New SME loan scheme takes effect on 29 March

The enhanced scheme will raise maximum loans and repayment period.

The enhancements to the Special 100% Loan Guarantee scheme for small and medium enterprises (SMEs) will take effect starting 29 March, the Hong Kong Mortgage Corporation Insurance (HKMCI) said.

The scheme, under the SME Financing Guarantee Scheme, is intended to alleviate cash flow pressure on SMEs affected by the COVID-19 pandemic. The application period will be open until 31 December.

Under the enhanced loan guarantee scheme, enterprises that have operated for at least three months as of 30 June 2020 are considered eligible, provided that they suffered at least 30% decline in sales turnover since February 2020 compared with the monthly average of any preceding quarter from early 2019 and mid-2020.

In the previous version, eligible enterprises should have been operating at least three months since end-2019, whilst the sales drop should have been at least 30% in any month since February 2020 compared with the monthly average of any quarter in 2019.

The changes in the Special 100% Loan Guarantee Scheme were proposed during the 2021/22 Budget statement to extend low-interest loans amongst other forms of assistance to help the industry recover.

The enhancements also include raising the maximum loan per enterprise to the total amount of employee wages and rents for 18 months, or $6m, whichever is lower.

The earlier version only accounted for 12 months’ worth of wages and rents, or $5m, whichever is lower.

“If an enterprise does not have employees as well as business premises, the calculation can be replaced by half of the maximum monthly net income during the period from early 2019 to mid-2020,” the HKMCI noted.

The maximum repayment period of guaranteed loans will be increased to eight years from five years, previously, whilst the principal moratorium arrangement will be extended to 18 months from 12.