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New £12 billion lending fund for UK SMEs launched by HSBC UK

Good news for SMEs – HSBC UK has doubled its original SME Fund, boosting it to £12 billion. The money helps companies to grow, and this is the fifth year this cash is being made available to SMEs.

Total funds committed to SMEs by the bank between 2014 and 2018 now reach £46 billion.

Overseas funding boost for SMEs

The fund also incorporates £1 billion ring-fenced to help UK SMEs grow their businesses overseas. As the UK heads towards a potentially drastic split from the EU, overseas business is becoming more crucial for small and medium sized businesses. The bank’s research shows that more than 72% (over two-thirds) of businesses in the UK are anticipating cross-border trade to increase over the next 12 months.

In addition, it includes a minimum amount of £300 million specifically for agricultural businesses in the UK. It’s allocated to different regions across England, Scotland, Northern Ireland and Wales, to ensure the fund remains country wide.

Head of Commercial Banking Amanda Murphy says: “British companies are optimistic about their trade growth prospects but it’s important they can get the finance they need to achieve it. With this in mind, we have set aside £1 billion of the fund to support international businesses in the UK. We cover more than 90% of global trade and capital flows and are uniquely placed to help these businesses trade overseas.”

Keeping SME’s afloat

BiFunds like this are especially important in light of research that shows 30% of SMEs actually need them just to survive. A report from finance provider Liberis finds that just under a third of small businesses need funding just to keep their heads above water.

The research looks into a range of criteria and records that ‘keeping afloat’ scores as one of the highest. Other in the top five reasons for business owners requesting funding include ‘purchasing new equipment, ‘general operating costs’ and ‘keeping up-to-date’.

The most common amount requested by SME owners is approximately £30,000. This is the amount of money needed to take a small business through to the next level. Despite initiatives like the HSBC UK fund, there is resistance from major banks to lend to small businesses. There is a perception among business owners that UK banks are reluctant to invest in innovation.

Economic backbone

According to Kelly Tolhurst, the Government’s Small Business Minister, more than 1,000 SMEs start up every single day. The 5.7 million small businesses in this country are its economic backbone and will continue to increase in significance post Brexit. She says: “Through our modern Industrial Strategy and industry-led initiatives such as this [HSBC UK fund], the Government and industry are building an environment in which businesses all over the country can thrive.”

SMEs contribute in excess of £200 billion a year to the country’s economy. Forecasts expect this to increase by around 20% by 2025. However, without enough cash going to the right places, this vision could be limited.

Almost two-thirds of small businesses in the UK see funding as a way to help them grow. And yet, 55% find it impossible to access the cash they need. This is leading increasing alternative providers, which reduces the pressure on banks and mainstream financial providers.

James Turner, Managing Director of Turner Little Limited says: “We’re experiencing an uncertain economic and political climate, with no real idea of what comes next. This means there is a greater need for the Government to support small businesses and ensure they can access the capital they need.

“While it’s becoming more difficult for small businesses to access funds from traditional channels such as business loans and funding, it’s encouraging to see new channels forming. Research by UK Finance regarding bank loans and overdrafts provided to small businesses over the past five years show that there is a drop of almost £6 billion. FinTech is filling this gap and providing new ways for SMEs to access funding.

“Combined with traditional funding options, we’re hopeful that the future of funding is strong. The Government must provide stability and support for the SME sector in the UK. Its importance is only going to increase as we leave the EU, and reform is essential. In particular, SMEs need encouraging to export outside of Europe and expand overseas.”

About Turner Little

Founded in 1998 in Yorkshire, UK, Turner Little is a specialist UK and offshore company formation, banking and corporate services provider. Our services include company formation, UK and offshore banking, asset protection, credit correction/repair, trademarking and trusts. Other services include Internet services, mail forwarding, wills and probate. Turner Little’s vision is to offer the best possible service, together with market leading products.

Turner Little and its affiliates do not provide tax, legal or accounting advice. Material on this page has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.