HSBC (HSBA.L) has announced a new £15bn ($21.1bn) fund to help small businesses in the UK recover and rebound from the COVID-19 pandemic.
The bank on Tuesday announced the latest iteration of its SME Fund, which was launched in 2014 and provides loans to help small and medium sized enterprises (SMEs) grow. HSBC has allocated £15bn to the fund this year, £1bn more than the last iteration.
HSBC delayed the launch of the latest SME Fund from late 2020 to coincide with the reopening of the economy. Peter McIntyre, HSBC's head of small business banking, said he expected "demand to build and build quickly" as lockdown restrictions eased in the coming weeks.
"The fact that we have a clear roadmap out of lockdown has given businesses a lot of cause for optimism," McIntyre told Yahoo Finance UK. "A lot of businesses are very positive."
Small business minister Paul Scully said HSBC's fund would "help small businesses not only prepare for reopening, but to try new ideas and build back better from the pandemic."
Businesses can borrow as little as £1,000 from the SME Fund on standard commercial terms. McIntyre said the funds would help the "Instagram entrepreneurs" that had sprung up during lockdown and support the "disruptive entrepreneurship" of established business owners.
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"People are looking at: how do I take my business model and take the opportunity to grow as I come out of this the other way?" he said. "Whilst COVID-19 has presented an unprecedented level of disruption, it's given that impetus to rethink processes, review relationships, consider new markets, revisit supply chain and the resilience of supply chain as well."
McIntyre gave the example of an East Midlands sports equipment supplier who had pivoted from supplying corporate gyms to selling home fitness equipment. Another HSBC client who works as a cobbler had begun marketing online and was now serving clients as far afield as Monaco. HSBC itself has announced plans to slash its office space as it moves to a more "hybrid" style of working post-COVID.
The new SME Fund will sit alongside the new state-backed Recovery Loan Scheme. Companies will be able to borrow between £25,000 and £10m with an 80% state guarantee under terms announced by the chancellor last week. McIntyre confirmed that HSBC would participate in the programme once it launched.
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New figures published on Wednesday showed small businesses borrowing soared by over 80% last year to more than £100bn. The Federation of Small Businesses called the debt loan "unmanageable".
"One of the things we would never do is over leverage customers," McIntyre said. "Affordability is key.
"As we move both to conventional lending and the replacement of government schemes, we will have a clear credit approval process with an assessment of affordability against that."
Much of the money has been lend under state-backed programmes such as the Bounce Back loan scheme, which is in the process of being wound up.
McIntyre said HSBC was actively educating its customers on how to manage the debts taken on during the pandemic. Many businesses owners are unaware of new repayment terms such as "Pay as you Grow" or the ability to extend the term of a loan to up to 10 years, McIntyre said.
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