There has been a 15 per cent decline in funding application rejection rates for SMEs but many small and medium-sized businesses still consider access to finance to be a major concern.

New data published by the Central Bank shows new lending to SMEs has consistently risen since the start of 2014, increasing by 4.9 per cent in the third quarter of 2015. However, despite the increase in funding opportunities, the overall stock of outstanding credit to smaller firms continues to decline, suggesting that the volume of repayments made by firms is outstripping new lending.

The Central Bank said outstanding credit to SMEs fell by 8 per cent in the second half of 2015 with new lending relative to domestic demand found to be considerably lower than in other euro zone Member States. One factor possibly stopping firms accessing finance is that interest rates on loans are still high relative to that in other countries leading to a lower level of applications for funding versus SMEs elsewhere.

According to the study, the agriculture and wholesale/retail sectors continue to receive the largest amount of lending with new loans and renewed overdrafts were the most common bank finance products requested by SMEs. Borrowing for working capital has decreased significantly since 2013, the study shows, while lending for expansion and for vehicles or equipment have increased.

Default rates have declined with 19 per cent of loans in arrears at the end of last year, down from 26 per cent in 2013. The highest number of defaults were recorded in the construction and hotel/restaurant sectors.

The study also indicates that while SMEs believe that banks are more willing to provide credit than previously, as many as 39 per cent of the companies surveyed by the Central Bank said access to finance was still a high concern.