Just under one in four applications for credit by small and medium-sized enterprises was refused last year by financial institutions.

The figure emerges from a study of SME lending here by DKM Economic Consultants for the Irish Banking Federation (IBF).

The rejection rate includes both formal and informal applications. When informal applications are excluded, the rate of rejection falls slightly to 21.5 per cent, a figure in line with the report on the issue published this week by the ESRI think tank.

The report shows that the rate of rejection is declining – it was 30 per cent in 2011.

Perhaps of more surprise is that just 39 per cent of SMEs surveyed had actually applied for some form of credit.

The data also shows that just one in five of the loans is being used by SMEs for growth or expansion purposes. This is due in part to the economic downturn and also to the fact that many SMEs are concentrating on managing their debts.

One-third of all applications for bank finance involved a restructuring of existing facilities.

The latest SME data is based on surveys by Red C.

According to the IBF report, 99.8 per cent of Irish companies can be defined as SMEs.

The amount of credit outstanding among SMEs contracted by €1.3 billion between December 2010 and the same month of 2012 to €23.14 billion.