HSBC are a popular business loan provider in the UK. Their small business loans range from £1000 to £25,000 and flexible loans repayments can be set over 12 months to 10 years. With asset funding, an independent investment company and overdraft and mortgage facilities, there are many financial options which may suit the needs of businesses of all shapes and sizes.
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|Reviewed by Expert Market & Independent Researchers:||11/03/2016|
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Types Of Loans
Major high street banks offer a variety of business loans and HSBC is no exception. Each model can usually be customised to suit the specific needs of the lender.
- Small Business Loan
- Asset Finance
- Business Overdraft
- Commercial Mortgage
- Enterprise Finance Loan
- Flexible Business Loan
- Partnership Capital Loan
Small Business Loan
We believe the flexibility of HSBC small business loans is one of their main selling points. Loan amounts that range from £1,000 to £25,000 can be made available on the day of acceptance, meaning there are often no unnecessary delays in the process, unlike some loan providers. The longevity of the loan is impressively flexible, from between 1 and 10 years, and there is an option to defer payments for the first few months, which can be of great benefit to new ventures.
Interest rates are fixed so, although this can lead to frustration if independently set rates fall during the course of the loan, you may have some peace of mind in avoiding unforeseen expenses in the future. For small businesses, rates are generally set at between 5% and 7% and you will also incur an arrangement fee of £100 at the start of the loan.
Specialising in specific sectors or funding for types of equipment, HSBC’s asset financing is a specialised loan that can help a business purchase or replace vital working parts of the venture. Typically this type of loan can fund commercial vehicle purchases and I.T. equipment and as HSBC can also offer their expertise in these fields, an asset finance loan can also act as a partnership, whereby you are offered advice and guidance from the bank itself.
Asset financing can provide funds of over £100,000 and can therefore, we believe, be deemed unsuitable for smaller businesses. Interest rates can be variable or fixed and while there is no guarantee that both options will be available to all, there is some degree of flexibility in the entire setting up of this type of loan.
Business overdrafts can be implemented and maintained as an evergreen loan. These are also sometimes referred to as revolving credit loans, essentially on going funds provided by the lender that can be extended, re-borrowed or paid off as required.
This can be beneficial as you only need to pay off the interest rates on the funds you use. There is a setup fee and the overdraft will need to be renewed annually if wish to use it for a prolonged period of time.
There is a sizeable risk involved with this type of loan should the bank require some form of security, which is usually property, making it a secured loan. Should you not be able to keep up with the repayments then you run the risk of losing the loan security, which can mean your home, thus it should be carefully considered before committing to the contract.
Similar to asset financing, this is essentially a business mortgage which can be used in order to help a business expand and improve their premises. As property can be the most expensive asset a business owns, may not be possible for most companies to expand these facilities without help of a loan but, as is generally the case for such large loans, it does come with a degree of risk.
HSBC offer up to 75% of the value of the property, with a minimum of £25,001 and no set maximum available. Fixed and variable rates are offered and payments can be deferred twice a year to enable some degree of flexibility, which is vital for sizeable loans such as these.
Term lengths vary from 2 to 30 years. Should you not be able to keep up with the mortgage repayments, however, you do run the risk of losing the property and even your entire business so it is a loan that should not be entered into lightly.
Enterprise Finance Loan
This government backed scheme was implemented to encourage the major banks to lend to small and medium sized businesses, although incomes of up to £41m can access the scheme. As you might expect, there are many criteria that must be met before this loan will be made available, not least that you should have a viable business proposal, but it has been designed to help those who might otherwise be unable to access funding.
You are 100% liable for the loan and it can be set against your assets, namely property or equipment. This can lead to you losing your home and business if you are unable to keep up with the repayments and as there are several other costs to consider, including arrangement fees, interest rates and a 2% annual premium to name a few, it can be a costly long term loan, especially as it can last as long as 10 years.
Flexible Business Loan
Designed for sole traders, partnerships and limited companies, the flexible business loan is HSBC’s most customisable loan. Because of its flexibility, no 2 loans are the same, meaning interest rates can be fixed or variable, lengths can be anything between 1 and 20 years and repayments can be set monthly or quarterly.
Interest rates and fees will therefore vary greatly and there are minimum requirements that need to be met before a loan will be accepted. Limited companies can borrow upwards of £10,000 and sole traders and partnerships over £25,001.
Partnership Capital Loans
A loan that is designed to help accountancy or legal firms buy or increase their capital stake, the Partnership Capital Loan is a specific and competitive funding option for those who are eligible.
Loans are highly flexible, with variable or fixed rates, monthly, quarterly or annual repayment, up to 30 year loan terms and interest only options are available, and can be accessed for loans of over £25,000. Due to the longevity availability with the loan, interest rates are generally lower in comparison to other loans we observed, but this can vary wildly depending on the various terms agreed.
Other Loan Types
HSBC also provide various individual loans that can be constructed to suit most needs. Personal loans can be stretched out for 5 years for values of up to £15,000 and 8 years for loans over that amount. Graduate loans can be a popular option for those leaving university, offering the same structures as the personal loan. Both incur an interest rate of 3.3% on those under £25,000.
Alternatively the Flexiloan is a rather more expensive option, at 17.9% interest rate, but does offer great repayment flexibility for those who are able to access it.
HSBC also offer a variety of different credit card types: standard, premium, student and premier world elite mastercard. You should always make sure you understand the terms of any credit card before committing as interest rates and fees can be extremely high.