New lending to small and medium-sized businesses rose by 4.8 per cent in the first quarter versus the same period a year earlier, and is up 38 per cent compared with the first three months of 2014.

Central Bank statistics show the lending market for SMEs remains highly concentrated, however, with three banks accounting for 95 per cent of all finance provided.

Annualised lending in the first quarter for SMEs totalled €2.7 billion, the data show.

Construction led the rise in lending, up 36 per cent compared with the same quarter a year earlier. Lending to agriculture and manufacturing-related companies was up 7.1 per cent and 1.8 per cent respectively.

In contrast, new lending to the wholesale/retail sector declined by 7.7 per cent year-on-year, and was down by 14 per cent in the hospitality sector.

Declining demand

Demand for credit continues to decline, with just 26 per cent of SMEs applying for bank finance in the first quarter, down from 30 per cent in the previous survey.

Rejection rates have also fallen, dropping from 15 per cent in September 2015 to 11 per cent at the end of March.

The figures show SME default rates improving, with 26 per cent of outstanding stock in default at the end of 2015, down from 41 per cent in 2013.

The Central Bank put the drop in default rates down to a number of factors, including repayments outstripping new lending, revaluations and bank loan sales.

Survey evidence also indicates that debt-to-turnover ratios are falling and the share of SMEs with no debt increasing.