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November 16, 2010 2:47 AM EST
The Hong Kong Mortgage Corporation (HKMC) will launch the SME Financing Guarantee Scheme from January 1 next year to help local small and medium-sized enterprises obtain sustainable bank financing, Financial Secretary John Tsang announced on Monday.
The scheme helps non-listed enterprises with business operations in Hong Kong obtain loans from banks to provide general working capital for their business operations or to acquire equipment and assets in relation to their business.
Under the scheme, the corporation will provide guaranteed coverage on 50 percent to 70 percent of the bank financing for eligible enterprises. The maximum loan amount for each enterprise or each group of enterprise under cover is $12 million. Both term loans and revolving credit facilities are eligible.
The maximum guarantee period for each loan facility is five years. The minimum annual guarantee fee is 0.5 percent p.a. of the loan facility. There is no upper limit in the total guarantee amount.
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"There are over 280 000 SMEs in HK with over 1.2 million employees," Tsang said in a statement. "They comprise an important segment of our local economy."
The SME financing guarantee scheme is a market-oriented program providing a sustainable and flexible financing platform for SMEs to meet their financing needs.
"This will help strengthen the partnership between banks and SMEs. By supporting banks to lend to SMEs, the SME Financing Guarantee Scheme will further enhance the stability of the banking system and complement the SME Loan Guarantee Scheme of the Industry & Trade Department, producing an even greater benefit for Hong Kong as a whole," Tsang said.
Monetary Authority Chief Executive and Mortgage Corporation Deputy Chairman Norman Chan said helping SMEs obtain sustainable bank financing is one of the key factors that helped Hong Kong weather the recent global financial turmoil, leading to earlier recovery of the local economy and employment.
"With the expiry of the Government's Special Loan Guarantee Scheme, it is timely for the Mortgage Corporation to launch this new guarantee scheme which will help SMEs obtain sustainable bank financing."
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