In comparison, the amount lent to businesses by UK banks across the UK increased 3%, to £449bn outstanding in December 2016 from £435.3bn in December 2014, according to Bank of England data.
Jon Salisbury, managing director of Ortus Secured Finance, warned the continued caution of big banks since the credit crunch is particularly acute in areas that are still considered higher-risk, such as Northern Ireland.
He argued the tighter rules on capital requirements introduced since 2008 continue to fuel the risk adverse nature of banks with the situation worsening since the UK’s vote to leave the European Union.
Salisbury believes Basel III rules also favour lending to the very largest businesses, which are seen as the safest borrowers under the rules, at the expense of smaller businesses. This has created a double impact for Northern Ireland-based small and medium-sized businesses.
Salisbury said: “Too many Northern Ireland based businesses say that they are ignored by the big banks.
“There is a concern that, because the head offices of many big banks are so far away in London, Northern Ireland lending books suffer. Even the challenger banks have much less of a profile in Northern Ireland than they have in the other parts of the UK.
“That reluctance of banks to lend to businesses doesn’t reflect the region’s economic situation and it is letting down the region’s business community.”
He said that Northern Ireland had a great many opportunities for growth with a lot of ambitious entrepreneurs requiring funding.
He pointed to Ulster Bank’s purchasing managers’ index, which has reported private sector growth.
Salisbury added: “Although the Northern Irish economy may be a few steps behind the UK in terms of recovering from the credit crunch, there is plenty of room for growth.”
As a result, there are opportunities for alternative lenders to step in and fill the funding gap, including Ortus Secured Finance, which plans to triple the size of its Northern Ireland commercial loan book by the end of 2017.