HSBC bank offers a range of attractive offers for startup companies that want to work with them. This includes everything from fee-free periods to attractive overdraft packages. Any tools which can help with cash flow in those early days are often welcomed and sought out by startup companies.
Despite the numerous perks offering by HSBC business accounts, there is mounting evidence that HSBC might not be the best choice for many startup companies. There is no shortage of horror stories online about startups being left without access to their bank accounts and losing income as a result. For a startup company, losing access to your accounts can spell disaster, particularly if you are a sole trader and rely on the business as your sole source of income.
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What could go wrong?
The common theme which seems to be troubling companies is that HSBC is prone to closing accounts without warning. For small companies that rely on the bank as their primary source of funds, this can be catastrophic. One company reported that their bank account was closed without warning which left them in arrears with suppliers, caused them to miss an HMRC payment and also left them unable to pay their staff.
What are the warning signs?
In some instances, startups reported that their accounts were subject to annual reviews and HSBC made requests for information. In one instance, startup company Loogun went through two annual reviews before learning that their accounts failed the review. This led to their accounts being blocked with no further explanation. It was only when the company took to social media that they were finally able to access their funds and move to another bank.
What is an annual review?
The annual review is something offered to business account holders with a turnover between £500k to £2m. It is often framed as a way to help businesses to identify opportunities and ensure they are making the most of the banking options available. However, it would seem that the annual review is also used as a way to identify accounts which may be used for money laundering. As a result of automated checks, this can occasionally flag up legitimate accounts.
Is it only startups who should be wary?
Any business with an HSBC bank account can be caught up in the annual review or be closed without warning. Often, it’s a case of a computer error which results in the account being closed and HSBC staff are often powerless to fix the problem. In one case, a church bank account was closed without warning and potentially lost out on tens of thousands of pounds.
A parish church in Hertfordshire had their HSBC account closed without warning after staff at the church failed to provide the right information about the funds. The account was used by parishioners to make direct debit donations to the church. When the account was closed without warning, this had a huge impact on the church’s finances.
What can I do if my account is frozen?
If you are already banking with HSBC and are concerned about the potential risk of having your bank account closed without warning, you can easily apply for a new business bank account and start the process of moving accounts. If your account has been frozen for any reason, the numbers to call HSBC are listed here. Your first step is to determine why the account has been frozen and if it will be reinstated. In many cases, HSBC will arrange to have a cheque for the amount in your bank account sent to your correspondence address, so it’s important to ensure this address is up to date.
Can I take legal action?
If your account is closed without reason, you have grounds to report HSBC to the financial ombudsman. This authority is intended to manage customers complaints from a fair and impartial perspective. If this doesn’t result in a favourable outcome, then there is the option to take legal action although this is likely to be costly. For startup companies thinking about banking with HSBC, the overwhelming advice from past customers is to be wary and to move accounts if you are concerned about the annual review process.
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