Irish SMEs are three times more likely to use bank debt as their UK counterparts, according to a survey by financial services firm Smith & Williamson.
The study also found that nearly a third businesses in the Republic have tried and failed to raise finance at least once.
A significant reason behind the failure rate could be the lack of knowledge about external finance, and a lack of alternative finance available.
The study found a majority of Irish businesses (58 per cent ) are still using traditional methods of finance such as bank loans, but scale-ups are starting to lean towards alternative methods.
Angel investors
Three-quarters of businesses said they were not confident about securing peer-to-peer lending, with 64 per cent saying they were unsure how the process with angel investors works.
Paul Wyse, managing director of Smith & Williamson Dublin, said: "Since the financial crisis, banks have been more cautious about lending and this has created a shortage of capital in the market.
"SMEs must look at alternative ways to meet their financing needs through, for example, business angels, venture capital, Enterprise Ireland and new providers of alternative finance."
