Digital challenger bank Allica has expanded access to its business overdraft, seeking to address what it describes as a long-term decline in flexible working capital for established UK firms.
Allica Bank has launched its business overdraft to a wider audience of established businesses, positioning the move as a response to a sharp contraction in SME overdraft provision over the past two decades.
The bank said overdrafts, once a cornerstone of day-to-day business finance, have become increasingly difficult for established SMEs to access. Its own lending research shows that since 2000 the value of SME overdrafts has fallen by more than 80%, from £18 billion in inflation-adjusted terms to £2.7 billion in 2024.
Over the same period, overdrafts have declined from representing 31% of all SME bank lending in 1998 to just 5% in 2024. Allica argues this has left a significant gap in cashflow support for established businesses with between five and 250 employees, a segment it describes as economically important but underserved.
The bank has focused its model on this group, which it says accounts for around a third of UK employment and GDP. Allica was named the UK’s fastest-growing fintech in 2023 by Deloitte and said it has now lent more than £3.5 billion to established businesses.
Analysis from Oxford Economics commissioned by the bank suggests that every £1 million of lending it provides supports £2.4 million in GDP, 35 jobs and £600,000 in tax revenue.
Allica said the contraction in overdraft availability has been particularly challenging for firms dealing with seasonal revenues, expanding order books or short-term working capital pressures, often forcing them to commit to expenditure without certainty that finance will be available.
The new business overdraft offers limits from £25,000 to £2 million. While previously available to some existing customers, the product is now being opened up more widely. Allica said the aim is to make access to overdrafts more predictable and less onerous for established businesses.
Unlike traditional banks, which typically require firms to open or switch a current account before applying for an overdraft, Allica allows businesses to apply and receive a credit decision before opening an account. The bank said this reduces uncertainty and delay at a point where cashflow decisions are often time-critical.
Applications are automated, with decisions delivered in days rather than weeks, although Allica said customers are supported by relationship managers throughout the process.
Richard Davies, chief executive officer 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 overdraft launch adds to Allica’s broader push to combine relationship-led banking with digital processes, as it looks to fill what it sees as persistent gaps in the provision of finance to established SMEs across the UK.
