Late last year, HSBC (HSBC) closed accounts held by some small and midsize U.S. businesses. The U.K. lender said it was stopping service to some customers so it could retrench around its expertise in international trade.
Now HSBC plans to lend $1 billion in 2014 to small and midsize U.S. companies that do business internationally, the bank announced on Jan. 28. Those funds, which are slated for companies with $3 million to $500 million in annual sales, expand a program originally launched in July.
That won’t appease customers dropped by the bank, who have complained about the way they were notified of the decision. HSBC had 46,455 commercial accounts in the U.S. as of June, according to financial statements. Bank spokeswoman Laura Powers declined to say how many accounts have been dropped.
“We made a strategic decision to focus on an area of expertise,” says Mark Luppi, head of U.S. business banking at HSBC, noting that small businesses have growing opportunities abroad. More than 75 percent of the world’s purchasing power resides outside the U.S., according to a recent report on small business exporting from the Congressional Research Service (CRS). Technology has removed barriers that once prevented small businesses from tapping foreign markets, Luppi says.
Since July, the bank has lent $1 billion under the international loan program, which is open to companies that import or export goods, have international clients, or plan to expand outside the U.S. in the next two years. Luppi says amounts have ranged from $100,000 to tens of millions of dollars.
A U.S. manufacturer of rearview cameras for RVs used the HSBC program to get a line of credit to pay for component parts made in China, says Luppi. Another manufacturer received a $1 million loan backed by the Small Business Administration to finance sales of electric conveyor belts to foreign countries.
The SBA backed $1.2 billion in loans to promote exports at companies with fewer than 500 workers, according to the CRS research report. In that context, the $2 billion HSBC plans to lend from July 2013 through the end of this year sounds like a large amount. Luppi wouldn’t say how many loans HSBC has made through the international program, so it’s unclear what portion of the money is going to businesses the government would describe as small.
Updates to clarify Powers’ response to how many accounts have been closed.