HSBC small business loans: limits, terms and alternatives

The HSBC small business loan is a fixed-rate term loan of £1,000 to £25,000, repaid monthly by Direct Debit over 12 months to 10 years. HSBC’s product page says it can fund working capital, stock and asset purchases, that the rate is fixed for the term and agreed at the outset, and that there is no arrangement fee. The amount and rate offered are subject to credit status and confirmed after a full application.

HSBC’s page also says:

• Security may be required, considered case by case, and an administration fee is payable if it is.
• You can choose at application to defer your first repayment by 3 or 6 months, or take a January repayment holiday each year, which lengthens the term. Interest is charged throughout either way.
• There are no charges for additional repayments, and if you repay early you may get an interest rebate, less one month and 28 days of interest.

Comparing a bank loan with other lenders? Our guide on how to compare business loan lenders covers what to check beyond the rate.

HSBC publishes two representative examples, which work as a simple HSBC business loan calculator for those amounts:

A representative APR is the rate HSBC reasonably expects at least 51% of accepted applicants to pay, so your rate can be higher. HSBC also notes that its representative APR can change. Our guide to APR explains what the annual rate includes.

Before you accept an offer, check in writing:

• The rate you have actually been offered, and the total amount payable.
• Whether security is required, and the administration fee if it is.
• Whether you have chosen a deferral or January holiday, and what it adds to the cost.
• Whether a personal guarantee is part of the offer.

HSBC publishes two larger loans:

HSBC says the Commercial Business Loan needs no minimum turnover and no relationship manager, is available in sterling only, and cannot fund property or land development or purchases. It says the Flexible Business Loan supports a total lending need above £100,000, or a term over 10 years.

HSBC’s three loans overlap little, so the amount usually decides which one applies:

• Up to £25,000. The Small Business Loan: fixed rate, no arrangement fee, up to 10 years. It suits a single purchase or a stock or working capital need that you can repay in fixed monthly amounts.
• £25,001 to £300,000. The Commercial Business Loan: fixed rate, a 1.5% arrangement fee, up to 10 years, with capital repayment holidays available subject to status. It cannot fund property or land.
• Above £100,000 in total, or longer than 10 years. The Flexible Business Loan: fixed or variable, interest paid monthly or quarterly, up to 20 years, with fees negotiated case by case.

If the need comes and goes rather than arriving once, a term loan may not be the right shape at all. A business overdraft or revolving facility charges interest only on what you use.

Both banks publish a small business loan with a fixed rate. Their own pages show these differences:

Compare the actual offers on the total amount payable, not the representative APR, because each bank prices your application individually.

HSBC lends subject to credit status, and its pages do not list a full set of criteria for the Small Business Loan. Points it does publish:

• Banking. There is no requirement to open or maintain an HSBC business current account, unless a debenture or fixed charge over book and other debts is required.
• Applying. Primary users of HSBC Business Internet Banking can apply online. New customers, or those not registered, apply by phone.
• Eligibility check. HSBC’s page links to an eligibility check to see whether you are likely to get the money you need before a full application.

Lenders generally look at trading history, turnover, existing borrowing and the credit records of the business and its directors. Our guide to business loan requirements lists the documents lenders commonly ask for.

First, ask why. HSBC’s page links to its process for appealing a declined application. Our page on why business loans get declined covers the common reasons and what to fix.

Second, the law gives a declined small business a route to other lenders. Under the Small and Medium Sized Business (Finance Platforms) Regulations 2015, where a bank designated under the regulations turns down a small or medium-sized business, it must pass the application details to designated finance platforms if the business agrees. HSBC’s Small Business Loan page names Swoop, Funding Options and Funding Xchange under alternative business funding, so ask HSBC about a referral if you are declined.

Third, consider whether a different product fits the need better:

• Unsecured business loans from online and challenger lenders, which publish their own criteria.
• Asset finance for vehicles and equipment, secured on the asset.
• Invoice finance if customers pay you on credit terms.
• Another bank’s small business loan. Our guide to the NatWest small business loan sets out its published terms.

Capzy is a credit broker, not a lender, and the lender pays us when a facility completes. We describe lenders from their published terms in our directory of UK business lenders and do not rank them. You can check your funding options with a soft search that does not affect your credit score. A lender’s full application may use a hard search, and all funding is subject to status and lender criteria.