Allica Bank lands £350M from British Business Bank to unlock £700M in SME lending
What's the deal? Allica Bank, the London-based fintech unicorn, has secured £350M in backing from the British Business Bank's ENABLE Guarantee scheme. The deal lets Allica slash its capital requirements and free up capacity to lend up to £700M in asset finance to established UK small businesses.
Sona Asset Management will serve as a junior investor in the transaction, covering the junior risk portion while the British Business Bank backs the senior position.
Allica — which reached $1B unicorn status earlier this year — has lent over £4B to UK businesses since getting its licence in 2019.
Why now? Small business lending in the UK has been under pressure. A report from the Department of Business and Trade found that loan approval rates for small businesses fell below 50%, down from 67% in 2018. Ministers summoned the bosses of major banks earlier this year to address the problem.
Challenger banks now account for 60% of total SME lending, a dramatic shift from nearly two decades ago when the four largest banks controlled 90% of the market. Allica chief executive Richard Davies has called the small business lending landscape a "barren wasteland" five to ten years ago.
What could go wrong? The scheme relies on a risk-sharing structure between a state-backed institution and a private investor. If default rates among small business borrowers rise — during a downturn, for instance — both the British Business Bank and Sona could face losses. There's also the question of whether £700M in new lending capacity will materially move the needle on a systemic access-to-finance problem.
The signal: Allica Bank's ability to attract a £350M state-backed guarantee at the late growth stage underscores how UK challenger banks have moved from market entrants to systemic infrastructure for SME finance. With challengers now responsible for 60% of total SME lending — up from a near-zero share less than two decades ago — government-backed risk-sharing mechanisms like ENABLE are effectively formalising fintechs as the primary pipeline for small business capital.
Read more: cityam.com
