Allica Bank has made significant changes to its commercial mortgage credit appetite with cuts to its stress-testing and Debt Service Cover Ratio (DCSR) requirements across all products, and an increase in its maximum Loan to Values (LTV) for prime owner-occupied commercial mortgages. It has also reduced the DSCR requirement for its asset finance product.

The business bank – which is dedicated to the needs of established SMEs – believes the changes will help customers retain more cash in their businesses to support growth and investment, and deliver a welcome lending boost to the industry after the UK’s recent period of financial uncertainty.

With the outlook for Bank of England Base Rate seemingly becoming more stable, Allica has reduced its stress test on commercial mortgage variable rate loans from 3% to 1.5% above the Bank of England Base Rate. This means that the same level of profit generated by a business will now enable them to be considered for a higher loan with the bank.

Allica has similarly lowered its DCSR from 150% to 130% across all commercial mortgage products. By considering a lower level of income, Allica hopes to be able to increase the level of support it can provide to businesses.

For ‘prime’ businesses that achieve income levels that enable them to cover loan repayments by at least 200%, Allica has also increased its maximum Loan to Values (LTV) by 5% without any change to pricing on owner-occupied commercial mortgages. The result is that qualifying business can now borrow more at the same interest rate, while still benefiting from Allica’s award-winning dedicated relationship banking expertise, which is becoming more difficult to access with high-street banks.

Allica’s asset finance customers will also benefit from reduced DSCR, lowering from 140% to 125%. This enables the bank to support more businesses looking to invest in their equipment, machinery, and vehicle assets.

Nick Baker, Chief Commercial Officer at Allica Bank, says Allica’s decision to expand its credit appetite signals the bank’s commitment to supporting an even greater number of established businesses as the UK looks to get back to growth: “In seeing a stabilising market, and following a period of uncertainty, we want to make sure that businesses have access to the lending that will enable them to invest in their futures. Ultimately, these changes mean businesses can do more with less, and that we can lend more to more businesses, building on Allica’s ambition to be the true alternative to high street banks.”

The news follows Allica’s recent extension of its owner-occupied mortgages proposition to include interest-only terms of up to five years for businesses qualifying for the Recovery Loan Scheme.