Banks are now more willing to lend to Small and Medium-sized enterprises (SMEs) than previously, according to new figures from the Central Bank.

The SME Market Report also shows that annualised gross new lending to smaller firms increased from €1.9 billon in the last six months of 2013 to €2.1 billion at the end of June.

Outstanding credit to the SME sector was down to €22.6 billion, from €24.6 billion over the same period.

According to the study, agriculture received the largest share of new lending in the first half of the year, followed by the wholesale/retail and business and administrative services sectors. The construction and hotel/restaurants sectors showed the biggest decline in lending, while manufacturing showed a 21 per cent increase.

Almost half of all applications for loans were for working capital requirements, down from 61 per cent in the last such report. The share of firms borrowing for growth and expansion increased over the period.

The report shows that rejection rates for bank finance continue to decline, falling to 14 per cent in the last six months, compared to 19 per cent for the second half of 2013. In September 2012, rejection rates stood at 24 per cent.

The study also shows however that application rates for bank finance is declining, particularly for so-called Micro-SME firms. The Central Bank attributed the decline to reduced applications for loan and overdraft renewals and restructurings.

Currently, the rejection rates for micro-firms stands at 21 per cent, about twice as high as for small and medium firms.

Loan default rates are highest for SMEs in the construction and hotel/restaurants sector, the report shows.