Editor: Dorcas Wong
The Hong Kong Mortgage Corporation Insurance Limited (HKMCI) is introducing a new 100 percent loan guarantee under the Hong Kong SME Financing Guarantee Scheme (HKSFGS) to absorb some of the economic shock felt by businesses in the last several months. This is according to Hong Kong’s 2020-2021 Budget, delivered on February 26, 2020.
Following the budget, the Anti-Epidemic Fund 2.0 announced by the Hong Kong SAR government on April 8 expanded on the measures previously announced by introducing a set of new enhanced terms for the 80 percent, 90 percent, and special 100 percent guarantee loans available for small and medium enterprises (SMEs).
Under the Enhanced 100 Percent Loan Guarantee Scheme, the guarantee commitment has been increased to HK$50 billion (US$6.5 billion). Eligible SMEs will receive a maximum loan amount of HK$4 million (US$520,000) and can benefit from the principal moratorium arrangement for the first 12 months.
This is expected to benefit around 20,000 to 50,000 households and will account for an additional HK$11.69 billion (US$1.5 billion) government expenditure, as well as an additional guarantee commitment of HK$30 billion (US$3.9 billion).
For SMES, these new measures could alleviate some of the burden of having to pay employees’ wages and rent, thereby helping minimize business closures and layoffs.
The HKMC Insurance Limited is expected to liaise with individual banks on the implementation details. Meanwhile, the Special 100 Percent Loan Guarantee program will be open for applications beginning April 20, with the application period extended from 6 months to a year.
Eligibility for the loan requires that enterprises have been operating for at least three months, as at the end of December 2019, and have suffered at least 30 percent decline in sales turnover – in any month since February 2020.
SMEs from all sectors are eligible to apply, particularly those most affected by the coronavirus outbreak – such as retail outlets, travel agencies, restaurants, cinemas, entertainment facilities, and transport operators. The total loan amount guaranteed by the government is HK$20 billion (US$2.6 billion).
The secured loans are to be taken out with participating lending institutions (PLIs) for the purpose of either acquiring business installation and equipment or meeting working capital needs of general business uses.
So far, the HKMC Insurance Limited has released guidelines for three different Guarantee Products.
The following table details the most updated information available as of April 21, 2020.
Participating lending institutions (PLIs) are those financial institutions authorized by Hong Kong’s Banking Ordinance and have chosen to participate in the SME Financing Guarantee Scheme. Various banks, on the PLI list have introduced their own relief measure programs. Some examples are listed below.
The bank policies are subject to change, and the information below was updated on March 20, 2020.
These measures are available to eligible enterprises from February 6 to June 30, 2020.
Application procedures can vary in accordance with the bank at which you are applying for a loan, but generally the procedure is as follows:
SMEs should prepare the following documents for their application:
For more information about how your business can benefit from Hong Kong’s SME Financing Scheme, please contact Jennifer Lu at email@example.com.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at firstname.lastname@example.org.
We also maintain offices assisting foreign investors in Vietnam, Indonesia, Singapore, The Philippines, Malaysia, and Thailand in addition to our practices in India and Russia and our trade research facilities along the Belt & Road Initiative.
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