A new survey reveals a significant increase in the level of loan refusals to small and medium sized companies in the second quarter of this year. 

ISME's latest quarterly Bank Watch survey shows that refusual rates rose to 36% from 24% in the previous survey.

It noted that demand remains on par with the first quarter at 31%, while the waiting time from getting a decision from a bank to actually drawing down the loan increased from six to eight weeks. 

Today's survey also showed that 31% of respondents required additional or new bank facilities in the last three months, unchanged from the previous three month period.

It also said that 50% of those who required funding made a formal application, an increase from 47% in the previous three months, while informal applications decreased from 77% to 70%.

Meanwhile, awareness Of the Credit Review Office dropped from 74% to 68% in the second quarter of the year.

Awareness of the Credit Guarantee Scheme increased slightly from 66% to 67%, while awareness about the microfinance scheme dropped from 60% to 52%, ISME also said.

ISME's CEO Neil McDonnell said today's results were "unsatisfactory", while the the increase of 12% in refusal rates was "disappointing" after consecutive decreases. 

He said that without sufficient access to finance many SMEs will struggle. 

Mr McDonnell also said that one ISME member has reported that their bank - a so-called pillar bank - had sold their overdraft to a vulture fund. 

"We understand that our banks are still repairing their balance sheets, but they must consider the viability of their customers as they do so," he added.

The ISME CEO also said it was "unacceptable" to have businesses waiting on average eight weeks from decision to drawdown. 

"On top of the delays and refusal rates, Irish SMEs are paying more interest on their loans. It costs on average 5% for an Irish SME to borrow €250,000 from a bank, compared with only 3.3% across most of Europe," he stated.

Neil McDonnell said that ISME is encouraging SMEs to tap into alternative sources of finance. 

"Our reliance on the main pillars banks is unhealthy and this needs to change," he added.