Europe’s banks are lending more cautiously again. In the third quarter of 2026, a growing share of euro area banks tightened their criteria for business loans, turned down more applications and expect to tighten further before the year is out. For many companies, the familiar route to capital is becoming slower and narrower. The ones that keep moving will not be those that wait for the wind to change, but those that learn to sail against it. Increasingly, that means raising equity: bringing in investors who share the risk, rather than lenders who need it secured.
A familiar answer, a different question
Levi Hogerhorst, Investment Analyst at Kylla Corporate Transactions, hears the change in the first five minutes of a conversation. “A year ago, many entrepreneurs opened with: our bank will finance most of it, we just need a bit extra,” he says. “Now they open with: our bank has asked for more security, or has said no. The question has shifted from how much can we borrow to who could invest alongside us. More and more of them are asking about raising equity.”
That shift is easy to underestimate. For generations, Europe’s companies, and especially its family-owned and mid-sized businesses, have relied on a single trusted harbour: the house bank. It knew the business, the owners and often the parents of the owners. When the bank was willing, almost everything else could wait.
A sailor would recognise the problem. As long as the wind blows from behind, you barely need to think about your course. It is only when the wind turns that you discover how well you know your boat.
The wind has turned
The figures behind Hogerhorst’s observation came from Frankfurt at the end of October. In its quarterly bank lending survey of 159 euro area banks, the European Central Bank reported that a net 9% of banks had tightened their credit standards for loans to companies in the third quarter of 2026. That was more than in the previous quarter (7%), more than the banks themselves had expected (5%) and slightly above the long-term average.
The reasons are not mysterious. Banks pointed to higher perceived risks and a lower appetite for risk, with geopolitical uncertainty and energy prices adding pressure. The tightening was concentrated in France and Germany; in Italy standards eased, while in Spain they were unchanged. Banks also reported that the share of rejected loan applications rose again, and they expect standards for business loans to tighten further in the final quarter of the year.
Demand is changing too. Companies asked for fewer loans, mainly because of the general level of interest rates. But the ECB noted a second, quieter factor: some firms are moving towards alternative sources of finance. That small line in a long report may turn out to be the most important one.
Not every boat faces the same wind
One part of the survey stands out. While overall demand fell, banks expect a gradual but sustained increase in demand for loans to finance AI infrastructure, particularly data centres. Even there, lenders are selective: they are more inclined to finance the companies that build the infrastructure than the software developers and businesses that use AI.
In other words, bank credit is not disappearing. It is becoming more concentrated. Large, asset-backed projects with predictable cash flows still find a willing lender. Growth companies, innovators and businesses in transition, the ones with ideas rather than collateral, increasingly find the harbour gate half-closed.
Learning to tack
A sailboat cannot sail straight into the wind. It moves forward by tacking: a series of deliberate angles, each one adjusted to the conditions, that together make progress towards a destination the wind seems to forbid. It takes more planning than running before the wind, and more crew. But it works, and good sailors are rarely surprised by a change in the weather.
Capital raising in a tighter market works in a similar way. For a growing number of companies, the first tack is equity. Where a bank needs collateral and fixed repayments, an equity investor shares the risk and the upside, brings experience and a network, and strengthens the balance sheet, which can make the remaining bank financing easier to obtain. Around that equity, companies combine other sources: a smaller bank facility, a family office willing to take a long view, a specialist private credit fund, sometimes a strategic partner that needs the company’s product. Private lenders have grown as well. According to Carlsquare, European direct lending reached a record EUR 41 billion in volume in 2025, and research firm Octus sees lenders increasingly stepping into sectors from which banks are pulling back.
Each of these routes asks something different. Equity investors want a clear growth story, a management team they trust and a fair share of the upside; for owners, that means giving up part of the company in exchange for capital that does not have to be repaid on a fixed schedule. Private lenders price for risk and move quickly. Family offices care about alignment and character as much as returns. The skill lies in knowing which combination fits a particular company, and in what order to approach them.
The crew does not have to come from the same port
There is one more lesson from the water. Ocean crews are rarely recruited in a single harbour, and the strongest capital structures are increasingly assembled across borders too.
“When credit tightens in one country, it hasn’t necessarily tightened everywhere,” says Hogerhorst. “We regularly see a company in the Netherlands or Germany find its most natural investor in Scandinavia, Switzerland or the Middle East. The investor is not looking at the local bank’s mood. They are looking at the business.”
This is where Kylla comes in. Its own crew is international by design: partners and professionals spread across Europe and beyond, in more than 25 countries, who know the investors in their markets personally. Kylla helps companies prepare their story, find the investors whose mandate and horizon fit, and approach them through existing relationships. Above all, it helps assemble the right crew for the voyage: the equity investors, family offices, lenders and strategic partners who, together, can carry a funding round through the roughest conditions, with everyone on board before the boat leaves the harbour. Where an opportunity meets its own investment criteria, Kylla can also invest alongside those investors, and sail with them.
Set the sails before the storm
The worst moment to look for new investors is when the money is needed tomorrow. Investors, like weather, reward preparation: a clear plan, credible figures, a management team that can explain both the opportunity and the risks, and enough time to build trust.
For companies that rely heavily on one bank, the latest ECB survey is not a reason for alarm. It is a weather forecast. The banks have said clearly what they expect for the coming months. The sensible response is to check the rigging now: which equity investors would understand this business, what they would need to see, and how long it would take to bring them on board.
Calm seas never made a skilled sailor. Tighter credit markets may do the same for Europe’s companies.
By: Levi Hogerhorst
Investment Analyst
Kylla Corporate Transactions
2-11-2026
Sources
- European Central Bank – The euro area bank lending survey, third quarter of 2026 (press release of 27 October 2026)
- Carlsquare – European Debt Markets: Quarterly Insights #1 2026 (February 2026)
- Octus – EMEA Private Credit Review H1 2026 (August 2026)
- Kylla Corporate Transactions – Who we are (kylla.com)
