SMALL and medium sized businesses have found it increasingly difficult to get bank funding in recent months while most remain unaware of their right to appeal against the decisions made by lenders, research shows.

The latest SME Finance Monitor study found that 66% of all applications for loans and overdrafts made in the last 18 months resulted in firms securing funding, down from around 70% in 2011.

The results of the bank-funded study highlight the challenges faced by young firms. Only 30% of SMEs that had applied for their first facility since January 2013 were successful.

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BDRC noted the percentage of SMEs that identified access to finance as a major barrier fell to 7% in the first quarter, the lowest level since the study was launched in 2011. Some 12% identified access to finance as a barrier in the first quarter of 2013, while 11% did in the first quarter of 2011.

But the Forum of Private Business said the results highlighted its concern that continued distrust in the banking sector may slow down the pace of recovery in the real economy.

It noted that the proportion of SMEs that reported using external finance fell to a series low of 33% in the first quarter of 2014, compared with 51% in 2011.

The study by the BDRC market research firm found only 12% of all SMEs are aware of the process under which they can appeal to banks to review decisions they are unhappy with. The authors said: "This has changed little over time."

The BBA trade body said many banks run programmes that refer businesses unsuited to bank finance to alternative providers.