The Hong Kong General Chamber of Commerce (HKGCC) has welcomed the recently announced Finance Guarantee Scheme for small and medium-sized enterprises.

Earlier this month, the Hong Kong Mortgage Corporation Limited (HKMC) announced that on January 1, 2011, it would be launching a guarantee scheme to assist SMEs in obtaining sustainable bank financing.

The SME Financing Guarantee Scheme is designed to provide assistance to non-listed enterprises with business operations in Hong Kong to obtain loans from banks, providing general working capital for their business operations or helping them to acquire equipment and assets in relation to their business.

In order to qualify for the Scheme, firms must have been in operation for at least one year, 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 (USD1.5m), 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.

Commenting on the planned launch, Chief Executive of the Hong Kong Monetary Authority and the Deputy Chairman of the HKMC, Norman Chan observed that SMEs represent "a cornerstone of the Hong Kong economy", and explained that:

“With the expiry of the government's Special Loan Guarantee Scheme, it is timely for the HKMC to launch this new guarantee scheme which will help SMEs obtain sustainable bank financing."

Commenting on the initiative, the HKGCC described it as "timely", and suggested that it would likely play a valuable part in helping SMEs cope with the current economic uncertainty.

Chamber Chairman Anthony Wu stated that:

"The Chamber has been tirelessly advocating for consistent and enhanced government efforts to assist SMEs in their financing. At a time when quantitative easing in the US is adding more uncertainties to the global economy, the new Scheme is a much-needed and welcome initiative."

The launch of the new Finance Guarantee Scheme will follow the expiry of the Special Loan Guarantee Scheme which expires at the end of 2010.