Allica Bank has secured £350 million in backing from the British Business Bank's new ENABLE Guarantee scheme, designed to support high-growth challenger banks that lend to small businesses, City AM can reveal. The London-based fintech, which achieved unicorn status earlier this year with a $1 billion valuation, will use the funding to significantly reduce its capital requirements and free up capacity to lend up to £700 million in asset finance to established UK small businesses.
Transaction Details
Sonia Asset Management will serve as a junior investor in the transaction, with the British Business Bank covering the senior risk position and Sona covering the junior portion. This structure allows Allica to expand its lending capacity without increasing its capital burden. Since obtaining its banking license in 2019, Allica has lent over £4 billion to UK businesses, building a reputation for its distinctive orange hat logo and witty advertising campaigns.
Broader Scheme Impact
The ENABLE Guarantee programme is open to all UK banks, as well as UK branches of foreign banks, as the British Business Bank seeks to encourage lending to the nation's small and medium-sized enterprises. This initiative comes amid concerns about small businesses' access to finance. Earlier this year, ministers summoned banking bosses after a Department of Business and Trade report revealed that loan success rates for small businesses had fallen below 50%, down from 67% in 2018.
Richard Davies, Allica's chief executive, told City AM last year that the small business lending market was a "barren wasteland" five to 10 years ago, and that Allica's strategic focus on this area was key to its growth. Data from the British Business Bank shows that challenger banks now account for 60% of total SME lending, compared to nearly two decades ago when the four largest banks held 90% of the market.
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."
