Hong Kong 's Special Loan Guarantee Scheme Extended

by Mary Swire, Tax-News. com, Hong Kong

30 October 2009

Hong Kong’s Trade and Industry Department has announced that the special loan guarantee scheme’s application period will be extended for six more months, to June 30, 2010.

The government's total loan guarantee commitment under the scheme will remain at HKD100bn (USD12.9b). So far, it has been disclosed, 46 participating lending institutions have joined the scheme. The department has approved 22,341 applications involving a total loan amount of HKD53.5bn.

The applications approved cover a wide spectrum of companies and industries in the manufacturing and non-manufacturing sectors. These firms hire more than 250,000 employees and 95% of the beneficiaries are small and medium enterprises.

According to the Trade and Industry Department, as the economic outlook in the coming months remains uncertain, it is necessary to extend the scheme for another six months to provide continued support for local companies. The application period was scheduled to end on December 31.

Under the scheme, the Government provides an 80% guarantee ratio for loans with a repayment period of up to five years, granted by the participating institutions, in order to help with liquidity problems.

The personal guarantee is required of the enterprise owner or, in the case of a limited company, shareholders together holding more than 50% of the equity interest of the enterprise; the enterprise must have no outstanding default; and the loans should not be used for repaying, restructuring or repackaging other loans.

The maximum loan amount for each enterprise is HKD12m, out of which up to HKD6 million can be used as a revolving credit line. With the exception of listed companies, all registered companies with substantive business in Hong Kong which has been operating for more than one year as at December 15, 2008, are eligible to apply.

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