Access Denied - Sharing Folders

I've recently shared and it was successfully. Try the below procedure and let me know your feedback.

1. Add the external user email domain into your SharePoint Online environment.

2. Share the folder with external user(s) work accounts. If you miss step 1, then you may see 'Your organization does not allow sharing with outside' kind of error.

3. SharePoint will send an automatic email to the external user (no-reply@sharepointonline.com). Ask user to accept this invitation and create a Microsoft account if user don't have one (the username should be same as the email address to which user received this invitation). Before clicking the link in the invitation, user need to logout of all other active accounts (including gmail) on browser.

4. After step 3, the user will have access to the documents in the folder.

5. If user still have issues after creating the MS account, then you can share the URL of the folder directly thru email. Ext. user then needs to sign-in using MS account credentials to access files.