B-North plans to open a national network of small business-only bank branches across England by the end of 2020.
The start-up bank, which has raised £4.5m in seed funding so far, plans to offer small business loans of anything between £500,000 up to £5m when it opens its doors.
Manchester will be the first B-North branch (or “lending pod”) to open next year, followed by branches opening in Yorkshire, the Midlands and London in stage one. B-North has identified another four locations for stage two.
Founders of the bank – which is currently in the process of applying for a banking licence – believe there is a gap in the market for an SME lender offering loans higher than the almost-instant debt offered by fintechs and peer-to-peer lenders, while offering faster lending decisions than incumbent high-street banks.
Spotcap, for example, offers loans of up to £250,000 to small businesses, priding itself on one-day decisions, while rival Esme offers fully automated SME loans of up to £150,000.
Currently, with traditional banks, requests for loans have to be passed upward to head office and can take between three and four months to be rubber stamped.
B-North’s highly localised model will allow loans to be made to SMEs within 10 days.
B-North, whose founders are drawn from Atom Bank, Santander and First Direct, also wants to harness cutting-edge data technology to traditional face-to-face lending. Although local branches will be given autonomy to make lending decisions, bank officials will parse data including social media sentiment towards any borrower.
“Nobody likes to do things online only,” said Jonathan Thompson, CEO and co-founder of B-North, previously a divisional managing director at Santander. “We see the human touch as key when making lending decisions, and we want branches to have that autonomy. On the other hand, we’re not shackled by legacy IT systems or legacy infrastructure.”
As for where its business is going to come from, B-North sees 70pc of loan referrals coming through the growing popularity of the financial broker network, as clearing banks withdraw from the small business lending market. The other 30pc will come from branch walk-ins.
Of course, a bank is in the business of making loans and B-North does not itself as yet have much cash in the bank.
Once its crucial banking licence is approved, B-North plans to offer fixed-term bonds to private investors to raise capital. Thompson admits that as a dedicated SME lender, his capital base has to be triple that of what’s required for a traditional high-street bank.
Products that B-North plans to offer include business loans, revolving credit facilities and buy-to-let finance.
British Business Bank is in talks with B-North about supporting its ambitions.
Last month, the Greater Manchester Combined Authority (GMCA) invested in B-North ahead of its opening the Manchester branch.
Small and medium-sized enterprises (SMEs) make up the vast bulk of the northern UK economy – according to an IPPR report in February 2019, 99.8pc of North England businesses have fewer than 250 employees.
Thompson said: “There are 5.6m small businesses operating in the UK, comprising 61pc of the UK workforce: that’s an integral part of the UK economy, which we anticipate will only increase as the UK’s relationship with the EU evolves and we become more reliant on ‘home-grown’ enterprise. The ‘Northern Powerhouse’ already contributes significantly and is an essential pat of the UK’s identity.”
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