London-based challenger bank, iwoca, said it’s overtaken two banking powerhouses in the small business and entrepreneur funding market.

The company cites the latest UK Finance data of small business overdraft approvals, which has revealed growth in market share for iwoca. The startup, which has rapidly grown into one of Europe’s largest small business lenders, has overtaken Santander and HSBC for the first time.

According to Q4 2018 data provided by UK Finance, 31,014 overdraft facilities were approved for small businesses, compared to 3,802 credit facilities approved by iwoca.

The number of iwoca’s new credit facility approvals now equates to 12 per cent of all new business overdrafts approved in the UK, representing a two percentage point increase from the previous quarter and places iwoca ahead of the two established high-street banks, the company said.

Of the banks analysed using latest quarterly data, Santander (9 per cent), has the smallest share of SME lending, followed by HSBC (11 per cent), Barclays (15 percent), Lloyds (20 per cent), and RBS (30 per cent).

UK Finance data also reveals that the number of overdraft facilities offered by the banks to small businesses has reduced by 50 per cent since 2011.

Gaining market share

The regional UK Finance data shows iwoca’s volume of approved credit facilities equated to 19 per cent in London, and 15 per cent in the North West and South East.

In terms of approved pound value, iwoca’s credit facility approvals across a combination of the North West, North East and Yorkshire & the Humber amounted to over £13.3 million or 9 per cent market share, which is some way off iwoca’s quarterly contribution in London at £18.6 million (24 per cent market share), but ahead of the West Midlands £6.6 million (12 per cent) and the South West with £7.4 million (11 per cent).

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

This pledge was to address the lack of credit facilities available for small businesses from banks across key northern towns and cities, with 700 closures combined across the North West and Yorkshire and the Humber in the past three years.

“We are a challenger to the banks, and our challenge has been successful”, said Christoph Rieche, CEO and Co-Founder of iwoca. “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.

Speed of service is key

“We’ve built a unique digital platform so small businesses can get the funds they need, when they need them.

Our personal best is three minutes and 26 seconds from starting an application to money in the bank.That’s an experience the banks can’t match.

“Our technology innovation and excellent service will enable us to fulfill our mission – to fund one million small businesses.”

Customer experience

The company quotes one of its customers John Mcrae, Director at Lexx Ltd, who manages a group of abseiling technicians whose job it is to inspect and instal electrical equipment on oil rigs in the North Sea.

“Due to the late payment of invoices into the company I have used iwoca on several occasions for short term loans”, Mcrae said.

“Prior to using iwoca it has always been a bit of a chew using the bank for a quick no nonsense loan.

“I’ve found peace of mind knowing that in the future, on the occasions when VAT, rent and other outgoings need to be paid I can, if needed, with a few clicks draw-down available funds to service these necessary payments.”

This analysis comes as iwoca prepares its bid to secure £10 million as part of The RBS Alternative Remedies Package.