Allica Bank has made several changes to its commercial mortgage credit appetite with cuts to its stress-testing and debt service cover ratio (DCSR) requirements.

The business bank has also increased its maximum loan-to-value (LTV) for prime owner-occupied commercial mortgages and reduced the DSCR requirement for its asset finance product.

Allica suggested the changes will help customers retain more cash in their businesses to support growth and investment and deliver a lending boost to the industry after the UK’s recent period of financial uncertainty.

With the outlook for the Bank of England base rate looking more stable, Allica has reduced its stress test on commercial mortgage variable rate loans from 3% to 1.5% above the 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 enabling them to cover loan repayments by at least 200%, the bank has increased its maximum LTV by 5% without any change to pricing on owner-occupied commercial mortgages.

Allica’s asset finance customers will also benefit from a reduced DSCR, lowering from 140% to 125%. The firm said this will enable it to support more businesses looking to invest in their equipment, machinery, and vehicle assets.

Chief commercial officer at Allica Bank, Nick Baker, commented: “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.”

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