HSBC aims to ramp up SME lending

The UK’s largest bank has set aside £8 billion in order to offer SMEs a helping hand.

Lending to small and medium-sized enterprises (SMEs) will be given a welcome boost as HSBC sets up a new £8 billion fund. The bank also plans to do away with some of the many fees on business loans that firms incur in order to support smaller companies that can ill afford them.

Since the financial crisis, the government has been looking to boost the ease of access and amount of credit available to small businesses. However, this latest step has come from a private firm.

“Too often we’ve heard smaller, domestic businesses ask whether we are as committed to them as we are to big global firms,” said Ian Stuart, HSBC’s head of UK commercial banking.

“I want to show UK businesses that we are right behind them, whatever the size of their ambitions.”

£400 million for Manchester, Birmingham and Scotland

The complaint comes after years of figures showing that small business lending sharply declined during the recession, as banks sought to shore-up their balance sheets. SMEs often found access to credit difficult as financial institutions required greater amounts of buffer capital, more so than when issuing loans for property.

HSBC’s new SME fund will be made available to 43 parts of the country and three packages of at least £400 million have been earmarked for Manchester, Birmingham and Scotland. In addition, the bank will waive or refund between £1,000 and £300,000 of qualifying business loan fees through to the end of July. The bank’s offer is open to both clients and customers who aren’t registered.

Lending to SMEs on the rise

Despite the drought of credit in the years following the financial crisis, recent data shows that lending to SMEs is on the rise. According to the Bank of England, net lending to SMEs (excluding overdrafts) increased by 1.9 per cent in the first quarter of 2015. Furthermore, HSBC’s own figures show that its lending for the year is up on the year before.

“Our net lending to businesses is up in 2015 – but we want to do even more,” said Mr Stuart.

“Our £8 billion fund is an aspiration, not a limit, and waiving fees from our business loans could save the average firm hundreds of pounds."

However, the UK’s largest bank will find that it’s facing competition from a number of challenger banks - a fast-growing sector - especially since businesses and homeowners are becoming increasingly open to the idea of using alternative financing options, rather than sticking with traditional high street banks.