How to Take Advantage of Hong Kong Government's SME Loan Measures | Article – HSBC VisionGo

In this article, we look to provide knowledge on the various funding schemes available to Hong Kong’s SME’s from the Hong Kong Government.

Startups  ·    ·  5 mins read

What are the Hong Kong Government's SME Funding Schemes

On 26 February 2020, Hong Kong’s Financial Secretary Paul Chan presented Hong Kong’s budget for 2020-21 (“the Budget”). The key focus of the budget is to provide financial relief and support to enterprises and Hong Kong citizens, to safeguard jobs and to stimulate the economy. While various measures such as the distribution of HKD 10,000 of electronic consumption vouchers to Hong Kong residents were well received, praise should also be directed to the Hong Kong Government’s willingness to support the economy and Small and Medium Enterprises (“SME’s”) in particular. In this article, we look to provide knowledge on the various funding schemes available to Hong Kong’s SME’s from the Hong Kong Government. 

Funding Schemes for SME’s

The Hong Kong Government provides various funding schemes to SME’s, with each scheme designed to address the different business needs / objectives that a Hong Kong company may face. To provide a brief explanation, the following schemes will allow Hong Kong SME’s to obtain easier financing to support their working capital needs, encourage expansion to foreign markets, and to implement projects that will increase the SME’s competitiveness.

SME Loan Guarantee Scheme (“SGS”) 

The SGS provides loan guarantees to Hong Kong SME’s for the purpose of helping secure Business Installment Loans, such as those typically offered by HSBC. These loans are used to acquire equipment or to meet working capital needs of the business. Such examples include machinery, computer software. Interestingly, the acquired equipment may be located outside of Hong Kong and the loans can be utilised to acquire second-hand equipment. 

Hong Kong SME’s are eligible to apply to the SGS if they meet the following requirements:

  • The applicant Is a registered Hong Kong company; and

  • Meets the Hong Kong Government’s definition of an SME; and

  • Has substantive business operations in Hong Kong at the time of submitting the SME Loan Guarantee Scheme application; and

  • Is not an associate of the lender; and

  • Is not carrying on the business of a lender

In the event that a SGS application is approved, the acquired Business Installment Loan must be in the form of either a non-revolving loan or a hire purchase agreement. What makes Business Installment Loans so attractive for SME’s, like those offered by HSBC is that the number of payments to the creditor are fixed, as opposed to revolving credits.The simplicity surrounding the eligibility requirements of the Business Installment Loans provided by the Hong Kong banks also make it obtaining a loan easy. For instance, HSBC’s requirements are as follows:

  • The applicant is a company registered and operating in Hong Kong

  • The owners of the applicant company are living in Hong Kong

  • The applicant company has been operating for at least 2 years 

Under SGS, the Hong Kong Government can provide a guarantee of 50% of the applicant’s loan amount, subject to a maximum total guarantee of HKD 6 million for a period of up to 5 years (beginning from the first drawdown date of the loan). In the event that the applicant has successfully repaid their Business Installment Loans, the applicant may further utilize the Hong Kong Government’s guarantee for one additional Business Installment Loan application. The subsequent loan obtained will be subject to the same guarantee conditions as the initial loan. 

SME Export Marketing Fund (“EMF”)

The EMF aims to encourage SME’s to expand their markets outside Hong Kong by providing financial assistance to support the SME’s export promotion activities. Export promotion activities include trade fairs and exhibitions outside of Hong Kong, local trade fairs and exhibitions that are primarily targeting foreign markets, advertisement costs and enhancing a company’s online presence to foreign markets. Companies unsure about whether their promotion activities are eligible under EMF’s funding scope may consult the Trade and Industry Department for preliminary advice in respect of the eligibility of their specific export promotion activities. 

Hong Kong SME’s may apply to the EMF scheme if they fulfill the following requirements:

  • Is a registered Hong Kong company; and

  • Meets the Hong Kong Government’s definition of an SME; and

  • Has substantive business operations in Hong Kong at the time of submitting the EMF application; and

  • Must not be the organiser / co-organiser / service provider or related company of the organiser / co-organiser / service provider of the export promotion activity and the related services covered by the application; and

  • If the applicant has previously received funding support under EMF, the cumulative amount of funding received must not exceed the prevailing cumulative funding ceiling

Successful applicants to EMF are eligible to receive a maximum amount of funding support of 50% or HKD 100,000 of the total approved expenditure of one export promotion activity only, whichever is the less. Although each application may only cover one export promotion activity, there is no limit on the number of applications a company may submit - however, companies are subjected to a cumulative limit of HKD 800,000 in respect of funding for all approved projects. 

Applications to EMF may be submitted either within 60 calendar days after the completion date of an export promotion event, or within 45 to 120 calendar dates before an export promotion event’s commencement date. 

Trade and Industrial Organisation Support Fund (“TSF”)

The objective of TSF is to provide financial support to non-profit-distributing organisations in the implementation of projects that will enhance the competitiveness of SME’s. Such projects include seminars, workshops, conferences, exhibitions, research studies, award schemes, support facilities, etc. To the extent that an application has been successful, the applicant must sign a provided Project Agreement and agree to the terms that the related project must be completed in 3 years. In addition, while costs directly incurred for the project will be funded, overhead expenses cannot be covered by the financial support unless prior approval has been given by the TSF Vetting community. 

The TSF eligibility requirements are much simpler as compared to the other two SME loan schemes. Applicants will be considered eligible if they are a Hong Kong registered non-profit-distributing organisation. A non-profit-distributing organisation is defined as an entity that does not distribute their profits to their directors, shareholders, employees or any other person. 

The maximum funding support that can be provided for each TSF approved application is HKD 5 million, or 90% of the total approved project expenditure. Funding is typically paid out in installments, in accordance with the project’s cash flow the applicant has advised in their TSF application. The first installment is payable upon signing of the Project Agreement.

To be further eligible for the later installments, the applicant must submit regular progress reports and audited accounts that detail the project’s development. A final report must also be submitted upon completion of the project to outline the quantifiable results of the project’s deliverables and the total expenditures incurred in relation to the project. 

Support and Consultation Centre for SME’s (“SUCCESS”)

SUCCESS is overseen by Hong Kong’s Trade and Industry Department and is run in collaboration with Hong Kong’s various industrial and trade organisations, professional bodies and private enterprises. The intention behind founding SUCCESS was to create a platform and community where SME’s can receive practical advice and professional insights at no-cost to them. 

When taking advantage of the Hong Kong Government’s various SME loan measures, SME’s are encouraged to further utilize existing government resources. In addition to regularly hosting seminars and workshops to broaden an SME’s business knowledge and entrepreneurial skills, applicants can direct their questions and enquiries to SUCCESS’ support services. SUCCESS staff can advise and provide detailed documentation on the particulars of and appropriateness each funding scheme in relation to the SME’s business. 

Entrepreneurs who are not looking to apply to the Hong Kong Government’s SME loan measures will still find SUCCESS relevant. SUCCESS offers consultation services to business starters who seek to understand particulars of running a business such as what business licenses are necessary, how to write a business plan and how to register a company in Hong Kong

With the Coronavirus still prevalent around the world, Hong Kong businesses have been forced to adapt. Cash is the resource that SME’s most require to help them through these troubling times. With the Hong Kong Government committing themselves to providing relief to SME’s, the burden of responsibility lies on the SME’s to take advantage of the SME funding schemes offered.

Fastlane Group
Fastlane Group