More than half the small businesses who sought bank credit in the last three months were refused, according to the Bank Watch survey by SME group Isme.
Some 53 per cent of businesses were declined funding, the survey of 918 business managers found, up from 49 per cent in the previous quarter.
Of the requests, 53 per cent were for overdrafts, with 48 per cent for term loans, or alterations to existing facilities. Invoice discounting accounted for 4 per cent of requests, with 14 per cent of respondents seeking leasing.
Isme said that less than 10 per cent of respondents who required bank finance did not apply, with 36 per cent of these saying they were discouraged by their bank from making application, 18 per cent said they were afraid of a reduction in existing facilities and 9 per cent afraid of refusal.
Isme said it was concerned by the "delaying tactics" of the banks on SME lending decisions, despite the Code of Conduct for SME lending.
The survey found that 28 per cent of initial bank decisions were made within one week, with the average wait now four weeks. Isme said it took a further four weeks, on average, to get permission to draw down, with 24 per cent saying they had a decision within one week.
The association urged the Government, through the Central Bank, to investigate "the inordinate delays in getting a decision" which it said averaged eight weeks instead of the 15 days as set out in the lending code of conduct.
Last monht, a survey carried out by Red C on behalf of the Department of Finance showed companies were waiting an average of 29 working days for their credit applications to be approved or declined.
Some 94 per cent of respondents to the Isme survey said the Government was having either a negative or no impact on SME lending, down from 96 per cent in the previous quarter.
Isme chief executive Mark Fielding said it was "disappointing in the extreme" that, after being bailed out, the main rescued banks were not stepping up to the plate to help businesses.
"The delays by cynical bankers has coined a new phrase, 'constructive refusal' as they treat the customer with disdain and hoodwink the Government with continuing distorted statistics," he said.
"There is no doubt that banks are not lending to the level appropriate to an economy 'on the mend'. The statistics from our own Central Bank, the ECB and numerous economists, demonstrate the dearth of appropriate credit."
