UK SME Lender Goes After Banking License

A small business lender is looking to bring new competition into the U.K.’s banking sector.

Reports Tuesday (Oct. 18) said Amicus Finance, an alternative SME lender, has applied for a banking license from the Prudential Regulation Authority and the Financial Conduct Authority. If granted, the license would make Amicus the newest so-called “challenger bank,” a term used for smaller banks to rival the nation’s Big Four banks — Barclays, HSBC, Lloyds and RBS.

“Becoming a bank will ensure we have the resources to grow, adapt and evolve our proposition in the market over the coming years,” said Amicus CEO John Jenkins in a statement.

According to reports, the company is looking to secure a banking license sometime in 2017. Until then, the firm plans to convert £30 million (about $37 million) of debt, currently used to fund its SME lending activities, into equity.

The company also revealed a shakeup to its upper management, appointing three new non-executive directors to its board. Former Sainsbury’s Bank CEO David Fisher, former PricewaterhouseCoopers Partner Alex Shapland and former Head of Investec Private Bank Paul Stevens were named.

The rise in the number of U.K. challenger banks is largely in response to a shortfall in available SME bank loans and government efforts to support competition in the banking sector. Last year, Amicus published a report that found evidence small businesses were starting to prefer alternative lenders to traditional banks, a sign that government initiatives were working, the company said.

According to the report, nearly half of SMEs agreed that alt-lenders offered greater flexibility than traditional banks, and more than two-thirds said alternative lenders have greater capacity to lend to SMEs than traditional FIs.

“Given the challenges faced by banks in recent years, it’s little surprise that many small business owners feel they’ve missed out on exciting deals and growth opportunities due to lack of support,” Jenkins said at the time the research was released.