Some of Britain's digital small-business lenders have reached profitability faster than consumer-focused fintechs by filling a gap left by traditional banks. Consumer-focused fintechs have reported growing losses for many years longer. A report last year from the state-owned British Business Bank said non-traditional lenders accounted for 60% of annual small-business lending in 2024. Some small and medium-sized enterprise (SME) lenders are considering international expansion, including banking licence applications and overseas offices, according to people familiar with the matter.
Allica Bank, which lends to businesses with between five and 250 employees, delivered its first statutory pre-tax profit in 2023, three years after launching lending. Allica ranks 58th on the Financial Times list of the UK's fastest-growing companies. Allica generated £36.9 million of profit in 2025, up 23% from the previous year. Allica has applied for a Swedish banking licence and intends to expand elsewhere in Northern Europe. Allica chief executive Richard Davies said Allica sees European expansion opportunities because Allica believes established banks similarly underserve small businesses there.
Iwoca posted its first pre-tax profit in 2018, seven years after its founding. Iwoca ranks 59th on the fastest-growing companies list. Iwoca is exploring a sale that could value the business at more than £1 billion. Annual accounts filed at Companies House in October disclosed Iwoca revenue of £366 million last year, up 56% from 2024. The accounts disclosed profit of £113 million, up 91%.
OakNorth lends to medium-sized businesses and entrepreneurs. OakNorth became the first UK digital challenger bank to turn a profit in 2017, after its second full year of trading. OakNorth bought Michigan-based Community Unity Bank last year to meet demand for start-up lending following the collapse of Silicon Valley Bank. OakNorth hopes to accelerate expansion in the US.
These digital lenders launched after the financial crisis, when large traditional banks moved away from SME loans. SME loans can be riskier and less profitable because smaller companies require substantial due diligence. Bank of England data show lending to British businesses has fallen to its lowest level for nearly 30 years. SME loans almost halved over the past 15 years, from 12% of GDP in 2011 to 6.5% in 2026. Davies said market share has shifted significantly toward challengers and fintechs over the past 15 years.
Iwoca chief executive and co-founder Christoph Rieche said the growth of small-business lenders demonstrates that SME lending can be profitable. Rieche said millions of small businesses operate in the UK and Germany, where Iwoca operates, and a large group remains badly served or unserved. Rieche said Iwoca probably receives about 40,000 to 50,000 applications per month, demonstrating substantial unmet demand for finance. Iwoca opened a German office in 2015 and grew to become one of Germany's biggest SME lenders.
Many digital lenders advertise that loan processing takes a fraction of the time required by large banks with greater bureaucracy. The lenders also say the lenders can serve businesses that larger banks might consider too small. Rieche said Iwoca can assess and approve a customer's loan application in as little as two minutes and 37 seconds, partly through automated credit checks. Rieche said more than 80% of all Iwoca credit decisions are fully automated, with no human intervention. Davies said digital lenders take minutes to decide on loans, while traditional lenders with more processes may take weeks. Davies previously served as Revolut's chief operating officer and worked in Barclays' corporate bank.
Gurprit Singh Gujral and Aymeric Monod-Gayraud founded LoanTube, a comparison website connecting lenders and borrowers that ranks 42nd on the fastest-growing companies list. Gujral and Monod-Gayraud said lender activity in the small-business market is growing. Gujral said more lenders have entered SME lending. Gujral said smaller SME lenders' growth demonstrates that, despite economic shocks, small businesses reliant on credit still largely run the UK economy. Gujral described the UK economy as highly entrepreneurial and more dependent on credit than continental Europe. Not everyone is convinced that competition among SME lenders makes the sector ready for consolidation. Rieche said Iwoca has substantial opportunities for organic growth.
UK Neobanks Outpace Fintechs in Profitability by Filling SME Lending Gap
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Summary
Value investing in crypto often focuses on fundamentals, but traditional finance trends also offer insight. UK neobanks have hit profitability faster than fintechs by filling the SME lending gap. A 2024 report shows non-traditional lenders now handle 60% of SME loans. Allica Bank, Iwoca, and OakNorth are profitable and expanding globally. These lenders use automation to serve small businesses ignored by big banks. Support and resistance levels in crypto markets can mirror such shifts in financial innovation and lending trends.
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