Challenger bank OakNorth nearly tripled the number of loans it made to British small businesses last year

OakNorth has lent more than £2.9 billion to British businesses since its launch in 2015, mostly to property developers. The lender says it has helped create 9,500 new homes and 11,000 jobs.

The lender does not disclose its average loan size or the number of businesses it has backed. However, it lends anything between £500,000 to £40 million or more.

Earlier this month, OakNorth benefited from the largest-ever fundraising for a European fintech business, when Japan’s SoftBank led an investment round worth £324 million into the start-up.

Overall, investors have ploughed $1 billion into OakNorth. Apart from SoftBank – whose other investments include Uber and WeWork – investors include Toscafund and Clermont Group. Former Cabinet Office minister Lord (Francis) Maude sits on its advisory board, as does former Financial Services Authority chairman Lord (Adair) Turner.

Eyebrows have been raised by OakNorth’s claim never to have had a single default – or even a late payment.

OakNorth told Growth Business that so far it has banked £400 million worth of repayments so far.

OakNorth reduces the risk of lending to traditionally high-risk companies through its technology. The software that underpins the credit decision works by “leveraging data, machine learning and technology to make a previously unprofitable market segment highly profitable”, the company told The Sunday Times.

Borrowers eventually speak to humans, but everything else is “massively tech-driven,” OakNorth CEO and co-founder Rishi Khosla. “It helps you make a quicker and better decision.”

By comparison, Funding Circle, a peer-to-peer lender to small businesses, says its default rate for loans make last year was between 3 per cent and 3.8 per cent. Funding Circle’s own lending grew by 40 per cent to £2.3 billion last year, typically offering smaller sums.