Sat. Nov 28th, 2020

Regulation HK

Financial Regulator

Hong Kong Introduces New Loan Guarantee Scheme for SMEs

2 min read

LegCo has approved HK$33bn in funding to provide 90% guarantees on approved loans taken out by eligible enterprises and professionals seeking to set up their own practices.

HKMC Insurance Limited, a wholly-owned subsidiary of HKMC (Hong Kong Mortgage Corporation), has announced the introduction of a new loan guarantee product under the SME Financing Guarantee Scheme, after funding was granted from LegCo.

The ‘90% Guarantee Product’ provides a 90% guarantee for approved loans taken out by eligible enterprises, with a total of HKD 33 billion available for government guarantees.

Smaller-sized enterprises, businesses with relatively less operating experience, and professionals seeking to set up their own practices are eligible to apply for the guarantees for term loans up to HKD 6 million, with a maximum guarantee period of five years, and the same guarantee fee rate as the existing ‘80% Guarantee Product’.

The 80% Guarantee Product was launched since 31 May 2012, and has since seen over 17,000 loan applications approved, with the aggregate guarantees provided of about HKD 57 billion (as of 29 November 2019).

HKMC Insurance Limited plans to start receiving applications by year-end once it completes its final preparatory work in coordination with lenders.

The application period will last until 30 June 2022.

The HKAB (Hong Kong Association of Banks) has issued a statement welcoming the scheme, saying the initiative will help enterprises in need to overcome potential financing difficulties amidst the economic downturn.

“The banking industry has been proactively communicating with SMEs since the start of the year,” said HKAB chairperson Mary Huen. “We understand that the operating environment of SMEs is very challenging amidst the current economic downturn.”

The initiative is the latest of a string of measures introduced in Hong Kong to support SMEs amid worsening economic conditions largely a result of six months of civil unrest in the city.

In October, the HKMA (Hong Kong Monetary Authority) established the ‘Banking Sector SME Lending Coordination Mechanism’, through which nine major banks pledged to avoid withdrawing credit lines hastily and taking other credit actions that may adversely affect SMEs’ business operations.

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