HSBC have announced the introduction of a new small business loan scheme to be rolled out across the UK this year. The overall fund will total £10 billion and will be divided among regions in Britain and Northern Ireland to encourage small businesses across the nation.
One thing that has always proved to be difficult for new entrepreneurs and business owners is getting access to funding to either start or expand a business. It’s estimated that 55% of small 
businesses do not last more than five years. Business survival rates have continued to fall in the last decade. The recession made things worse, but despite recent improvements in the economy, rates have continued to be low. With statistics painting a poor picture of lasting business success banks have been more hesitant to lend money to start-ups.
HSBC leading the way
Kevin Caley, founder of online lender ThinCats said that ‘HSBC has kept a low profile in the SME lending sector for several years, so this decision to make a £10 billion commitment to UK businesses will be roundly welcomed.’ HSBC’s new fund may signal the start of a relaxation in banks granting business loans. With HSBC leading the way, more banks may follow their example.
Minister for small business, Anna Soubry praised HSBCs efforts to address the problem of accessing finance for small business. She said, ‘it’s absolutely right that banks such as HSBC continue to develop their support for smaller businesses. I also want to see more of these businesses taking advantage of what’s on offer, both from banks and alternative lenders, to help them grow, invest and create jobs for people.’
Lack of funding opportunities is one of the main barriers to people starting their own businesses. If it was easier and more accessible more jobs could be created. With a lack of jobs, new businesses are important to encourage economic growth.
The government has taken some steps to make the burden of growing a business easier by cutting corporation tax from 20% to 17%. More businesses will also be exempt from paying business rates, meaning thousands of small businesses will be better off. Though these two changes announced in the recent budget are helpful for growth, they do little to address the initial start-up capital that is needed. This is where the loan fund from HSBC might help.
Ian Stuart, head of UK commercial banking at HSBC said that ‘this fund underpins our support by putting SMEs in a stronger position to be making investments that will stimulate local economies and create more jobs.’
As well as the £10bn, the HSBC broader package will include:
- Free banking for up to 18 months for start-ups or 12 months for switchers
- Year-long fixed price of £5.50 a month to begin at the end of the free banking period
- A reduction in the Personal Guarantee Fee from £80 to £10 for any lending above £10,000
- New Business Lending Eligibility Checker (BLEC), an online tool for customers to get credit decisions for loans up to £30,000 within 3 minutes.
- Free text alert service for informal overdrafts to help customers avoid paying fees and interest.