<strong>Allica Bank ramps up SME support with refreshed credit appetite</strong>

Allica Bank has made significant changes to its commercial mortgage credit appetite with cuts to its stress-testing and Debt Service Cover Ratio (DCSR) requirements across all products, and an increase in its maximum Loan to Values (LTV) for prime owner-occupied commercial mortgages. It has also reduced the DSCR requirement for its asset finance product.

The business bank – which is dedicated to the needs of established SMEs – believes the changes will help customers retain more cash in their businesses to support growth and investment, and deliver a welcome lending boost to the industry after the UK’s recent period of financial uncertainty.

With the outlook for Bank of England Base Rate seemingly becoming more stable, Allica has reduced its stress test on commercial mortgage variable rate loans from 3% to 1.5% above the Bank of England Base Rate. This means that the same level of profit generated by a business will now enable them to be considered for a higher loan with the bank.

Allica has similarly lowered its DCSR from 150% to 130% across all commercial mortgage products. By considering a lower level of income, Allica hopes to be able to increase the level of support it can provide to businesses.

For ‘prime’ businesses that achieve income levels that enable them to cover loan repayments by at least 200%, Allica has also increased its maximum Loan to Values (LTV) by 5% without any change to pricing on owner-occupied commercial mortgages. The result is that qualifying business can now borrow more at the same interest rate, while still benefiting from Allica’s award-winning dedicated relationship banking expertise, which is becoming more difficult to access with high street banks.

Allica’s asset finance customers will also benefit from reduced DSCR, lowering from 140% to 125%. This enables the bank to support more businesses looking to invest in their equipment, machinery, and vehicle assets.
<p style="text-align: center;"><strong>Nick Baker, Chief Commercial Officer at Allica Bank, says: </strong></p>

<blockquote>Allica’s decision to expand its credit appetite signals the bank’s commitment to supporting an even greater number of established businesses as the UK looks to get back to growth: “In seeing a stabilising market, and following a period of uncertainty, we want to make sure that businesses have access to the lending that will enable them to invest in their futures. Ultimately, these changes mean businesses can do more with less, and that we can lend more to more businesses, building on Allica’s ambition to be the true alternative to high street banks.”</blockquote>
The news follows Allica’s recent extension of its owner-occupied mortgages proposition to include interest-only terms of up to five years for businesses qualifying for the Recovery Loan Scheme.

<strong>--Ends--</strong>

<strong>About</strong><strong> </strong><strong>Allica</strong><strong> </strong><strong>Bank </strong>

<a href="http://tracking.vuelio.co.uk/tracking/click?d=mxpgkzHKc5aGWSL9YmHFFGYMJoC2-2qg6FWBEyUW80AlmbTTY2FQM3fReFeIEe2CNGY_6RKcXZ5KqE2qVgU-pR8LRxca7-1jtFwtptlaVCQvimgN01l1GWn8F2y6gY1VP1UfdRH4WKjq4PYnKgU2QK41" target="_blank" rel="noopener" data-saferedirecturl="https://www.google.com/url?q=http://tracking.vuelio.co.uk/tracking/click?d%3DmxpgkzHKc5aGWSL9YmHFFGYMJoC2-2qg6FWBEyUW80AlmbTTY2FQM3fReFeIEe2CNGY_6RKcXZ5KqE2qVgU-pR8LRxca7-1jtFwtptlaVCQvimgN01l1GWn8F2y6gY1VP1UfdRH4WKjq4PYnKgU2QK41&amp;source=gmail&amp;ust=1680697010857000&amp;usg=AOvVaw3QxSiwX0f-oS5lh0ffCVtE">Allica Bank</a> is dedicated to serving and supporting small and medium businesses and empowering them to succeed. We combine modern, powerful technology with local relationships in the community to deliver expert banking for business Britain.

We offer businesses market-leading lending products including commercial mortgages and asset finance, as well as a range of business and retail savings products and services.  We are working hard on developing a full suite of banking services to help Britain’s businesses flourish and grow.

Allica Bank was the winner of Commercial Mortgage Lender of the Year, BDM Team of the Year, and Patron of the Year at the prestigious 2020 National Association of Commercial Finance Brokers (NACFB) Awards. It was also named ‘Best New Savings Provider’ in the 2021 MoneyNet Awards.

Allica Financial Services Register number – 821851. Allica is backed by Warwick Capital Partners.

Allica Bank Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (FRN: 821851). Registered office at First Floor, Eldon House, 2-3 Eldon Street, London EC2M 7LS. Incorporated under the laws of England and Wales with company number 7706156.

Allica Bank ramps up SME support with refreshed credit appetite

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<strong>Allica Bank launches five-year interest-only commercial mortgages supported by the Recovery Loan Scheme as it looks to help more businesses get back to growth </strong>

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Allica Bank, the business bank dedicated to the needs of established businesses, has extended its owner-occupier commercial mortgage offering to include interest-only terms of up to five years. It has been able to do so due to the British Business Bank’s Recovery Loan Scheme (RLS), which a business must be eligible for to access the product.

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Without the RLS, Allica was only able to offer a short interest-only period at the beginning of a longer-term amortising loan.

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The scheme, which will enable it to support an even greater number of established small and medium-sized businesses with their expansion plans, has remained an untapped opportunity, with many business owners not realising they can benefit from it.

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The Recovery Loan Scheme is available to accredited lenders, such as Allica, to support loans to eligible businesses that would otherwise be outside of their credit appetite.

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Businesses that can benefit must have a turnover of up to £45 million and can include businesses that took out previous government-backed loans (e.g., Coronavirus Business Interruption Loan Scheme (CBILS), Coronavirus Large Business Interruption Loan Scheme (CLBILS) and Bounce Back Loan Scheme (BBLS)). Businesses can access up to £2 million through Allica’s RLS-backed loans, subject to eligibility.

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It has prioritised launching the product following extensive feedback in its broker survey in late-2022, which revealed a clear demand for interest-only products among brokers. However, a number of misconceptions about the RLS scheme may have led to some brokers and businesses believing they wouldn’t be eligible.

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<p style="text-align: center;"><strong>Nick Baker, Chief Commercial Officer at Allica Bank, said</strong>:</p>

<blockquote>“A lack of understanding of the Recovery Loan Scheme has meant many businesses are missing the opportunity to secure the finance to grow at a time when the British economy needs growth more than ever. Many business owners, for example, think they can only use an RLS-backed loan to help with recovery from the covid pandemic, but really it can support with all types of situations, such as buying commercial property, acquisitions and refinancing.
“The additional paperwork is also a lot easier than many people realise, with much of the extra admin falling on the lender rather than the borrower.
“We’re delighted to be able to offer interest-only, owner-occupied commercial mortgages with terms of up to five years – which we’re only able to do thanks to the Recovery Loan Scheme (RLS) – as we look to help an even wider pool of businesses achieve their goals.”</blockquote>
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Specific limitations and exclusions of the scheme can be found here: <a href="http://tracking.vuelio.co.uk/tracking/click?d=6YgN0DFQukPrBk1uG7SxtF0G-8uTHB21GwG7NxgngVBvmXQUvOS0TjRwWXmq8NGzWIA8uiyNtNsL-mFUnSlBgZTlw4zdihWfE4N_4edyPRwjWfRCmviY7T-RGWFJUHN62uPLZ44rxbDIybD3JL3eWs9YIAMUa9oBz0hkcYQrM4oWgHn48E9mIPgbY8ANvjUWOA2" target="_blank" rel="noreferrer noopener" data-saferedirecturl="https://www.google.com/url?q=http://tracking.vuelio.co.uk/tracking/click?d%3D6YgN0DFQukPrBk1uG7SxtF0G-8uTHB21GwG7NxgngVBvmXQUvOS0TjRwWXmq8NGzWIA8uiyNtNsL-mFUnSlBgZTlw4zdihWfE4N_4edyPRwjWfRCmviY7T-RGWFJUHN62uPLZ44rxbDIybD3JL3eWs9YIAMUa9oBz0hkcYQrM4oWgHn48E9mIPgbY8ANvjUWOA2&amp;source=gmail&amp;ust=1680082393942000&amp;usg=AOvVaw1BKNJ-agIncIw2mm2k6-kY">https://www.allica.bank/<wbr />recovery-loan-scheme/business-<wbr />loan</a>.

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Allica Bank launches five-year interest-only commercial mortgages   supported by the Recovery Loan Scheme as it looks to help more businesses get back to growth

<strong>Allica Bank urges the Bank of England to seize a ‘golden opportunity’ to support the UK’s SME ecosystem</strong><strong> </strong>
<ul>
 	<li>Cautions against damaging Britain’s successful SME challenger bank sector, which currently accounts for 55% of all new small business lending</li>
 	<li>New research by Oxera suggests PRA’s current proposed approach to new rules could put up to £44 billion of SME lending ‘at risk’<strong> </strong></li>
</ul>
<em>(London, 20 March 2023) </em>Allica Bank, the leading fintech SME challenger bank, is urging the Prudential Regulatory Authority (PRA) to consider changes to proposed new bank capital rules to ensure small businesses have access to finance and the UK’s SME challenger bank sector continues to thrive.

In November 2022, the PRA published a consultation paper outlining its proposed approach to implementing the final elements of the Basel international banking standards, known as Basel 3.1. The consultation contains proposals to materially increase the level of risk-weighting banks would need to apply to SME lending.

<a href="http://tracking.vuelio.co.uk/tracking/click?d=hUqF_B9xgGQ1FMzLKto-pofLamM9uuDeSwL1PKkvG_hjNmRrqOITZujcc4L3g3UzIb6AOKhcLGwKR3DaN9wrFas0umvG_ULYPyCcfffF9tMv1tjXUzj624kcoQe3sVOSC6x8i9uQhVBYHPegkdn_tAeVfmO4OBOywfAbFPn7HOKnRWhXE94W0nQ0N3ZkWafoIKDtryD-76AFRle0_Ng_Hol7LTscTndxGs_GbBtF825U6ucWiY9mi02xHbvkLbCaqg2" target="_blank" rel="noopener" data-saferedirecturl="https://www.google.com/url?q=http://tracking.vuelio.co.uk/tracking/click?d%3DhUqF_B9xgGQ1FMzLKto-pofLamM9uuDeSwL1PKkvG_hjNmRrqOITZujcc4L3g3UzIb6AOKhcLGwKR3DaN9wrFas0umvG_ULYPyCcfffF9tMv1tjXUzj624kcoQe3sVOSC6x8i9uQhVBYHPegkdn_tAeVfmO4OBOywfAbFPn7HOKnRWhXE94W0nQ0N3ZkWafoIKDtryD-76AFRle0_Ng_Hol7LTscTndxGs_GbBtF825U6ucWiY9mi02xHbvkLbCaqg2&amp;source=gmail&amp;ust=1679402592872000&amp;usg=AOvVaw0zZEyPDt48yaFzUaMHOTlI">Based on new research by leading economic and finance consultancy Oxera</a>, commissioned by Allica, the PRA’s current proposals could put up to £44bn of SME lending ‘at risk’ if a more risk-based and proportionate approach to new SME lending capital rules is not implemented.

Oxera’s detailed analysis of the PRA’s proposals has found that:
<ul>
 	<li>the risk weighting for secured SME lending would be higher than for unsecured lending to SMEs – this is illogical and incentivises riskier lending which is not aligned to the PRA’s own objectives to make capital rules more risk sensitive</li>
 	<li>challenger banks, using the so-called Standardised Approach to measure their capital requirements, would see an increase of over 30% in the risk weighting that must be assigned to loans made to SMEs</li>
 	<li>the overall effect of the increase in risk weighting, assuming no change in either the level of capital held by banks or the capital-risk-weighted asset ratio with which they operate, would be a reduction in SME lending of up to £44bn from the banking sector.</li>
</ul>
<a href="http://tracking.vuelio.co.uk/tracking/click?d=lDKKCIxOTrme-Yve_se-otjlJWwVmzkGMQfzuHImBsyHz-P3CYmMYKbZKT7QTreF_dtvAiaNlkcgo0He6HinzKYw3e6YEWcFjUR_pPDOTn9xbHsWFEZHJBrDRVUSDf2p-AsNo1DyGF2Ll6GNspC1sP_c5-uFV_hJLG9A_st-AlKs4LieOTwhasKB18N48VBihJPwl6SVAH50IJgkndi_j1JJAgKxygF2h1HQWibJVDr70" target="_blank" rel="noopener" data-saferedirecturl="https://www.google.com/url?q=http://tracking.vuelio.co.uk/tracking/click?d%3DlDKKCIxOTrme-Yve_se-otjlJWwVmzkGMQfzuHImBsyHz-P3CYmMYKbZKT7QTreF_dtvAiaNlkcgo0He6HinzKYw3e6YEWcFjUR_pPDOTn9xbHsWFEZHJBrDRVUSDf2p-AsNo1DyGF2Ll6GNspC1sP_c5-uFV_hJLG9A_st-AlKs4LieOTwhasKB18N48VBihJPwl6SVAH50IJgkndi_j1JJAgKxygF2h1HQWibJVDr70&amp;source=gmail&amp;ust=1679402592872000&amp;usg=AOvVaw1-LURXyzPvo3E25--9VFwy">Research published by the British Business Bank in February</a> showed that challenger and specialist banks accounted for 55% of gross lending to small firms in 2022 – a record share compared to the traditional ‘big 5’ banks – demonstrating the vital role challenger banks now play in providing finance to SMEs across the UK.

The UK’s c.5.5 million small businesses make up more than half of private sector employment, half of GDP, and have created double the number of jobs compared to large companies.

Allica has separately provided its own detailed evidence to the PRA on the risk of different types of SME lending – as well as proposing changes to the PRA’s current proposals.

While Allica believes the SME Support factor could be removed for new lending, it has proposed that a more risk-sensitive capital regime should be implemented than the PRA is currently proposing, including:
<ul>
 	<li>Remove the PRA’s proposed 100% minimum risk weight floor for SME business loans secured on property – this would be substantially higher than international standards and would mean unsecured SME loans would have lower risk weights than secured loans, potentially incentivising banks to favour riskier lending.</li>
 	<li>Introduce a new risk weight for equipment and invoice finance lending to SMEs at 69%, which is equal to the current average of the SME Support Factor and also the PRA’s own benchmark risk weight for SME lending in its Pillar 2A guidance</li>
 	<li>Put unsecured SME lending in line with the current proposals, applying 75% risk weights for smaller loans and 85% risk weights for larger loans to SMEs.</li>
</ul>
Allica believes this approach could achieve the PRA’s over-arching objectives, while also implementing a fully risk-sensitive basis for capital requirements, without materially increasing the capital required which could cause substantial damage to the SME economy.
<p style="text-align: center;"><strong>Richard Davies, CEO of Allica Bank said:</strong></p>

<blockquote>“Over the past decade, the PRA has been instrumental in helping establish a more diverse and competitive banking market – and non-systemic challenger banks now account for more than half of all new lending to small firms across the economy.
“This transformational change in the UK banking market has helped to create a more robust, diverse and responsible SME finance market for Britain’s army of small business owners, the engine room of our economy.
“With a more risk-based approach to new capital rules, aligning the PRA’s proposals to the actual risks associated with lending, the regulator could avoid a really negative impact on the SME economy in the next two to three years.
"It’s really a golden opportunity to continue to cement the gains made in increased competition in the SME banking market while meeting the PRA’s prudential objectives.”</blockquote>
Writing introductory forewords in support of the new analysis, both the Federation of Small Business (FSB) and the National Association of Commercial Finance Brokers (NACFB) have called for the PRA to provide a more detailed assessment of how their proposals could impact the SME finance market and real economy.
<p style="text-align: center;"><strong>Martin McTague, National Chair of the Federation of Small Businesses, said:</strong></p>

<blockquote>The PRA have an opportunity to pursue their secondary objectives in terms of supporting the UK’s economic growth and competitiveness, and encouraging competition in the financial sector, without compromising on their primary objective of ensuring financial stability.

We would welcome the PRA publishing empirical evidence and cost benefit analysis specific to SME lending, as it isn’t clear that the proposed changes are justified.</blockquote>
<p style="text-align: center;"><strong>Paul Goodman, Chair of the National Association of Commercial Finance Brokers</strong>, said:</p>

<blockquote>“Market plurality and competition are central tenets of what has become a vibrant SME lending community, and now is not the time to hinder smaller players and hold back their evolution.
The NACFB supports calls for a greater examination of the potential unintended consequences that the proposals framework will likely bring and encourages the Bank of England and the PRA to show their workings by releasing supporting data ahead of any implementation.”</blockquote>
<strong>--END--</strong>

<strong>About Allica Bank </strong>

Recently named by The Times newspaper as one of the UK’s Top 20 fintech  companies, Allica is a digitally-native bank dedicated to serving and supporting Britain’s established small and medium businesses, a vital and underserved segment of the economy that represents over 30% of UK GDP.

Allica Bank urges the Bank of England to seize a ‘golden opportunity’ to support the UK’s SME ecosystem 

<p>Recently named by The Times newspaper as one of the UK’s Top 20 fintech firms, <span class="il">Allica</span> is bringing relationship <span class="il">banking</span> back to the UK’s established SMEs, using the latest technology. In 2021 <span class="il">Allica</span> announced a £100+ million Series B investment, and in 2022 it announced monthly profitability.</p>


Allica Bank

Recently named by The Times newspaper as one of the UK’s Top 20 fintech firms, <span class="il">Allica</span> is bringing relationship <span class="il">banking</span> back to the UK’s established SMEs, using the latest technology. In 2021 <span class="il">Allica</span> announced a £100+ million Series B investment, and in 2022 it announced monthly profitability.