Only one in 10 SMEs applied for loans and investments in the last 12 months despite a large increase in the number of entrepreneurs winning funding, a new report claims.

Venture capital business Albion Ventures said only 10 per cent of growing businesses applied for finance in the last year compared with 17 per cent in the previous 12-month period.

But the firm also found that 80 per cent, or four in five, applications were successful, a significant increase from 71 per cent before.

Patrick Reeve, managing partner at Albion Ventures, said: “Demand for bank finance and the reasons for needing it are key proxies for the health of UK SMEs and there are reasons for optimism on both counts.

“Not only have firms been more successful in applying for finance but their motivations are more about growth than funding working capital.”

He added that demand for funding was particularly strong in so-called “threshold businesses” with turnovers between £500,000 and £1 million.

Twice as many of these attempted to raise finance in the last 12 months compared with the previous period, while 68 per cent said they wanted capital to grow compared with only 41 per cent for other types of business.