ISME's latest Bank Watch survey shows a small decrease in loan refusal rates, with the rate decreasing from 36% to 29% in the three months from July to September.
The SME association said the survey also revealed that demand for credit rose from 31% to 36% while the waiting time from funding decision to drawdown is on average eight weeks.
ISME said that 17% of initial bank decisions were made within the first week, down from 28% on previous quarter. 17% are waiting four to six weeks, while 17% are waiting more than 10 weeks, it added.
According to ISME, awareness of the Credit Review Office among SMEs remained unchanged at 68%.
It also noted a nominal decrease in awareness of the Credit Guarantee Scheme from 67% to 66%, while awareness about the micro finance scheme rose from 52% to 57% in the third quarter.
Meanwhile, 55% of SMEs who needed funding made a formal application, up from 47% in the previous three months. Informal applications decreased from 77% to 70%.
ISME's chief executive Neil McDonnell said the survey results remain "unsatisfactory".
"While a decrease of 7% in refusal rates is welcome, this figure is too high. There has been an increase in the demand for credit which is a very real issue facing SMEs. Without sufficient access to finance many businesses will struggle," Mr McDonnell said.
The ISME CEO also said the sharp rise in businesses waiting more than 10 weeks from permission to drawdown in this quarter is a worrying trend, adding that the delay is starving already cash-strapped SMEs.
He also noted that 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% in most other European countries," he stated.