Financing SMEs and Entrepreneurs 2026: Israel
Table of contents
As of 2024, there were 685 thousand businesses in Israel, 99.5% of which were SMEs (i.e., companies employing up to 100 workers). In an average year, 55 000-60 000 businesses are registered and about 40 000 closed down formally. In 2024, 61 000 new companies were established and 48 000 were closed. Removal of government support measures might result in many enterprises shutting down in the post-crisis period.
From 2023 to 2024, interest rates for SMEs decreased while the interest rate for large firms increased. The average interest rate for SMEs decreased from 7.31% to 7.1%, while the interest rates for large firms rose from 5.81% to 6.09%. Furthermore, the interest rate spread narrowed from 1.5% to 1.01%.
In 2024, Israeli banks provided NIS 365.96 billion in credit to SMEs, an increase of 6.04% compared to 2023 (NIS 345.1 billion). The share of SMEs in the credit granted by the banks was 44.21% of total business credit, representing a decrease compared to the previous year which registered a share of 45.89%.This is an even further decline compared to 2022, when it stood at 49.45%. This continues an ongoing decline that has persisted since 2017, when the share peaked at 59.88%. In total, between 2010 and 2024, nominal bank credit to SMEs grew by 74%.
In 2024, total venture capital investment in Israel reached USD 9.6 billion, representing a 39% increase over the USD 6.9 billion raised in 2023, and a 15% rise in the number of reported deals to 453. The total number of known deals for 2024 was 694, but IVC estimates that between 1 000 and 1 100 transactions were completed during the year. Despite the backdrop of war and global macroeconomic challenges, the Israeli high-tech sector saw renewed momentum, with Q4 2024 marking the strongest quarter of the year with 122 reported rounds, including five mega deals that accounted for 36% of the capital raised that quarter.
SME and entrepreneurship policies in Israel are primarily designed by the Ministry of Economy and Industry and implemented by the Israel Innovation Authority (IIA) and the Small and Medium Business Agency (SMBA). While the IIA (formerly known as the Chief Science Office) focuses on leading technology-based startups and SMEs, the SMBA caters to all SMEs in Israel’s main economic sectors through business management training and coaching, subsidised access to finance (for example, through the national loan guarantee programme) and the work of the business development centres (MAOF centres).
Israel’s economy is expected to rebound strongly following the shocks of 2023 and 2024. Real GDP growth is projected at approximately 3.3% 1in 2025 and an even stronger 4.9% in 2026. Inflation, elevated by supply constraints and a tight labour market, is forecast to reach around 3.2% in 2025 and then decline to approximately 2.9% in 2026 as fiscal consolidation and easing supply bottlenecks moderate pressures.
These projections rely on the assumption that geopolitical tensions across the region ease during 2025 and 2026. If such easing occurs, exports are expected to accelerate and private consumption should continue to recover.
Despite heightened geopolitical tensions, Israel continued to benefit from strong foreign currency inflows, mainly from the high-tech sector and defence exports. After an initial depreciation following the outbreak of the war, the shekel recovered and strengthened. This helped ease inflationary pressures by lowering the cost of imported goods and inputs.
As of 2024, there were 685 thousand businesses in Israel, and 99.5% of them were SMEs by definition. Independent workers (without employees) accounted for 56.6% of all businesses. Micro-enterprises (1-4 employees) accounted for 30.4% of all businesses, and 11.2% of total employment; 9.9% and 17.6%, respectively, for small businesses (5-19 employees), and 2.6% and 20.1% for medium-sized businesses (20-99 employees). The remaining 0.5% of Israeli companies employ more than 100 workers.2
Bank credit is the main source of funding for SMEs, while other financing channels such as funds, private credit companies, angel investors and others play a secondary role. In Israel, most of the bank credit to SMEs is provided by the five major banking groups, with the rest being negligible. The Bank of Israel requires banks to classify credit data according to business types. Until 2016, each bank used its own definitions for business types and sizes. This was resolved in 2016, when the Bank of Israel introduced a standardised set of business size definitions.
In 2024, Israeli banks provided NIS 365.96 billion in credit to SMEs, an increase of 6.04% compared to 2023 (NIS 345.1 billion). The share of SMEs in the credit granted by the banks was 44.21% of total business credit, representing a decrease compared to the previous year, which registered a share of 45.89%. This is an even further decline compared to 2022, when it stood at 49.45%. This continues an ongoing decline that has persisted since 2017, when the share peaked at 59.88%. In total, between 2010 and 2024, nominal bank credit to SMEs grew by 74%. In 2009, Israeli banks were required to increase their capital targets, a goal they achieved in 2017. This process constrained their ability to extend credit during those years.
In 2024, annual inflation reached 3.2%, slightly higher than in 2023, driven by a gradual recovery in demand alongside persistent supply constraints, in contrast to the global trend of moderating inflation. At the start of the year, the Bank of Israel lowered the interest rate by 0.25 percentage points, following the stabilisation of financial markets, a moderation in the inflation environment, and reduced war intensity compared with the early stages of the conflict. For the remainder of the year, the interest rate was maintained at 4.5% to support market stability amid the ongoing war and to guide inflation, which was elevated due to supply constraints, back towards the target range.3
In NIS billion
Source: Financial statement of Israeli banks
Interest rate data is not officially published but is rather extracted and calculated from the financial statements of the main banking groups in the country, which are required to publish a breakdown of credit distributed according to specific business group sizes. In these statements, there is no reference to the average duration or the guarantees of the credit that was given.
The estimated interest rate for small, medium, and large enterprises was obtained by dividing the interest income received from businesses4 by the average credit extended to those business segments. From 2023 to 2024, interest rates for SMEs decreased, and the interest rate for large firms increased. The average interest rate for SMEs decreased from 7.31% to 7.1%, while the interest rates for large firms rose from 5.81% to 6.09%. Furthermore, the interest rate spread narrowed from 1.5% to 1.01%.
Demand for credit among SMEs continued to decline, falling from 54% of the SME's in 2022 to 38% in 2024, after reaching 56% in 2021 shortly after the COVID-19 period. Recent demand has also shifted more towards financing ongoing operations and addressing cash flow difficulties, rather than mainly supporting expansion.5
Source: Financial statement of Israeli banks.
Handling fees in Israel are charges for handling credit and collateral and apply to loans that are not housing-related. Each major bank has an upper limit on the fees chargeable (see Table 5). Until 2012, loan fees applied to loans above NIS 50 000. Since 2013, the base loan amount has been increased to NIS 100 000, but loan fees charged on operations above that amount have remained largely unchanged. In general, the fees charged by each bank are different, but they have remained stable since 2014. All business loans below NIS 100 000 are exempt from fees by all banks. The figures in the Table 4 and Table 5 below are the maximum fees each bank can charge. In principle, however, fees are negotiated on a case-by-case basis.
Source: Fee list published by the five big banks in Israel.
Apart from those charged by Bank Mizrahi, credit allocation fees for SMEs were the lowest for all banks in 2024 since 2008 and remained the same since 2014, thus providing a stable credit environment for SMEs.
As a percentage
Source: Fee list published by the five big banks in Israel.
In 2024, total venture capital investment in Israel reached USD 9.6 billion, representing a 39% increase over the USD 6.9 billion raised in 2023, and a 15% rise in the number of reported deals to 453. The total number of known deals for 2024 was 694, but IVC estimates that between 1 000 and 1 100 transactions were completed during the year. Despite the backdrop of war and global macroeconomic challenges, the Israeli high-tech sector saw renewed momentum, with Q4 2024 marking the strongest quarter of the year with 122 reported rounds, including five mega deals that accounted for 36% of the capital raised that quarter.
Foreign investors continued to dominate, both in the number of investments and in total capital deployed, maintaining a pattern established since 2020.
Early-stage activity benefited significantly from large transactions, most notably the USD 1 billion Safe Superintelligence A round, resulting in an 84% year-on-year increase in capital and a 14% rise in deal numbers for seed and A rounds combined. In total, there were 21 seed rounds exceeding USD 10 million, amounting to USD 361 million, which is almost identical to 2023 levels. Pre-seed deals also rose, with 144 transactions, an increase of 25% compared to 2023.
Mid to late-stage investments also rebounded after two years of decline, with growth-stage companies benefiting from renewed investor appetite. Deals over USD 100 million accounted for 48% of total capital raised, with six transactions exceeding USD 200 million and totalling USD 2.97 billion. Cybersecurity remained the leading sector, attracting 38% of all 2024 funding, boosted by large rounds for Wiz and Cyera. Generative AI also drew attention due to the Safe Superintelligence investment.
Israeli high-tech exit activity in 2024 recorded a substantial rebound, with total capital proceeds of USD 20.5 billion, representing a 64% increase from 2023, although the number of exits remained relatively modest. Mergers and acquisitions dominated, with the acquisition of Own Data Company Ltd. by Salesforce for USD 1.9 billion being the largest deal of the year. The top 22 M&A transactions valued at over USD 300 million each accounted for about 80% of all M&A proceeds. First exits were particularly strong, contributing 75% of total exit value and nearly doubling compared to 2023.
Source: Summary of Israeli High-Tech Company Capital Raising 2020, IVC Research Centre and ZAG S&W.
A decline in non-performing loans6 as a share of total credit volume can be seen across all company sizes, with the most significant improvement recorded among large companies, dropping from 0.99 in 2023 to just 0.33 in 2024. This notable reduction suggests a marked improvement in credit quality and repayment capacity within the large-company segment, potentially reflecting stronger financial performance and improved risk management.
As a percentage
Source: Financial statements of Israeli banks.
Since 2017, Israel has a law for ethical (late) payment for suppliers. The law stipulates that governmental entities and public entities should pay their suppliers within 30 days (counting from the end of the month). Local authorities should pay their suppliers within 45 days (counting from the end of the month), and business sector entities should pay their suppliers within 45 days (counting from the end of the month).
The SMBA survey shows a consistent decline in late payment rates over recent years. In 2019, late payments were recorded in 51% of G2B transactions, 61% of transactions with local authorities, and 17% of B2B transactions. By 2022, these rates had dropped to 33% for G2B, 36% for local authorities, and 6% for B2B. In the 2024 survey, late payments were reported in 25% of G2B transactions and 30% of transactions with local authorities, while data for B2B transactions was not collected.
Since 2017 the Official Receiver's report has not published figures for bankruptcy orders. "Receiving orders” are a demand from the court to officially close a bankrupt company. Over the last decade they have fluctuated, peaking at 19 906 in 2017, falling to 16 373 in 2019, and then rising again to 17 431 in 2020. Since then, they have declined overall, reaching 13 040 in 2024, which represents a slight decrease of about 1% compared to 2014. Data for dissolution requests show a gradual rise until 2017, followed by a 32% jump in 2018 to 1 207. The numbers then remained relatively stable until 2021, ranging between 1 179 and 1 328, before increasing sharply to 1,682 in 2022. After falling to 1 311 in 2023, dissolution requests rose again to 1 632 in 2024. (see Table 8).
Total number, all businesses
Source: Ministry of Justice, the Official Receiver Report, https://www.gov.il/BlobFolder/reports/insolvency-and-financial-rehabilitation-procedures-report-2024/he/report-2024.pdf
In 2023-24, SME and entrepreneurship policy in Israel continued to rely on a combination of long-standing business support instruments and temporary measures introduced in response to the 'Swords of Iron' War. The Ministry of Economy and Industry, through the Small and Medium Business Agency, remained responsible for broad SME support, while the Israel Innovation Authority continued to focus on technology-based startups and innovative SMEs.
The State Guarantee Loan Fund remained the main public instrument for facilitating SME access to debt finance. Operated by the Accountant General at the Ministry of Finance in co-operation with the Small and Medium Business Agency, the fund supports working capital, investment and business establishment needs. It serves businesses with annual revenue of up to NIS 100 million and includes dedicated tracks for new businesses, exporters, industrial investment, agriculture, sustainable energy and short-term working capital.
Following the outbreak of the war in October 2023, the government expanded liquidity support through special war-related tracks under the State Guarantee Loan Fund. Eligibility was extended to businesses with annual revenue of up to NIS 1 billion. The framework enabled up to NIS 10 billion in loans, including up to NIS 8 billion for micro, small and medium-sized businesses and up to NIS 2 billion for large businesses. For SMEs, the state guarantee covered 85% of the loan amount, and repayment could be deferred for up to 12 months.
Grant-based compensation schemes were also introduced to support businesses affected by the war. The Property Tax Compensation Fund provided nationwide compensation to businesses with annual revenue of up to NIS 400 million that experienced the required decline in revenue due to the war. Additional area-based mechanisms applied to localities and sectors more directly affected, including the red track for border communities and green track arrangements for eligible localities and sectors under emergency regulations.
The Bank of Israel and the banking system introduced complementary measures to ease short-term financial pressure on businesses. These included a loan payment deferral framework for eligible households and businesses, including business credit of up to NIS 2 million for businesses with annual revenue of up to NIS 25 million. The Bank of Israel also launched a targeted monetary loan programme under which banks received lower-cost funding against loans extended to small and micro businesses whose revenues had declined by at least 25% due to the war, subject to limits on the interest rate charged to borrowers.
For technology-based SMEs and startups, the Israel Innovation Authority expanded support in response to tighter funding conditions and wartime uncertainty. In October 2023, the Fast Track programme was expanded to NIS 400 million to provide rapid funding to startups facing short runways and difficulties raising private capital. In 2024, the government approved a broader high-tech stimulus package, including the Startup Fund for early-stage deep-tech companies and Yozma Fund 2.0, designed to mobilise greater institutional investment into Israeli venture capital funds.
In NIS million
Note: *estimate. Source: Accountant general, Israeli Ministry of Finance.
References
Financial statement of Israeli banks and credit cards companies:
https://www.boi.org.il/roles/supervisionregulation/analizestat/
Accountant general, Israeli ministry of finance:
http://mof.gov.il/AG/FinancingAndCredit/StateGuarantees/Documents/BusinessLoansFound.pdf
Credit allocation fees in Israel available under:
https://www.leumi.co.il/home01/commissions_and_fees/9046/
https://www.bankhapoalim.co.il/wps/portal/PoalimPrivate/taarifone
https://www.mizrahi-tefahot.co.il/he/Bank/Pages/interest-list.aspx
https://www.discountbank.co.il/DB/private/general-information/price-list-and-hiking-fees
https://online.fibi.co.il/wps/portal/FibiMenu/Marketing/AnNote/AnInformation/AnCommissionsRate
Venture capital investments in Israel:
IVC Research Centre - Home (ivc-online.com)
Summary of Israeli High-Tech Company Capital Raising 2024, IVC Research Centre
Bankruptcies DATA:
Ministry of Justice, the Official Receiver report
https://www.gov.il/BlobFolder/reports/new_2023-report/he/REPORT2_2023.pdf
SMEs in the national economy:
https://www.sba.org.il/hb/PolicyAndInformation/Researches/Pages/sr15.aspx
Outstanding Payment delays, B2B:
SMBA, SME annual state, 2021
https://www.sba.org.il/hb/AidPrograms/Pages/pr10.aspx
https://www.boi.org.il/en/bank-of-israel/iron-swords/boi-outline-banks2024/
https://innovationisrael.org.il/en/calls_for_proposal/yozma-2-0-fund/
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Please cite this publication as: OECD (2026), Financing SMEs and Entrepreneurs 2026: An OECD Scoreboard, OECD Publishing, Paris, https://doi.org/10.1787/075d8058-en
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← 1. BOI updated forecast
← 2. There are also other definitions of sizes of SMEs by turnover and sales, but mostly both definitions are compatible.
← 4. Interest income from external sources
← 5. https://www.sba.org.il/hb/PolicyAndInformation/Researches/Documents/mimun%20assakim%202019-2025.pdf
← 6. Non-performing loans are damaged debts which had been defined by the Bank of Israel as debts expected not being able to collect by the bank.