One in four loans to small and medium enterprises in Ireland is in default, according to new Central Bank data.

The new research on small business debt shows just over a quarter of the loans are impaired - this accounts for 41% of the €21 billion owed by SMEs and totals €8.6 billion in arrears.

The average SME loan balance is €71,000. However, that figure is slightly distorted by some of the larger enterprises and the median figure which strips out the biggest and smallest loans and averages the rest, is just under €10,000.

The Central Bank said that the highest rate of default was seen in the construction, hotels and restaurant sectors. 

Today's study notes that demand from small and medium companies for credit is beginning to pick up, with the proportion of applications being rejected falling from 30% to 20%. 

The report says the bulk of demand is either for working capital or for restructuring with little appetite for funding to invest in expansion.

It also notes that the proportion of Irish companies saying they are discouraged from applying for loans because they believe their applications will be rejected is among the highest in Europe and significantly ahead of the EU average.