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100% & 90% Guarantee Under SME Financing Guarantee Scheme
 
Date: 25 Mar 2020

100% & 90% Guarantee Under SME Financing Guarantee Scheme



1. Special 100% Loan Guarantee 

The Financial Secretary announces on 26 February 2020 that the HKMC Insurance Limited (HKMCI) will introduce special 100% Loan Guarantee under the SME Financing Guarantee Scheme. The new measure aims to alleviate the burden of paying employee wages and rents by small and medium-sized enterprises which are suffering from reduced income, thereby help minimise enterprise shutting down and layoffs.
 
    Eligibility
  • Applicable to Hong Kong enterprises of all sectors, including those most affected by the COVID-19 infections such as retail outlets, travel agents, restaurants, cinemas, karaoke establishments and transport operators and loan applicants should have been operating and holding a valid Business Registration Certificate for at least three months by end December 2019.
  • Loan applicants need to provide proofs that they have suffered at least a 30% decline in sales turnover in any month since February 2020 compared with the monthly average of any quarter in 2019.
    Loan Ceiling and Maximum Loan Guarantee Period
  • The maximum amount of loan per enterprise is up to the total amount of employee wages and rents for 6 months per enterprise or HK$2 million, whichever is the lower (If an enterprise does not have employee(s) and rented office(s), proxy is made to 50% of the highest monthly net income in 2019 multiplied by six).
  • Enterprises are eligible for the Special 100% Guarantee Product regardless of its existing exposure under the 80% and 90% Guarantee Products, if any.
  • The maximum repayment period is 3 years from the first drawdown of the facility. To lessen the immediate repayment burden of enterprises, an option for principal moratorium will be provided under which loan applicants will only be required to pay interest in the first six months.
   Interest Rate and Guarantee Fee
  • An interest rate of the Hong Kong Prime Rate minus 2.5% per annum (or equivalent). The guarantee fee will be waived.
According to the information from the banks which we work closely with, the application process is about one week after submission of the guarantee application form and relevant supporting documents.
 

2. 90% Guarantee Coverage
 
With the approval of the funding by the Finance Committee of the Legislative Council on 6 December 2019, the 90% Guarantee Product under the SME Fiancing Guarantee Scheme (SFGS) has been introduced on 16 December 2019. The 90% Guarantee Product aims at providing additional support to smaller-sized enterprises, businesses with relatively less operating experience, as well as professionals seeking to set up their own practices, to obtain financing. The application period will last until end-June 2022. Guarantee Fee Concessions and Further Concessions in Guarantee Fee apply to the 90% Guarantee Product as well.
 
The terms applicable to the 90% Guarantee Product are similar to those for the 80% Guarantee Product except for the items below:

Business Operation History There is no requirement on business operation history
Eligible Type of Loans Term loan only
Maximum Facility Amount HK$6 million
Maximum Guarantee Period Five years
Maximum Interest Rate It requires the overall interest rates of the guaranteed facilities not exceeding specified interest rate ceilings tiered based on the borrower’s business operation history.
Annual Guarantee Fee Rates On qualifying guarantees ­under the 90% Guarantee Product under Further Concessions in Guarantee Fees:
  • For borrowers with business operation history more than three years: Up to 0.36% of the loan amount (not subject to a minimum annual guarantee fee rate of 0.5%)
  • For borrowers with business operation history of three years or less: Up to 0.45% of the loan amount (not subject to a minimum annual guarantee fee rate of 0.5%)
 
We can refer our clients to the banks which we work closely with, please contact Ms. Amie Cheung at amie.cheung@lccpa.com.hk for further assistance.