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HKMC Signs SME Financing Guarantee Scheme

by Mary Swire,, Hong Kong

15 December 2010

The Hong Kong Mortgage Corporation Limited (HKMC) has held a signing ceremony for its guarantee scheme, which was first announced last month and will assist local small and medium-sized enterprises (SMEs) to obtain sustainable local bank financing.

The SME Financing Guarantee Scheme, to be launched on January 1, 2011, aims to assist non-listed enterprises with business operations in Hong Kong to obtain loans from banks so as to provide general working capital for their business operations or to acquire equipment and assets. In order to qualify for the Scheme, firms must be at least one year old and have a good loan repayment record.

Under the scheme, the HKMC will provide guarantee coverage on 50%, 60% or 70% of the bank financing for eligible enterprises. The maximum loan amount for each enterprise or each group of enterprises under the cover is HKD12m (USD1.54m), with both term loan and revolving credit facilities being eligible. The maximum guarantee period for each loan facility is five years, and the minimum annual guarantee fee will range from 0.5% to 2.5% of the loan facility.

During the signing ceremony, however, the HKMC announced that there will be a guarantee fee promotion for the first six months after the launch of the scheme. Loans with a tenor of one to three years will be granted a waiver of three months’ guarantee fee, while loans with a tenor of more than three years and up to five years will be granted a waiver of six months’ guarantee fee. The promotional period will end on June 30, 2011.

It was further disclosed that a total of 21 banks have signed a letter of intent expressing their interest in joining the scheme.

Norman T.L. Chan, the Chief Executive of the Hong Kong Monetary Authority and Deputy Chairman of the HKMC, said: “The HKMC’s SME Financing Guarantee Scheme offers extensive and flexible guarantee coverage to help SMEs in Hong Kong obtain more sustainable bank financing for their daily operations or purchase of equipment.”

He also added that the “Scheme will help banks manage their lending risks more effectively – the banks can meet the financing needs of SMEs without having to warehouse excessive credit risks.”

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TAGS: business | law | banking | financial services | small and medium-sized enterprises (SME) | Hong Kong | services

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