The UK’s Prudential Regulation Authority (PRA) has granted a full banking licence to fintech company Cashplus.

Established in 2005, Cashplus provides lending and current digital account services for small businesses and customers who are with low credit scores.

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Till now, Cashplus has been functioning under an e-money license, which prohibited it from lending out customer deposits.

The licence will allow Cashplus to convert most of the £200m ($265m) in customer safeguarded funds it currently holds into bank deposits.

Cashplus CEO Rich Wagner said: “We had some very unattractive lending terms from traditional high street banks.

“The new licence will take our cost of funds from nearly 10% down to zero, and allow us to provide more widespread lending solutions for SMEs in a period where they need it the most.”

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The company, which serves over 1.6 million small business customers, is looking to lend nearly £1bn to small business that are unable to take loans from the high street banks.

“While big banks are slamming the door shut, we’ll be welcoming customers, opening up lending and delivering enhanced products to support them through the challenging months ahead,” Wagner added.

Five months ago, Wagner told RBI that not being a bank was an advantage. 

Wagner said Cashplus has an advantage over other baking startups because of its long history in the industry.

“Our data on lending is extensive and the ability to have five to seven years of credit data on overdrafts, credit cards and the like from day one puts us in an advantageous position.”

Most of the customers of Cashplus are newly formed companies. It is hoping to benefit from the rise in new startups triggered by the current economic downturn.