BBB backs up to £350m ENABLE Guarantee deal with Allica

The British Business Bank (BBB) has agreed an ENABLE Guarantee transaction of up to £350m with Allica Bank in a move designed to increase asset finance lending to smaller businesses across the UK.

The transaction marks the first ENABLE Guarantee deal involving a bank to include a junior investor within the structure, with Sona Asset Management participating alongside the British Business Bank.

The new structure is intended to unlock additional regulatory capital compared with traditional ENABLE Guarantee transactions, increasing Allica’s capacity to support a significantly larger portfolio of asset finance lending.

Over the lifetime of the transaction, the arrangement is expected to support up to £700m in lending from Allica Bank, helping smaller businesses acquire equipment, machinery and vehicles to support growth.

Under the structure, the British Business Bank will guarantee the senior position, while Allica retains a portion of the credit risk across the underlying agreements.

Peter Kyle, Secretary of State for Business and Trade, said the transaction would help smaller firms access growth funding.

“To grow our economy, firms need the financial firepower to turn their bright ideas into thriving businesses – especially smaller companies looking to expand,” he said.

“That’s why this transaction with Allica Bank is so exciting – meeting the huge ambition of the UK’s entrepreneurs by unlocking hundreds of millions in lending.”

Michael Strevens, managing director, Structured Financial Institutions Solutions at the British Business Bank, described the deal as an innovative structure designed to strengthen the impact of the ENABLE Guarantee programme.

“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,” he said.

Richard Davies, chief executive officer of Allica Bank, said the arrangement represented an important milestone for the lender.

“This innovative ENABLE Guarantee transaction is an important milestone for Allica, potentially enabling us to lend up to £700m of additional funding to established UK businesses to support their growth,” he said.

“These businesses are Britain’s real economy, and this investment will mean new jobs and boosted economic activity in our communities up and down the country.”

John Aylward, founder and chief investment officer at Sona Asset Management, said the transaction demonstrated confidence in Allica’s underwriting and created a scalable route for institutional capital to support SME lending.

“If successfully replicated, this model has the potential to create a scalable channel for institutional capital to support the UK real economy over the long term,” he said.

The ENABLE Guarantees programme was expanded at last year’s Spending Review, with programme capacity increased from £2bn to £5bn to support greater lending to UK smaller businesses.