Enterprises and Tradesmen Crafts of Czechia (the AMSP), the most pressing barriers to faster adaptation include financial constraints (40%), an unstable economic environment (33%), and a shortage of skilled labour (32%), all of which echo the broader challenges of inflation, rising interest rates, and disrupted supply chains. Additionally, regulatory burdens and administrative complexity (28%), lack of clear information (28%), and resistance to change (14%) further hinder transformation efforts. These obstacles are compounded by internal issues such as rigid corporate structures (11%), making it increasingly difficult for SMEs to remain competitive.
An economic survey published by the CZSO (Czech Statistical Office) shows that in July 2024, business confidence in Czechia has improved across most sectors year-on-year. The overall economic sentiment indicator, as well as both the business and consumer confidence indicators, are at higher levels than a year ago. In industry, despite recent monthly declines, year-on-year confidence is stronger, supported by increased production capacity utilisation and a higher share of businesses reporting no barriers to operations. Confidence in construction has risen significantly, although concerns about demand have grown. In trade, year-on-year confidence is slightly lower, while selected service sectors show improved sentiment, with more businesses reporting stable demand and fewer production constraints.
In 2024, the Czech economy showed signs of a mild recovery, with inflation easing and unemployment remaining low at 2.8%. Gross domestic product accelerated from 0.1% in 2023 to 1% year on year. This growth was mainly driven by household consumption, while foreign consumption and investments had a negative impact. Soaring inflation of 15% in 2022 dropped to 11% a year later, reaching a new low since 2018 (2.4%). The foreign trade balance grew by a remarkable 86% and resulted in a surplus.
From a business perspective, several sectors faced mounting pressures. Non-automotive manufacturing, energy, and construction struggled due to slowing productivity, high energy costs, and weak demand. Although the automotive industry remained resilient, the shift towards electric vehicles and rising foreign competition posed future risks. High-value sectors like ICT services were constrained by a shortage of skilled labour and limited access to capital, hindering their global competitiveness. These factors collectively signalled a need for strategic investment and policy reform to ensure sustainable growth.
SMEs play an important role in job creation in Czechia and generally contribute to social stability and economic development. Their development may, however, be hindered by factors such as insufficient collateral for obtaining capital or loans, limited resources to access information (especially on new technologies and potential markets), limited market reach, obstacles to entering foreign markets, as well as insufficient innovative potential.
The value added by SMEs continues to grow on a year-on-year basis, rising by 4.9 % in 2024. The share of SMEs that directly export is lower than that of large companies, amounting to one-third (30%) of all exports. The statistics may, however, be skewed by the fact that SMEs often play the role of suppliers to large exporting enterprises, and they play a bigger role in indirect exports.
Investments of SMEs in 2023 grew by 6.2% in comparison with 2022. The share of SMEs in investments of the business sector in 2023 remained stable (57 %).
New SME lending has been highly volatile, shaped by major economic disruptions. Following a steep decline during the global financial crisis of 2007–2010, recovery was slow and uneven throughout the 2010s. Lending volumes remained well below pre-crisis levels. The onset of the pandemic in 2020 marked another turning point: while there was a temporary surge that year, lending volumes subsequently dropped sharply, reaching a record low in 2022. Although lending increased by 25% in 2024 compared to 2022, it remains far below pre-crisis levels, when SME financing was more than double the current amount.
Total new business lending has followed a similarly volatile path, strongly influenced by the financial crisis, the COVID-19 pandemic and energy market disruptions. After peaking in 2008, volumes contracted significantly and remained subdued throughout the following decade. A temporary post-pandemic surge in 2021 was followed by another sharp decline. Although 2024 marked a modest recovery, total new business loans still fall short of both pre-pandemic and pre-crisis levels, highlighting the long-term impact of economic instability on corporate financing.
Two main factors continue to shape the evolution of business lending. First, in response to lingering economic and geopolitical uncertainties (including energy market volatility, supply chain adjustments, and elevated input costs) many companies have remained cautious, prioritising operational stability over investment. As a result, they increasingly rely on internal financing or short-term borrowing to cover running expenses. Second, although inflation eased substantially, interest rates remain relatively high due to the Czech National Bank’s tight monetary policy stance, which continues to weigh on the cost and accessibility of business credit.
The share of new SME loans in total business lending remained stable around 20% until 2020, but dropped significantly during the pandemic. Since 2023, it has returned to previous levels. This shift reflects both stricter lending conditions from banks and increased caution among entrepreneurs, who have faced ongoing economic uncertainty and have relied more on internal financing.
Interest rates for SME loans declined steadily until 2017, then gradually increased in 2019 to fall again in the immediate aftermath of the pandemic. Between 2022 and 2023 rates rose sharply for both SMEs and large enterprises (8.07 % for SMEs and 8.71 % for large enterprises in 2023), reaching record highs. For the first time, SME rates were lower than those for large firms, reflecting stricter lending conditions and higher costs associated with larger loans. Although rates eased slightly in 2024, they remain well above pre-COVID levels at 6.6% for both large firms and SMEs. Businesses continue to face elevated borrowing costs, which, combined with rising input prices, are likely to dampen investment activity and slow economic growth.
Venture and growth capital have experienced strong growth in certain years, notably in 2009 and 2021, followed by steep declines. Over the past two decades, these investments have been marked by dramatic fluctuations. While 2021 was a peak across several categories, subsequent years saw notable drops. Despite some recovery in 2024, private equity activity remains unstable and continues to reflect broader economic uncertainty. The notable drop in VC investments during 2023–2024 was primarily driven by two key factors: lack of quality startups and economic uncertainty and risk aversion.
According to recent surveys, nearly two-thirds of Czech investors identified the shortage of investable, high-quality startups as the biggest challenge in 2024, which limits the opportunities for meaningful VC deployment despite available capital. Furthermore, this reported shortage has significantly increased since 2023. Broader financial conditions, including inflationary pressures and tighter monetary policy, contributed to a cautious investment climate. Investors were more selective, and high capital demands combined with perceived risks discouraged larger commitments
By stage of investment, in EUR thousand
Note: Data from Invest Europe present a far from complete picture of the VC/PE market in Czechia, as most transactions are not captured. Indeed, the majority of VC transactions in Czechia come from captive VC funds and other non-Invest Europe members (e.g. Springtide Ventures, Inven Capital, JT Ventures). The actual trend from the past few years is a growth in the number of funds and capital raised.
Source: Invest Europe/EDC
While the VC OPEIC Fund of Funds and the CEFoF ceased operations in 2023, the Ministry of Industry and Trade (MIT), in co-operation with the EIF, launched a new VC Fund of Funds supported by the Czech Recovery Plan (CRP). The fund, which has been entrusted to the management company Tensor Ventures, focuses on investments in innovative digital companies and start-ups at the earliest stage (so-called pre-seed). The fund must co-invest alongside other professional VC investors in order to support the development of this market segment and the creation of new VC funds that focus on the pre-seed stage. This will significantly help innovative projects to emerge and develop in the most sensitive and risky initial phase of business. The Tensor Ventures Co-investment Fund has a target size of EUR 50 million. Up to EUR 20 million will be invested by Czechia's CRP through the EIF. Tensor Ventures plans to raise the remainder from private investors. Over the next five years, Tensor Ventures plans to invest in around 50 digital start-ups in the pre-revenue phase.
Another option for alternative SME financing emerged on the Prague Stock Exchange in 2018 with the creation of a new alternative SME market called START. Since 2020, the MIT has cooperated with the National Development Bank (NDB) to establish a new instrument, the VENTURE CAPITAL – IPO FUND, which has helped SMEs enter the START market.
Similarly, the BROWNFIELD FUND was established in the Moravian-Silesian Region in 2020 and also operates as a fund of funds. This financial instrument is aimed at regenerating brownfield sites in the Ostrava agglomeration, and is managed by the NDB and operated by Urban Development Fund MS s.r.o. as a result of a public tender.
Factoring volumes fluctuated around CZK 130 billion between 2007 and 2016, but have grown steadily since 2017, reaching CZK 297 billion in 2024, more than double the 2007 level. Similarly, the leasing sector has shown consistent growth since 2007, with only a brief dip in 2020 due to the COVID-19 pandemic, followed by a quick recovery.
The share of non-performing loans doubled between 2008 and 2010 as a result of the financial crisis, but gradually declined over the following years, reaching 3.1 % in 2019. The COVID-19 pandemic caused a temporary increase in 2020, but the ratio has since continued to fall, reaching 2.5% in 2024.
SME bankruptcies multiplied by 5 between 2010 and 2015, but have steadily declined since then, dropping to around 5,600 cases in 2023. Bankruptcies among commercial companies peaked in 2013 and followed a downward trend until 2020, with some fluctuations in the following years. In 2024, both individual and corporate bankruptcies saw a slight increase of 6.6 %, suggesting renewed pressure on businesses amid ongoing economic uncertainty.
Government policy in support of SMEs is based on Act No. 47/2002 Coll., which covers support for small and medium-sized enterprises, as well as the Strategy to Support Small and Medium-Sized Enterprises in Czechia (2021–2027). In recent years, financing SMEs has been one of the Czech government's key topics due to geopolitical developments and steep increases in energy and input prices. The government has been looking for ways to make it easier for SMEs to access finance.
The MIT has prepared several co-ordinated actions to help SMEs deal with the energy crisis. In August 2022, the Operational Programme for Technology and Application for Competitiveness (OP TAC) was launched, offering support to SMEs and large businesses for energy savings and the installation of renewable energy sources. This support can take the form of grants or revolving financial instruments, such as loans and guarantees. These financial instruments are provided in co-operation with the Czech National Development Bank (NDB).
The NDB stepped up its loan activities in the aftermath of the crisis and subsequent decline in SME lending and launched the Subordinated Loan CRP, which is a preferential financial instrument designed for small and medium-sized enterprises and self-employed individuals across Czechia. This loan, financed from the Czech Recovery Plan, aims to support investments in projects that contribute to climate goals and green transformation. It can cover up to 45% of eligible project costs and is conditional upon drawing a senior loan of at least the same amount from a cooperating financial institution. The subordinated loan ranges from CZK 1 million to CZK 100 million, depending on the project's climate coefficient. It is interest-free during the repayment period of the senior loan and subsequently carries an interest rate of 3% p.a. The repayment term can be up to 25 years, with the possibility of deferring repayments for up to 5 years. Supported investments include long-term tangible and intangible assets such as machinery, technology, buildings, or software, provided they meet climate benefit criteria.
This programme is designed for companies that are considering energy-saving projects. Besides subsidies, it also provides interest-free loans to help SMEs to finance projects that are specifically aimed at saving energy. Projects can be implemented anywhere in Czechia except the capital city of Prague.
The first call for proposals has been launched in 2017 under previous operational programme (OP EIC) with the allocation of CZK 400 million OP EIC until 2023. Its successor was launched under the OP TAC in 2022 (grants) and in 2023 (loans). Among supported activities are the following: reducing the energy consumption of business buildings; modernisation of electricity, gas and heat distribution systems in buildings; upgrading or replacing existing equipment (e.g. boilers) for self-consumption energy production; installation of cogeneration units; acquisition and installation of renewable energy sources for own use (biomass, solar systems, heat pumps and photovoltaic systems); upgrading or replacing outdated lighting in buildings and industrial sites with modern and efficient systems; introduction of energy metering and control systems; recovery of waste heat from production processes; replacing energy-intensive production machinery (including mobile machinery such as construction machinery and equipment); and replacing equipment with more efficient technology and electricity storage.
The interest-free loan can cover up to 90% of eligible project costs, with amounts ranging from CZK 500,000 to CZK 60 million. The repayment period is up to 10 years, with a possible deferral of principal repayments for up to 2 years. In addition to the loan, recipients may receive a grant of up to 35% of eligible expenses, paid directly to their account upon successful project completion and verified energy savings. The programme also includes a subsidy of up to CZK 250 thousand for obtaining an energy assessment. The allocation of this programme has increased from CZK 140 million to CZK 390 million due to increased demand of entrepreneurs.
Source: See Table 2.
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