The former CEO of Bank of Ireland says an institution which is independent to the banks should be set up to lend to small businesses.

It comes as the latest figures from the Central Bank show that 1-in-4 credit applications to banks for loans or overdrafts by small and medium enterprises (SMEs) is being rejected.

See more on that story href="http://www.newstalk.ie/2012/news/report-shows-high-rejection-rate-of-lending-by-irish-banks/">here

Mike Soden says an entity similar to the former Industrial Credit Company could be funded by AIB, Bank of Ireland and the government to lend to SMEs.

This was set up to encourage investment in Irish industry decades ago.

Mr. Soden told Breakfast here on Newstalk this would be the best solution to the cash-flow problem for SMEs.