Allica Bank seeks to fix £15 billion SME overdraft gap

Allica Bank has launched a business overdraft designed specifically for established SMEs, after research showed provision to this sector has collapsed by over 80% since the year 2000, falling from £18 billion, when adjusted for inflation, to stand at just £2.7 billion.

The bank says move marks a strategic milestone in its mission to transform finance for a part of the economy that has long been overlooked.

The lender identified a fundamental collapse in the offering of SME overdrafts over the past 25 years – in 1998, overdrafts accounted for 31% of all SME bank lending compared to just 5% of all SME lending in 2024.

Allica says this collapse in overdraft provision has created challenges particularly for established businesses managing seasonal income, growing order books and short-term working capital pressures.

Allica’s new business overdraft, which was previously available to a subset of existing customers, is designed to help plug this gap. With limits between £25,000 and £2 million, the banks says it offers a more straightforward and human way for established businesses to access working capital.

New model

Unlike many legacy banks, which typically require businesses to open and switch to a current account before applying – often with no certainty of approval – Allica has flipped the model. Businesses can apply for an overdraft and receive a credit decision before opening a current account, removing unnecessary risk and delay at a time when cashflow decisions are often time-critical.

Applications are also automated, meaning decisions are provided in days rather than weeks, with consistent human support throughout the process.

Richard Davies, CEO of Allica Bank, said: “Overdrafts used to be one of the most crucial types of working capital for UK business owners.

“Since the global financial crisis they’ve all but collapsed, and not because demand has dried up – the system just stopped providing them, leaving established businesses with no safety net.

“The £15 billion funding hole that’s been left is a symptom of a system that no longer works for established businesses, creating a problem Allica was built to fix. For too long, established businesses have been caught in the middle – too complex for one-size-fits-all banking, yet not big enough to get proper attention from legacy banks.

“We’re changing that by making overdrafts simpler to apply for, quicker to decide, and overseen by experts who understand the needs of established businesses and their role in the real economy.”

The launch of its overdraft builds on Allica Bank’s rapid growth and expanding support for established businesses across the UK. The fast-scaling fintech bank, which Deloitte named the UK’s fastest-growing fintech ever in 2023, has lent over £3.5 billion to established businesses, with analysis from Oxford Economics showing that every £1 million Allica lent supported £2.4 million in GDP, 35 jobs, and £600,000 in tax revenue.

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