Finance · 2 October 2015

OakNorth Bank CEO: Hoping to overhaul the peculiarly British disease? of small firms being overlooked by larger lenders

RishI Khosla,  CEO of OakNorth
RishI Khosla, CEO of OakNorth
Challenger bank OakNorth has just started lending to entrepreneurs and small businesses. CEO RishI Khosla spoke to Business Advice about why current offerings still aren’t up to scratch and why he’s hoping OakNorth will have a big impact on the UK economy.

As access to finance becomes more widely discussed, so too does awareness of the latest raft of challenger banks aiming to widen options and fill gaps left by the established names. We’ve already seen the likes of Metro Bank, Aldermore and Hampshire Trust Bank start to make waves and after receivingits licence earlier this year, OakNorth Bank has begunlending to small businesses.

CEO and co-founder RishI Khosla, has thrown down the gauntlet, calling for entrepreneurs to reject major banks which he feels have long prioritised larger companies and taken a computer says no? approach to small business lending.

Khosla’s no stranger to the struggles of an early-stage business seeking finance, having previously founded his own firm, an outsource research business for investment banks. Copal Amba, which he founded with Joel Perlman, was then acquired by Moody’s Corporation in 2014. He said they initially funded themselves on a month by month basis, there would be a cash flow crunch if payment was late, we were very much bootstrapping.

Back in around 2005, at a stage when they needed 50, 000 for cash flow, they struggled to get lending from the banks, and noted the opportunity looming. The idea for OakNorth took shape from there.

He added that even now, the UK had a way to go in catching up the US and Germany, with penetration of debt pretty much double? that of the UK. Our view was that there was a large gap hindering small businesses, where they’re not large enough to attract finance, Khosla said.

OakNorth is therefore very much billing itself as a bank created by entrepreneurs for entrepreneurs. We’re looking at a quicker turnaround and increasing the customer experience, he told Business Advice. There’s a targeted focus in OakNorth’s approach it’s very much steering away from trying to deliver all things to all people.

Barclays veteran Cyrus Ardalan, who joined the bank as chairman in the summer, said OakNorth would be more nimble than big banks, aiming to provide short-term working capital within days and larger loans within weeks.

He added that it would be better value than the P2P lenders offering alternative sources of loans to small firms and would provide cash flow finance as well as the more established small business products like asset finance.

Its term loans and short-term working capital loans don’t always have to be secured against customers’ property. Khosla’s view is that with falling home ownership and a rising number of young entrepreneurs operating in industries which don’t require property assets, the older property-backed lending model doesn’t work for significant numbers of high-growth UK firms.

if the British economy is to grow, everyone knows we need small businesses to be thriving, he said. Entrepreneurs and business owners have been underserved by large lenders for decades, in what has become a defining problem for our economy.

He dubbed this a peculiarly British disease? resulting in chronic underinvestment in SMEs, yet the European Commission found they were still managing to generate around 50 per cent of the UK’s GDP.

Khosla feels that for newer businesses, a lot of people have a great idea of a product or service or hospitality, but for all young businesses keeping a grasp on overall financials is tough, it just all adds up. He said it can be all too easy to significantly overspend and cash flow finance could make a difference here.

He has spent a lot of time in both Silicon Valley and India, where Khosla said the entrepreneurial culture is palpable, with strong SME percentages. He wants to cultivate an ability to help the equivalent community in the UK achieve goals, as that will help the UK economy achieve goals and I am passionate about that.

It has been a gradual process getting OakNorth ready for action, and Khosla said as with any new business there are some significant challenges, which are amplified in for a challenger bank.



Rebecca is a reporter for Business Advice. Prior to this, she worked with a range of tech, advertising, media and digital clients at Propeller PR and did freelance work for The Telegraph.

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