Securing the right financing is crucial for small and medium-sized enterprises (SMEs) for growth and sustainability, where Hong Kong has a competitive business landscape. With the many needs of SMEs such as expanding operations, launching a new product, or navigating cash flow challenges, SME loans can provide the capital needed to move forward with confidence. SMEBrother will guide you to explore the key loan options available in Hong Kong, and choose the best financing solution for your business goals.
How does an SME loan work?
An SME loan is useful for small and medium-sized enterprises with access to financing that helps them to manage or grow their business. Once you have a loan purpose, you must submit the application process by preparing several pieces of information, such as a business registration certificate, financial statements, bank statements, a business plan, and personal and business credit history. Some government-backed programs, like the SME Financing Guarantee Scheme (SFGS), facilitate businesses by offering partial guarantees to banks, lowering the risk for lenders.
Loans for Bad Credit Score in Hong Kong
Once the application is approved, the loan terms are outlined, including loan amount, interest rate, repayment period, and collateral requirements. The funds will be disbursed to the business account, and repayment usually begins the following month, with fixed monthly installments. Lenders will monitor you and have to carry out regular updates or proof that the loan is used according to the loan purpose.
How is interest applied to an SME loan?
In Hong Kong, interest on SME loans is calculated using annual percentage rates (APR) based on either a fixed or floating structure, depending on the loan type and the lender. There are several interest rate structures in Hong Kong you need to know:
-
Fixed rate loans
The interest rate remains constant throughout the loan term, more often for smaller or short-term loans. For example: 6% p.a. fixed over 24 months.
-
Floating rate loans
Interest is linked to a benchmark rate, which can be the Prime rate (set by banks, might be around 5-6% as of 2025), or the Hong Kong Interbank Offered Rate. The rise or fall loan rate depends on market conditions. You need to expect the actual loan rate from the benchmark plus margin, for example Prime + 1.5% = Total interest rate of 7.5% p.a.
-
Government support
If you are applying for an SME loan from SFGS, the Hong Kong Mortgage Corporation (HKMC) offers a guarantee to banks, and this will reduce the bank's risk and some cases can lead to lower interest rates. Even though the interest rates still follow Prime + margin, the margin can be more favorable because of government support.
How late can an SME loan payment be?
The lateness tolerance for SME loan payments depends on the terms set by the individual lender. We can only know general standards and consequences. For a typical grace period, most banks and lenders allow 7-15 days after the due date. Each grace period is not guaranteed and may vary depending on your loan agreement.
After the grace period, a late payment fee usually applies. The amount depends on a fixed fee or a percentage of the overdue amount, for example, 2-5%. Double-check your loan terms, as some lenders may charge penalty interest, and the rates can be significantly higher than the original loan interest rate. If you are more than 30 days late in paying, your credit record may be reported, and can affect the company's and the guarantor's credit rating, impacting future financing options.
If the payment is 60-90 days overdue, the loan is considered in default. The lender can recover any collateral, personal guarantees, or begin legal action. If you get a loan through the SME Financing Guarantee Scheme, the guarantee may be called upon, but the borrower is still liable.
Tips for SME borrowers
Since Hong Kong's banking system is very credit-score sensitive, you need to avoid credit problems or letting it become a legal issue. Contact your lender immediately to request restructuring or deferment. If your business is facing short-term hardship, ask the bank if there are temporary relief options available.
How much can you get from an SME loan?
The amount you can get from SME loans depends on several factors, including your financial health, business size, collateral, and the type of loan program. For unsecured or secured bank SME loans, the loan amount range is typically HK$100,000 to HK$6 million. Secured loans with collateral may go higher, depending on your asset value.
For government-backed loans - SFGS, the 100% loan guarantee product loan amount is up to HK$9 million, or up to 27 months of wages and rent, which is ever lower. The term is up to 5 years, and the interest is Prime-based, usually 2.5%.
For general business financing or 80%-90% Guarantee Products, the loan amount is up to HK$18 million, combined loan limit per borrower and the term is up to 7 years.
Lenders will determine the loan amount after they assess your business revenue and cash flow, creditworthiness of the business, loan purpose, collateral for secured loans, and existing debt obligations.
SMEBrother one-stop-solution for SME loans
SMEBrother is a trusted, one-stop solution for SME loans in Hong Kong, simplifying the financing process so you can focus on growing your business. Whether you're a startup needing working capital or an established company planning to expand, SMEBrother connects you with the most suitable loan options from a network of leading banks and financial institutions. With expert guidance, fast application support, and transparent comparisons, SMEBrother eliminates the uncertainty and delays often associated with traditional loan applications.
With us, you can not only handle business loans but also solve all kinds of business problems for you. We cover business growth, opening a new company in Hong Kong, open Hong Kong bank account, accounting, auditing, expanding your business, handling tax issues, and many more. Multiple services are available on demand, and a professional team will accompany you throughout the process. Contact SMEBrother now and solve all your business problems with us!
