Raising enough funds is essential for Hong Kong small and medium-sized enterprises (SMEs) that want to develop their businesses. Among the key solutions is the SME Financing Guarantee Scheme (SFGS), which helps them obtain financial assistance.
Knowing the SME Financing Guarantee Scheme (SFGS)
The SFGS helps local small and medium-sized enterprises (SMEs) and unlisted companies to secure loans from participating lenders. This support enables their higher productivity and competitiveness in the fast-evolving business world. The Hong Kong Mortgage Corporation Insurance Limited (HKMCI) runs the scheme and provides guarantee coverage for the lenders’ approved loans.
Types of Guarantees Issued Under SFGS
The SFGS provides different guarantee products to suit various business needs:
80% Guarantee Product
Maximum funding amount: HKD 18,000,000
Maximum guarantee period: 10 years
90% Guarantee Product
Maximum funding available: HKD 8,000,000
Maximum guarantee duration: 8 years
Special 100% Loan Guarantee
Maximum funding amount: HKD 9,000,000
Maximum guarantee period: 10 years
Note: The application deadline for the Special 100% Loan Guarantee was 31 March 2024.
Eligibility Criteria for SFGS
Eligibility varies for each guarantee product:
80% Guarantee Product
- Non-listed Hong Kong registered companies
- Minimum 1 year of business operation in Hong Kong.
90% Guarantee Product
- Non-listed corporations from Hong Kong or professionals starting up in practice
- No specific business operation history requirement
Special 100% Loan Guarantee
- Hong Kong registered non-listed companies
- Minimum 3 months of business operation in Hong Kong by 31 March 2022.
- At least a 30% decline in sales during the covered period when compared to the base period.
Benefits of the SME Financing Guarantee Scheme
The SFGS has several advantages:
Greater access to finance: Facilitates SMEs to obtain funds needed.
Risk reduction for lenders: The guarantee reduces the risk for the lenders involved, resulting in increased lending.
Flexible payment terms: The payment terms can be structured to accommodate business cash flows.
Application Procedure for SFGS
To be eligible for the SFGS:
Contact participating lenders: Initiate the application through banks or lenders that are part of the scheme.
Prepare necessary documents: These include financial statements, business plans, and other documents.
Lender evaluation: The lenders examine and analyze the application thoroughly.
Approval and payment: On approval, payment is made in terms agreed.
Note: Applications to SFGS are open throughout the year, but the application for Special 100% Loan Guarantee has ended on 31 March 2024.
Recent Improvements to the SFGS
Effective from 18 November 2024, enhancements to the SFGS also provide for borrower firms to be able to make application for a principal moratorium of a maximum of 12 months on outstanding as well as new loans. The measure has the intention to bring greater relief and ease for SMEs. The application timeline for such enhancements remains up to 17 November 2025.
Conclusion
The SME Financing Guarantee Scheme is a crucial instrument in empowering Hong Kong SMEs. The qualifying groups can pursue this avenue to fund their growth and viability amid a competitive market.
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