Allica lands £350m in British Business Bank scheme aimed at fintechs
Allica Bank has bagged lending backing from the UK’s state-owned economic development bank, in a scheme designed to bolster high-growth challengers that lend to small businesses.
The London-based fintech – which sealed its status as a $1bn unicorn earlier this year – has landed £350m in the British Business Bank’s ENABLE Guarantee scheme, Morning Wire can reveal.
Sona Asset Management will serve as a junior investor in the transaction, which sees the British Business Bank back the senior risk position while Sona covers the junior portion.
It allows Allica to significantly reduce its capital requirements and free up capacity to lend up to £700m in asset finance to established UK small businesses. The firm – known for its orange hat logo and witty advertisements – has lent over £4bn to UK businesses since clinching its licence in 2019.
The new programme will be open to all UK banks as well UK branches of foreign banks as the body looks to encourage lending to the nation’s small and medium-sized businesses.
Government scrambles to fix small business lending vacuum
Richard Davies, Allica’s chief executive, told Morning Wire last year that the small business lending market was a “barren wasteland” five to 10 years ago and Allica’s “strategic focus” on the area was key to its growth.
It comes after data from the British Business Bank showed challengers have continued to beef up their position in the small business market, accounting for 60 per cent of total lending.
Comparatively, nearly two decades ago the four largest banks made up 90 per cent of SME lending.
Concerns around small business’ access to finance led to ministers calling in the bosses of banking giants earlier this year after a report from the Department of Business and Trade revealed overall loan success rates for small businesses applying for bank finance were below 50 per cent – down from an approval rate of 67 per cent in 2018.
Michael Strevens, managing director at the British Business Bank, said: “We hope this transaction can unlock more risk-sharing opportunities for challenger and specialist banks’ lending to UK smaller businesses and act as a template for future transactions.
“This transaction will also help unlock the potential of smaller businesses and stimulate vital growth in nations and regions throughout the UK.”