As the number of so-called “challenger” banks across the U.K. increases, yet another small business finance company is considering entering the industry.
Orchard Funding Group is said to be mulling a banking license as it prepares for its Wednesday IPO, the Financial Times reported Sunday (June 28). The company is looking to raise $15.7 million through the float, funding that will be used to boost Orchard’s position in the small business lending space, according to CEO Ravi Takhar.
The financier has already facilitated more than $70 million in SME loans in the last year alone, reports said, and works with more than 100 insurance brokers and hundreds more accountants to connect small business owners with sources of working capital.
In addition to its initial public offering, Orchard is reportedly considering pursing a banking license, two unnamed sources told the Financial Times, to secure more funding and boost liquidity. Doing so would bring the lender into the ranks of challenger banks that have popped up in recent years as U.K. officials urge more competition against the biggest banks.
The government recently lowered the barriers to entry for such banking competitors, mainly in an effort to boost small business lending.
But a report released last month by accountancy group KPMG found that even with an influx of competition against the big banks, small businesses are still struggling. New challengers like TSB, Metro and Charter Savings Bank were found to have not sufficiently improved upon the shortcomings experienced by SMEs with the big banks. Many of these challenger banks, in fact, originate from the big banks themselves, meaning they share many of the same business practices and policies.
Still, KPMG found that some of the smallest rivals are the most successful, seeing an average return rate of 18.2 percent and experiencing a small business lending hike by nearly 33 percent between 2012 and 2014.
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