Unlocking Business Growth: A Guide to SME Financing and Loans in Hong Kong 

In Hong Kong, there are various SME financing and loan options available to support business growth, including large personal loans, collateral-free SME loans from banks, and government-subsidized schemes. Each option comes with its unique advantages and limitations, such as application thresholds, interest rates, and fund usage restrictions. If you're considering expanding your business or need significant capital, it's essential to understand your business needs and the purpose of the loan. Here’s a comprehensive guide to help you choose the most suitable SME financing option for your company. 

SME financing provides the necessary funds to support a company’s operations or invest in fixed assets. With stable cash flow, SMEs can enjoy greater flexibility to expand their business. This may include researching and developing new products, entering new markets, and enhancing productivity, all of which can contribute to business growth.

Working capital financing specifically helps businesses meet short-term operational needs, such as inventory purchases, rent, wages, and other day-to-day expenses. This type of financing offers liquidity and ensures smooth operations and effective cash flow management. 

The SME Financing Guarantee Scheme (SFGS), administered by the Hong Kong Mortgage Corporation Insurance Limited (HKMCI), provides government-guaranteed financing to SMEs. The scheme includes various products categorized by the percentage of guarantee coverage: 80% Guarantee (SFGS 80), 90% Guarantee (SFGS 90), and Special 100% Loan Guarantee (SFGS 100). 

The Special 100% Loan Guarantee offers eligible businesses a borrowing limit equivalent to the sum of wages and rent for a certain period or HK$9,000,000, whichever is lower. The repayment period can be extended to 10 years, with an annual interest rate equivalent to the Hong Kong Prime Rate minus 2.5%. The government guarantees 100% coverage of the loan, and borrowers can opt to pay interest only for the first 12 months after the loan drawdown. 

Trade Credit Insurance (TCI) is a valuable tool for SMEs looking to secure loans. TCI protects businesses against the risk of non-payment by their buyers, offering a safety net that ensures cash flow remains stable. By having TCI in place, SMEs can provide banks with additional assurance of their financial stability, making it easier to secure loans. TCI covers a wide range of risks, including buyer insolvency, protracted default, and political risks that can impact international trade. Allianz Trade’s TCI solutions help mitigate credit risks and enhance financial stability, making it a crucial asset for SMEs seeking financing. 

To apply for the 80% or 90% Guarantee Products, as well as the Special 100% Loan Guarantee, enterprises must meet specific criteria. Detailed eligibility requirements include being a non-listed company registered in Hong Kong, and for the Special 100% Loan Guarantee, businesses must have experienced at least a 30% decline in sales turnover during a specified period.

Typically, the HKMCI will notify the participating lender upon receiving the application. If approved, the lender prepares the necessary documents for signing. After submission of the signed documents to the HKMCI, a guarantee is issued.

Various banks in Hong Kong offer SME loans with different terms. For instance, HSBC offers a maximum loan size of HK$1,500,000 with a repayment period of up to 60 months, while Standard Chartered offers loans up to HK$6,000,000.

To apply for an SME loan from a bank, you need to submit the following documents:

• Company registration documents and business profile
• Latest financial reports
• Latest bank statements and loan information from major banks (if any)
• Business owners' information

With numerous SME financing options available, it’s crucial to consider the specific features of each scheme, including loan amounts, interest rates, fund usage limitations, eligibility criteria, and application deadlines. Ensure that you thoroughly understand these aspects before making a decision. 

SME financing options in Hong Kong offer significant benefits for business development, whether through government-subsidized schemes or bank loans. By understanding the advantages and requirements of each option, SMEs can make informed decisions that best support their growth and operational needs.

Trade Credit Insurance (TCI) from Allianz Trade can significantly enhance your chances of securing a loan by protecting your receivables and ensuring a stable cash flow. This additional financial stability makes banks more willing to extend credit to your business. 

Borrow or not to borrow? Borrow only if you can repay!