> ## Content Index > Fetch the complete content index at: https://entrepreneurplus.co.uk/llms.txt > Use this file to discover other available public pages before exploring further. # How Does OakNorth Make Money? Winning Where Big Banks Won't Lend - URL: https://entrepreneurplus.co.uk/untitled-4/ - Published: 2026-08-19T10:05:36.000Z - Updated: 2026-08-19T10:05:35.000Z - Description: How does OakNorth make money? The profitable challenger bank built its business around the UK’s overlooked middle market, combining commercial lending with its OakNorth Credit Intelligence technology. - Author: Editorial Desk - Tags: Founder Stories In 2005, **two entrepreneurs walked** into a string of high-street banks asking for a working capital facility. Their business was profitable. It had strong cash flow and loyal clients. None of the high-street banks they approached was willing to lend. That single, maddening rejection is the reason OakNorth exists and it's the place to start if you're asking how does OakNorth make money today. --- ### What Is OakNorth? OakNorth is a **UK digital bank that** lends to established small and medium-sized businesses too large for standard SME loans but too small to interest institutional private equity. Founded by Rishi Khosla and Joel Perlman who had previously built the data-analytics firm Copal Amba together, OakNorth received regulatory approval in 2015 and launched its lending operations in September that year. The founders' own experience shaped the **OakNorth business model** from day one. Trying to raise a working capital facility for Copal, they were turned down by numerous high-street banks despite running a profitable business, a rejection that convinced them a whole category of company was being ignored by mainstream lenders. Lord Adair Turner, former Chairman of the Financial Services Authority, now chairs the bank, with Khosla continuing as CEO. --- ### Lending to the Overlooked Middle Market OakNorth's entire lending strategy targets what it calls the "Missing Middle" established SMEs with roughly £1 million to £100 million in turnover that are too complex for retail banking apps but too small for the corporate coverage teams at major banks. Research OakNorth commissioned from the Social Market Foundation found that while these scale-up businesses represent just 1% of all UK SMEs, they account for 22% of all SME turnover around £497 billion and 8% of SME employment. The lending numbers have compounded steadily. By 2021, OakNorth had built a lending book of almost £5 billion, with cumulative lending subsequently passing £10 billion in November 2023, with OakNorth reporting that its lending had contributed to the creation of more than 40,000 jobs and 29,000 homes across the UK. By the end of 2024, that figure had grown to £12.5 billion, alongside more than £6 billion in deposit savings held for UK households. This is the customer base: the OakNorth business model was purpose-built around depth rather than volume. --- ### How It Makes Money: Net Interest Margin Plus OakNorth Credit Intelligence OakNorth's business model combines interest income from lending with a separate software business, OakNorth Credit Intelligence, which provides its credit-analysis technology to other banks. That's the short **answer to how does OakNorth make money**: its core banking business earns income from lending, while the technology arm commercialises the bank's credit expertise with other financial institutions. OakNorth's public financial statements report interest and fee income as its consolidated revenue base; they don't disclose OakNorth Credit Intelligence's contribution as a standalone figure, so the two streams can't be quantified separately from what's publicly available. The first is classic banking lending at a higher rate than it pays on deposits. In its 2020 annual report, the bank recorded a gross yield on its loan book of 7.8%, against a cost of deposits of 1.4%, producing an OakNorth net interest margin of 6.2% that year, up from 5.9% in 2019\. That spread earning more on loans than it pays savers is a core component of the bank's lending economics. OakNorth's later public results don't provide a directly comparable figure, so how the **OakNorth net interest margin** has moved since 2020 can't be inferred from profit growth alone. The second stream is the more unusual one, and it's what separates OakNorth from a typical challenger bank. Its technology platform, originally known as ACORN Machine, was developed and commercialised as OakNorth's credit-intelligence business and is now known as OakNorth Credit Intelligence. Built over five years by a team of around 250 credit scientists and software engineers, it gives commercial lenders a forward-looking, portfolio-wide view of borrowers rather than the backward-looking snapshot most banks work from. It's used by commercial banks including **Fifth Third Bank and Old National Bancorp**, with Fifth Third using its climate module to quantify climate risk across its commercial loan portfolio. Rather than remaining an internal technology project, the software arm allows OakNorth to commercialise its credit expertise with other financial institutions, without those institutions having to use OakNorth's own balance sheet for the underlying lending. By 2025, the combined effect of both streams was a bank generating £605.9m in gross revenue, with 40% of gross originations coming from the US market it entered in 2023\. Cumulative principal losses stood at just 0.045% over OakNorth's first decade, while the bank had granted more than £15.1 billion in credit facilities since inception. --- ### Why Big Banks Miss This Segment Big banks miss the Missing Middle because mainstream SME lending has been retreating for over a decade, leaving specialist lenders to fill the gap. Bank of England data shows a sustained reduction in large-bank SME lending between 2012 and 2019, and Innovate Finance estimates this created a c.£95 billion finance gap between 2015 and 2022\. The shift shows up clearly in market share: | Metric | 2012 | 2023 | | ------------------------------------ | --------- | ---------- | | Big five banks' share of SME lending | Over 60% | Around 40% | | Challenger/specialist banks' share | Under 40% | Around 60% | The pattern deepened rather than eased. **Gross bank lending to SMEs** fell from £15.5 billion in Q1 2023 to £14.2 billion in Q1 2024, and 77% of all bank lending by value went to larger businesses in 2023 up from 72% a decade earlier, according to iwoca's analysis of Bank of England data. Loan approval rates point to a tougher financing environment from another angle: research cited in recent UK SME lending coverage indicates approval rates, historically around 80–90% before the financial crisis, had fallen to below half by 2024\. More than 140,000 business accounts were closed at the instigation of the lender in 2023, according to a House of Commons Treasury Committee report. Together, these figures illustrate the financing gap in the SME market that OakNorth was established to address. --- ### OakNorth vs Allica vs Tide **OakNorth, Allica, and Tide all target UK** small and medium-sized businesses, but their products, customer segments and business models differ substantially. OakNorth lends larger, bespoke facilities to scale-ups; Allica serves established SMEs with day-to-day banking and lending; Tide is a business-finance platform focused primarily on business accounts, payments and administrative tools, rather than operating a lending model comparable in scale to OakNorth's. The financials reflect three very different business models. OakNorth posted pre-tax profits of £214.8m in 2024 (up from £187.3m in 2023), with cumulative lending past £12.5 billion. Allica, which only began lending in 2020, nearly doubled its own pre-tax profit to £29.9m in 2024, up from £16.1m, on a loan book that passed £3 billion. Tide grew turnover 55% to £177.2 million in 2024 but still posted an £11.3 million operating loss, narrowed from £33.2 million the year before, according to its Companies House filing. The contrast highlights how different the three approaches are: OakNorth operates a substantially larger lending business and reported significantly higher pre-tax profit than Allica in 2024, while Tide remained loss-making at operating level, exactly the gap the **OakNorth business model was built** to occupy. ![](https://storage.ghost.io/c/05/a4/05a4a052-18ab-4836-8924-ec8b322c371c/content/images/2026/08/oaknorth-business-model.png.png) OakNorth business model gap ### The Bottom Line The full answer to **how does OakNorth make money** is that its reported revenue comes from lending interest and fee income on loans to the Missing Middle while OakNorth Credit Intelligence operates as a separately commercialised technology business whose own financial contribution isn't broken out in the figures OakNorth publishes. By 2024, OakNorth had recorded eight consecutive profitable years and reported an adjusted return on equity of 22%. OakNorth also said its return on assets placed it among the top 1% of commercial banks globally. It's an unusual model for a challenger bank: the OakNorth business model has focused on commercial lending rather than consumer banking, building its business around the underserved middle market instead of pursuing mass-market customer scale. --- ### **FAQs** **1\. Is OakNorth profitable?** Yes. OakNorth reported pre-tax profits of £214.8 million in 2024, up from £187.3 million in 2023\. The 2024 result represented the bank's eighth consecutive profitable year. **2\. What is OakNorth Credit Intelligence?** OakNorth Credit Intelligence is OakNorth's cloud-based credit-analysis platform, developed over five years by a team of around 250 credit scientists and software engineers. Originally developed as ACORN Machine, the technology is now used by commercial banks including Fifth Third Bank and Old National Bancorp. **3\. Who founded OakNorth?** OakNorth was founded by Rishi Khosla and Joel Perlman, who previously co-founded the data-analytics firm Copal Amba before launching OakNorth in 2015. Also read: [*Cap Table Management Software: A UK Founder's Guide to Modern Equity Management*](https://entrepreneurplus.co.uk/cap-table-management-software-a-uk-founders-guide-to-modern-equity-management/) --- **Sources:* OakNorth Bank press releases and annual reports (2020–2025), Wikipedia's OakNorth Bank entry, the Social Market Foundation, Sifted, PitchBook (citing Companies House filings for Tide), Allica Bank press releases, the House of Commons Treasury Committee, and Bank of England data as reported by UK Finance and iwoca. Figures reflect the most recent available data at the time of writing.* ***The EP+ Editorial Desk covers UK startups, founder stories, and venture capital. All editorial content is independently produced and human-reviewed before publication.***