Demand for credit from small and medium sized companies is low but increasing, and the decline rate at the banks is falling.
This is according to new research from Red C, carried out on behalf of the Department of Finance.
The small increase in the number of firms looking for finance is driven mainly by "micro" companies - those employing up to ten people. These had not been seeking credit before.
The research showed that there has been an increase in companies saying they will look for finance in the future.
A major issue identified by today's research is that a growing number of respondents said they were not given a reason for their application for credit being declined.
This has gone up from 15% in September 2011 to 24% last month, though Red C said this is a bigger proportion of a smaller number of declines overall.
The research also showed that the time taken to process applications remains long. The average wait of 29 working days for an application for credit to be approved or declined is much longer than the 15 days recommended in the Government's code of conduct on lending to small business.
The survey concluded that most demand for credit was for cash flow and working capital purposes.
It also revealed that 78% of SMEs who were refused credit did not agree with the reason provided by the bank for the refusal. In 69% of cases were formal applications were declined, the bank did not tell the borrower of the right to internal review.
It highlighted that 77% of SMEs were aware of the existence of the Credit Review Office, while 65% knew of the code of conduct for business lending for SMEs.
The survey - the third of its kind - covered over 1,500 respondents and over 5,000 direct calls to small and medium sized firms.
Commenting on the survey's results, Finance Minister Michael Noonan said that the SME sector is a key driver of growth and jobs in the Irish economy.
''While there is no doubt that the operating environment is challenging and demand remains soft, stability is returning and our economy is growing again. I hope that this will give confidence to SME owners and managers to invest in their businesses,'' he added.
Lending targets of €3.5 billion for this year and €4 billion for next year have been set for both AIB and Bank of Ireland. The Finance Minister noted ''some encouraging signs'' in relation to applications and approvals in today's survey.
Mr Noonan also encouraged all small and medium sized businesses, with viable business plans, who are refused credit to avail of the services of the Credit Review Office, which is overturning about 55% of cases referred to them.
