EXCLUSIVE: "Only Collect" - James Hodkinson, Secure Trust Bank in 'Discover Money20/20'
26 June 2025
Collecting data from a myriad of SME accounting systems and standardising it to support credit decisions could benefit borrowers and lenders. It’s a problem that Secure Trust Bank would dearly like fintech partners to solve
“We see so many companies that aspire for growth but they haven’t got the working capital to fund that growth. Sometimes that can lead to them going out of business.”
That’s the observation of Secure Trust Bank’s James Hodkinson, and it probably won’t surprise anyone who’s fought to build an SME.
The UK’s incumbent banks typically have a corporate lending strategy that targets big businesses at the expense of small and mid-sized companies, while startups are supported by a variety of government-backed incentives. The weakness of incumbent bank interest in SMEs was underlined by a British Business Bank report in March that revealed challenger and specialist banks now account for 60 per cent of gross lending to the sector – £37.3billion out of a total £62.1billion – outperforming the UK’s big five banks for the fourth year in a row.
At the same time, however, borrowing appetite has been weakened by elevated credit costs and uncertainty caused by the pandemic and cost-of-living crisis, with the number of smaller businesses using finance sliding from 50 per cent in the third quarter of 2023 to 43 per cent nine months later.
Some 77 per cent of SME bosses polled for the report said they would accept a slower growth rate of their business rather than borrow to grow, and 58 per cent agreed with the statement that ‘credit is too expensive’. The government believes the situation is squeezing a brake on the economy, and meetings with leaders from the ‘big five’ banks have been held to discuss SME claims of a lack of credit since the pandemic.
A review of lending to the sector closed in May, and ministers are considering whether to impose obligations on banks to make it easier for businesses to access competitively priced loans. The government has also launched a ‘call for evidence’ ahead of the publication of its small-business strategy later this year to better understand the pressures SMEs face. Statistics quoted in the government’s Small Business Access to Finance document, of the 46 per cent of SMEs that were using external finance in the fourth quarter of 2024, around one-third were borrowing with credit cards and many others were using an overdraft.
It claimed that when firms seek credit from banks they are often refused, adding: “Overall loan success rates for firms applying for bank finance are low in the UK, at less than 50 per cent on average, down from an approval rate of 67 per cent in Q1 2018 to Q2 2019.”
Secure Trust Bank is among those smaller lenders that offer alternative solutions to big bank lending, in its case asset-backed finance of between £5million and £50million. It originally launched in Solihull, West Midlands, in 1952, with the Commercial Finance arm being established in 2014, giving it a long and successful record in asset-based borrowing, which offers an alternative to unsecured loans.
Its offer can prove attractive to businesses operating in unpredictable markets or navigating inconsistent cash flow, and, of course, it allows borrowers to keep hold of equity and leverage the value of assets. The bank grew its loan book by 3.2 per cent to £3.73billion in the first quarter of 2025 – an increase of 10.5 per cent year-on-year – with both business finance and consumer finance (mainly car loans) net lending balances up 4.9 per cent and 1.8 per cent respectively. Meanwhile, deposits grew 3.9 per cent in the quarter to £3.37billion on the back of very attractive interest rates.
STB’s primary source of funding is retail deposits from individuals, and, at the time of writing, the bank was offering a market-leading 4.42 per cent fixed rate on a two-year savings bond. In its first-quarter trading update this year, STB said it was ‘moving closer towards our £4billion net lending ambition’ (the bank passed the £2billion milestone of business and consumer lending in 2018), and, despite the uncertainty that has shadowed business over the past 12 months or so, Hodkinson himself – who’s MD of the bank’s Commercial Finance division – reports seeing ‘green shoots’ of lending activity.
In May, the Office for National Statistics said the UK economy had grown faster than expected in the first quarter of 2025, albeit by only 0.7 per cent which perhaps boosted borrowers’ confidence. There are many reasons companies seek finance, of course. STB has provided working capital to fund contract opportunities, helped SMEs survive a short-term cashflow crisis and supported management buyins and buyouts. Last summer, for example, it provided lending to support private equity firm Modella Capital’s acquisition of arts and crafts retailer Hobbycraft from Bridgepoint, which had owned the shop chain since 2010. Hobbycraft had 124 stores at the time and was boosted by a sales explosion during the pandemic lockdowns. “Our facility was largely based on the stock, and that enabled the private equity firm to acquire the business – that’s a great use of asset-based lending,” Hodkinson says. “In another instance, we provided funding to a company that wanted to install solar panels as part of its environmental, social and governance strategy. We also have examples where the client has won a contract, so has more revenue, so we provide an invoice discounting facility, and possibly a stock facility, so they can borrow to fund the growth.” The challenge for STB, Hodkinson explains, is to harness and interpret data to guide its decisions and pricing. And, unfortunately, the corporate lending market does not have the rich data pools that consumer lending enjoys, drawn from large portfolios with high-volume, low-value transactions. He says: “In the corporate market, it’s the exact opposite, as we are dealing with a low-volume, high-value scenario. The data that we’re keen to extract is at client level, and that comes in all shapes and sizes which, in itself, is a challenge. If there was one accounting platform that everybody used, then it would obviously be easier to extract data. But we come across all sorts. “It’s a challenge that the corporate lending market needs more investment in. When we deal with Excel spreadsheets, for example, we have to slice and dice the data into a format that the bank can use. If there were solutions that could format that data into something that is consistent across every accounting package, that would be really powerful.” Hodkinson reveals STB is looking for a technology partner to provide insights for the due diligence phase before a lending deal is agreed. But, ideally, he would like a solution that supports the whole lending life cycle. He says: “Can we make the onboarding slicker for us and for our client? Can we make it easier for the client to do business with us? Can we get better data to make better decisions? “If there’s a system that enables the customer to be more efficient in terms of data collection, gets the data to us, then we can possibly lend more money on the back of that. One challenge is that we’re often looking at partners at isolated parts of that life cycle. I think there’s a big opportunity in fintech for somebody to wrap around the whole, including the banking platform. We would much rather have one application, that is slick and quick, than a legacy banking platform and plug three or four different applications into it.” And anyone that can solve that problem would also be boosting UK plc."The data that we’re keen to extract is at client level, and that comes in all shapes and sizes which, in itself, is a challenge "
This article was published in Discover Money20/20 2025, Page 44-45