44% of small and medium-sized firms applying for development finance over the past year were successful, up from 27% in 2014, according to a report by venture capital investor Albion Ventures.

The third Albion Growth Report, designed to shed light on the factors that both create and impede growth among over 1,000 SMEs, reveals that of those who secured finance, 29% of firms did so to invest in new equipment while 26% used the money to develop new products and services. However, only 10% had sought to raise finance to invest in R&D, a key driver of longer term success.

Bank loans and overdrafts have continued to fall in popularity, down to 49% this year from 76% in 2013. However, the popularity of using third party equity or other long term finance has soared from 6% in 2013 to 34% in 2015 and 34% of firms would consider raising external equity finance.

Despite the improvement, 18% of SMEs said they were affected by a lack of access to finance with the percentage rising to 32% among medium-sized firms with a turnover of between £500k–£1m.

Younger entrepreneurs aged under 35 are the most likely to report difficulties in raising money (28%), almost double the number of business owners over 55 (15%). The findings also show that it is this same demographic that is most likely to embrace an equity culture.

Those sectors most willing to seek equity finance are manufacturing (43%) followed by IT/Telecoms (40%) while the construction industry has the lowest likelihood (19%).

Patrick Reeve, managing partner at Albion Ventures, said: “The UK economy continues to strengthen, providing excellent growth opportunities for UK businesses. Concerns about access to finance have given way to shortages in skilled staff and insufficient management expertise.

“It is a hugely optimistic climate, and we should be encouraged by the revelation that such a high percentage of firms are looking to raise finance to grow and innovate. There is also a clear trend toward non-bank lending such as the popularity of bank loans and overdrafts have continued to fall. What is particularly welcome is the emergence of the ‘Dragon’s Den generation’ – those under 35 who embrace an equity culture.”