By Lars Mucklejohn
The boss of challenger Cynergy Bank has said small firms are letting too much money languish in no-interest current accounts, as it launches a new offering that puts it in more direct competition with Britain’s major lenders.
Chief executive Nick Fahy told City A.M. that small and medium-sized enterprises (SMEs) are increasingly struggling to afford loan repayments as inflation continues to bite and the Bank of England holds interest rates at a 15-year high.
“A business that would have been able to take on a million pounds of lending just two or three years ago could probably take on half that now,” he said.
A raft of specialist SME offerings have emerged in recent years amid perceptions that high street banks have failed the sector.
London-focused Cynergy competes with the likes of Oaknorth, another challenger that announced a new range of business products in November targeting SMEs that have been underserved by traditional lenders.
“It’s a tough market,” Fahy said. “But I think the government and regulators have done a great job on building a vibrant challenger sector in the UK that is the envy of the world.”
Cynergy’s latest offering is a business current account with 1.5 per cent interest on deposits up to £25,000 for a flat fee of £25 per month. The bank already offers a market-leading 3.65 per cent business savings account.
“Nobody’s really disrupted the business current account market in a big way, and that’s where we’re playing,” Fahy said.
He added that while businesses were taking steps to “de-risk” their savings by opening accounts with multiple banks, too many were not doing the same with current accounts.
“We’re not telling customers they should move their current account from Lloyds or Barclays or HSBC. Open a second one, try it, get the interest. I think they should de-risk their current accounts.”
Small firms are increasingly relying on savings, with quarterly data from banking trade body UK Finance shows gross lending to SMEs fell for the fifth consecutive time to £3.5bn in the third quarter, down 20 per cent year-on-year.
UK Finance has blamed demand uncertainty, high borrowing costs and the impact of lending taken out during the pandemic for recent weakness in SME lending.
Cynergy’s growth plans include delivering more than £250m of new SME and property lending.
