Hong Kong SMEs rush to apply for government’s full guarantee loan scheme priced at half the market rate
- Government sets aside HK$50 billion (US$6.45 billion) as guarantee for SME loans
- SMEs can opt to borrow a maximum of HK$4 million and only repay interest for the first year
Thousands of small business owners have rushed to apply for the Hong Kong government’s full guarantee loan programme that started on Monday in a bid to get their hands on funds they need to survive the Covid-19-induced economic crisis.
HSBC, the largest bank in Hong Kong, said some 3,000 small and medium-sized enterprises had expressed an interest in the government-backed loans, while its subsidiary Hang Seng Bank had received 2,000 inquiries. Bank of East Asia, DBS Hong Kong, Bank of China (Hong Kong) and others also said the response was solid.
The government has said that it would guarantee up to HK$50 billion (US$6.45 billion) worth of bank loans, giving banks the confidence to lend. Each SME can apply for a loan of up to HK$4 million at an interest rate of prime rate minus 2.5 per cent, or at 2.75 per cent – much lower than normal corporate loans of between 5 and 6 per cent.
Since the banks are free of any risks, SMEs can be assured of quick loan approval within two to three days. However, the major shareholders will have to give personal guarantees to prevent abuse of the loan. Companies meanwhile have the next 12 months to apply for loans under the scheme.
“We understand that quick support for SMEs hit hard by the pandemic is essential in these difficult times,” said Terence Chiu, head of commercial banking in Hong Kong at HSBC. “In anticipation of the very high demand from SMEs, we have been pulling resources to help SMEs tap into this much-needed support as quickly as possible,” he said, adding the bank has set up a team of 100 staff to speed up the application process.
The full guarantee on loans is the latest government relief measure aimed at providing a lifeline for many small firms facing serious cash flow problems because of the pandemic. The coronavirus has infected 2.4 million people worldwide, including over 1,000 in Hong Kong. It has affected the city’s economy badly as the government has ordered businesses such as bars, cinemas to close and imposed restrictions on restaurants to contain the spread of the disease.