Small and medium-sized enterprises or SMEs have a crucial role in driving economic growth by fostering innovation, creating jobs, and opportunities. However, one of the toughest challenges for SMEs is having the necessary capital for company needs such as paying employees, business expansion, buying equipment, and other vital needs. Small and medium enterprise loans provide a valuable solution, providing financial support that can bridge cash flow gaps, manage unexpected expenses, and invest in bigger opportunities. Understanding SME loans can help you in taking your business to the next level.
SME Financing Guarantee Scheme
The SFGS, SME Financing Guarantee Scheme administered by the HKMCI, Hong Kong Mortgage Corporation Insurance Limited, provides government guaranteed financing to SMEs with various products, categorized by percentage of guarantee coverage. Starting from SFGS 80 (80% guarantee), SFGS 90 (90% guarantee), and SFGS 100% (Special 100% loan guarantee).
The SFGS 100% offers eligible businesses to borrow according to rent for a certain period, sum of wages, or HK$9,000,000, whichever is lower. The repayment process can be extended to 10 years, with an annual interest rate equal to the Hong Kong Prime Rate minus 2.5%. After the loan drawdown from the government, borrowers can take the option to pay interest only for the first 12 months.
Boost SME with Guarantee Loans
There are several reasons why guarantee loans can boost SMEs. Let's see what are the important reasons why you should start thinking about small and medium enterprise loans.
-
Easier access to capital
Guarantee loans help SMEs with easier access to financing by reducing the lender's risk. Because a portion of the loan is guaranteed, businesses that still do not have sufficient credit history or that still cannot have secure funding due to limited collateral can still have their loan applications accepted.
-
Lower interest rates
With financial institution guarantee backing up the loan, lenders are willing to offer lower interest rates. This will help SMEs to get higher fees, because the overall cost of borrowing has been reduced. Businesses can focus on investing more in operations and any kind of growth.
-
Stimulate business growth
With capital through guarantee loans, SMEs can have sufficient funds to purchase equipment, business expansion, hire additional staff, or conduct research and explore new markets. This small and medium enterprise loans can directly support business growth and development.
-
Government and institutional support
Guarantee loans from government programs are specifically designed to support small and medium sized businesses. These programs aim SMEs to have access to the capital needed, and boost local economies because they can expand the market, increase job creation, and business stability.
-
Creditworthiness
If a business can successfully manage a guarantee loan, it will improve an SME's credit rating. This will open any financing opportunities with more favorable terms, allowing businesses to manage future projects with new loans with ease.
Is it easy to get loan guarantee in Hong Kong?
Obtaining a small and medium enterprise loans is accessible but still depends on a variety of factors such as loan types, business' financial health, and the guarantee program you choose. Businesses must meet some criteria, such as being registered in Hong Kong, having no more than 100 staff and being in good financial standing. Businesses with less established credit can still get SME financing guarantee schemes as long as they meet the basic requirements.
A Guide to SME Loans in Hong Kong for Business Growth
If your business has good financial health and a solid track record such as strong profit margins, revenue, or a clear business plan, you can easily qualify for loan guarantees, whether from private lenders or government schemes. Good personal and business credit history also improves your chances of getting a loan guarantee. If your business has poor credit history, the application may be more challenging, but government-backed schemes may be an option for you, or hire a professional to help you apply for a loan.
Even with a 100% guarantee loan, the business that takes the loan must still be responsible for repaying the loan. If the business defaults, the government will cover the loan, but the business will receive legal action and face financial consequences.
100% government guarantee for SME loans
The 100% government guarantee for SME loans makes SMEs securing loans during times of crisis or economic distress. This guaranteed loan ensures that small and medium sized business enterprises can continue their operations and meet other critical expenses in any conditions. Only SMEs registered and operating in Hong Kong are included in the eligible criteria, that business can demonstrate a viable business model and the ability to repay the loan, plus is in good financial standing.
The loan amount can vary depending on specific terms and lenders involved. Generally, businesses can apply for loans up to a capped loan amount or a certain percentage of their annual turnover, sometimes in the range of a few million Hong Kong dollars. The repayment terms have a grace period for businesses starting to repay the loan, ranging from 12 to 24 months, and a repayment period up to 5 years with some flexibility, depending on agreements with the lender and the loan's purpose.
Prepare standard documentation such as business registration details, proof of business viability, financial statements, and credit score if any. You can do quick access to the loan application or with expert help, especially when your business is experiencing difficulties and needs urgent support.
HK Financing Solutions: SMEBro
SMEBrother is the strongest backing for corporate financing, as an SME financing consultant and your bank financing expert. We have exclusive service features that accurately interpret the market, match the needs of the enterprise with customized financing strategies, and efficient implementation to help you seize development opportunities with low risk.
SMEBro is ready to become your professional consultants follow up to provide comprehensive support from financial statements to negotiation offense and defense! Get instant access to free one on one consultation to know the loan amount you can borrow, or we will tailor a loan plan for you, and quickly open up the capital chain.
