The Hong Kong Mortgage Corporation Limited ("HKMC") launched the SME Financing Guarantee Scheme ("Scheme") in January 2011. The Scheme aims to help small and medium-sized enterprises and non-listed enterprises obtain loans from participating lenders such as banks for meeting their business needs so as to enhance their productivity and competitiveness in the rapidly changing business environment. Under the Scheme, the HKMC will provide guarantee coverage on 50%, 60% or 70% of the loans to eligible enterprises.

Eligible enterprises must have business operation in Hong Kong and be registered in Hong Kong under the Business Registration Ordinance (Chapter 310). They must also have business operation for at least one year on the date of guarantee application, and have good loan repayment record. Listed companies, lending institutions and affiliates of the lender are not eligible for the Scheme.

The Scheme guarantees both term loan and revolving credit facility. An enterprise can borrow a term loan and a revolving credit facility at the same time. There is no limitation on the proportion between the two types of facilities. The loans must be used for providing general working capital for the enterprises' business operations, or acquisition of equipment or assets in relation to the enterprises' business. Besides, the loans can be used for refinancing of facilities that are guaranteed under the Special Loan Guarantee Scheme offered by the Hong Kong Government through the Trade and Industry Department upon expiry of such guarantee.

Each enterprise or each group of enterprises can borrow not more than HK$12 million under the Scheme and the maximum loan tenor is five years. In general, the Scheme mainly covers loans with interest rate up to 10% per annum. But it will also consider applications with interest rate exceeding 10% per annum on a case-by-case basis. Enterprises should consult their lenders as the interest rate level is decided by the lenders.

In general, the annual guarantee fee ranges from 0.5% to 3.2% of the loan amount / credit limit. Enterprises can pay in one lump-sum upfront or make annual payments. Enterprises can make reference to the Scheme's guarantee fee calculator available here and consult their lenders for the details.

Enterprises should contact the participating lenders to discuss their financing needs. The participating lender will assess the application based on its lending criteria and the financing needs of the enterprise.

If there is a need to apply for a protection under the Scheme, the participating lender will submit the application together with necessary information and supporting documents regarding the enterprise, its subsidiaries and related companies and, where appropriate, the personal guarantor(s) to the HKMC.

An overview of the application procedures for the Scheme is available here.

Please note that the HKMC's receipt of an application does not necessarily mean that an approval to provide a guarantee or a credit facility is or will be granted. The HKMC relies on the participating lender to decide whether to grant a credit facility to the enterprise.