The Irish Small and Medium Enterprises Association says there was an improvement in access to bank credit for small companies in June, July and August.
But in its quarterly bankwatch survey, ISME warns that there is still a long way to go before the country gets back to 'normal lending'.
Today's survey shows that 42% of firms who applied for funding in the last three months were refused credit by their banks. This compares to 55% in the previous quarter.
58% of companies surveyed had accessed credit, an improvement on previous quarters, but the numbers approaching banks for credit fell. ISME says this is resulting in the postponement of investment, missed business opportunities and company closures.
83% of companies reported though that banks are making it more difficult to access credit.
The survey also says that 51% of the requests from small businesses were for overdrafts, while 31% were for term loans.
ISME says it is concerned at the reduction in bank competition.
Its chief executive Mark Fielding called on the Government to create a third bank force to compete with the 'duopoly of AIB and Bank of Ireland', by combing the EBS, Irish Nationwide, Irish Life and Permanent and what remains of Bank of Scotland (Ireland), to use their business lending expertise and branch network to set up a specific bank for business lending.
'This third force bank would provide more effective competition to the two and a half major banks, which are more likely to cherry pick top business clients and dump the marginal ones, during a recession,' he added.
