By Kristy Dorsey

A new bank focused on serving small and medium-sized businesses has launched a £5 million funding round ahead of what is expected to be its full operational launch later this year.

Glasgow-based Alba Bank, headed by former Airdrie Savings Bank chief executive Rod Ashley, has appointed Seismic Opportunities Fund to run the Series A investment round in which it hopes to attract a variety of private and regional investors. Billed as the first Scottish-based challenger bank, Alba says it will offer an alternative to the “industrialised” model of major banks that has steadily reduced the number of customer-facing staff.

The project is already backed by several Scottish entrepreneurs and business leaders including Jim McColl of Clyde Blowers Capital. Investors in the current round will collectively own almost half of Alba Bank, an amount which Seismic describes as “a fraction of the valuation of other challenger banks at the same stage of their evolution”.

HeraldScotland: Rod AshleyRod Ashley

“We are really excited by the opportunity to broaden our investor base to local people in the local areas we are looking to develop and grow into,” Mr Ashley said. “Our existing investors have been fantastic in their support to date and it is an important part of our journey to open up this investment to a broader range of investors across Scotland and the UK regions.”

Approximately £2m of the fresh funding will be used to meet Alba’s regulatory obligations, with £3m covering working capital in the run-up to obtaining a restricted licence from the Prudential Regulation Authority.

The current expectation is that Alba will then be granted permission to go fully operational in the second half of this year, by which time it will have raised further “substantial” funds.

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Mr McColl said Alba will combine the best of Fintech with that of human relationships to better serve the needs of SME customers. There are more than 334,000 SMEs in Scotland, with surveys suggesting the majority do not receive adequate support from their current bank.

“We view Judo Bank in Australia as a very similar model and although they are three years ahead of Alba, they are already ‘directly challenging the big four banks in Australia with almost A$3 billion of lending’, according to their current CEO, Joseph Healey,” Mr McColl added.

“Alba will certainly aim to emulate Judo’s success.”