Small business challenger lender nips at heels of big banks

Small business lender iwoca has overtaken two of the UK’s biggest banks amid shrinking funding options for entrepreneurs.

The challenger’s share of small business overdrafts rose to 12% in the final quarter of 2018, putting it above high street players Santander and HSBC.

The fresh data, provided by UK Finance, show that the overall number of overdraft facilities available for small businesses has dwindled, dropping 50% since 2011.

In the latest quarterly figures, Santander had a 9% share of SME lending, while HSBC had 11%.

RBS has the biggest share, with 30%, while Barclays and Lloyds hold 15% and 20% respectively.

Christoph Rieche, chief executive and co-founder of iwoca, said: “We are a challenger to the banks, and our challenge has been successful.

“We founded iwoca to help small businesses get the finance they need by filling the gap left by high street banks. The fact that we have grown so rapidly and overtaken two of the high street banks so quickly shows how badly small businesses have been served – until now.”

Iwoca, which was launched in 2012, has to date provided finance to more than 25,000 businesses.

It recently announced a pledge to fund another 100,000 businesses in the next five years after raising an additional £150 million from investors led by Augmentum Fintech.

In March last year, iwoca announced its aim to lend £100 million to small businesses in the North of England by 2020.

It said this would address the lack of credit facilities available for small businesses across major northern towns and cities after a spate of bank branch closures.

Iwoca had a 15% share of small business overdrafts in the North West during the fourth quarter.

The company’s most significant region was London, where it had a 19% share.