Digital bank OakNorth has formed a strategic partnership with specialist investment firm Fintex Capital to expand lending in the specialty finance market.

The firms have already deployed £20 million through the collaboration, which is primarily focused on UK opportunities.

Speciality finance is a subsection of private credit that targets SMEs, property owners and consumers that are underserved by the traditional banking sector. The two firms said they believe that specialist lenders and alternative finance providers will play an increasingly
important role in improving access to credit for these groups.

Fintex Capital has invested more than £400 million in specialty finance over the past decade, providing senior and mezzanine funding facilities to specialist lenders across sectors including SME finance, motor finance, buy-to-let mortgages, bridging loans and consumer credit.

OakNorth has also expanded its activities in the specialty finance sector in recent years, providing structured finance and loan-on-loan facilities to specialist lenders alongside its core lending business.

Under the partnership, the firms said they will target lending opportunities across specialty finance, real estate credit, asset-backed finance and cashflow lending, as well as more complex credit situations requiring bespoke underwriting and structuring expertise.

The companies’ collaboration will enable them to originate, structure and execute larger transactions together, typically deploying between £10 million and £40 million per borrower.

Mohith Sondhi, managing director of debt finance at OakNorth, said specialty finance had become an increasingly important segment of the private credit market but required significant underwriting expertise and sector knowledge.

"Lending together, with interests aligned, we aim to support high-quality businesses and lending firms backed by resilient assets, predictable cashflows and strong management teams,” he added. “Having deployed our first £20 million together is testament to the strength of our relationship and the breadth of opportunities we see in the market."

Regulators and watchdogs have warned in recent months that private credit’s opaque lending practices and interlinkages to traditional finance create vulnerabilities for the global financial system.

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