Allica Bank has launched a new business overdraft aimed at established small and medium-sized enterprises (SMEs), as the challenger bank looks to address what it describes as a £15 billion shortfall in working-capital funding for UK businesses.
The introduction of overdrafts for businesses comes against a backdrop of a dramatic long-term decline in overdraft availability. According to the business bank’s research, SME overdraft provision has fallen by more than 80% since 2000, dropping from £18 billion (inflation-adjusted) to £2.7 billion in 2024. Overdrafts once accounted for 31% of SME lending in 1998, but now represent just 5%, leaving many businesses struggling to manage short-term cashflow.
Allica’s new overdraft facility offers limits between £25,000 and £2 million and is designed to be approved before businesses open a current account — reversing the traditional banking process. The bank says automated applications mean decisions can be delivered in days rather than weeks, with ongoing human support.
Chief executive Richard Davies said the collapse in overdraft lending has left established businesses “with no safety net” despite continued demand. He added that firms are often forced to commit to growth without certainty around funding, creating pressure during periods of seasonal income or expanding order books.
The overdraft launch forms part of Allica’s broader push to reshape SME finance. Allica has repeatedly called for structural changes to improve access to business lending and support investment and growth across the sector.
Recent milestones highlight the lender’s rapid expansion. Allica’s asset finance division recently surpassed £1 billion in lending, doubling from £500 million in less than two years as broker demand accelerated. Allica has also cut rates on commercial mortgages and bridging finance as part of its strategy to improve access to funding for established firms.
With established SMEs accounting for roughly a third of UK employment and GDP, Allica says improving access to flexible working capital is key to unlocking growth and productivity across the economy.
Richard is the founder of the Good Money Guide (formerly Good Broker Guide), one of the original investment comparison sites established in 2015. With a career spanning two decades as a broker, he brings extensive expertise and knowledge to the financial landscape.
Having worked as a broker at Investors Intelligence and a multi-asset derivatives broker at MF Global (Man Financial), Richard has acquired substantial experience in the industry. His career began as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson), following internships on the NYMEX oil trading floor in New York and London IPE in 2001 and 2000.
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