The Government today welcomed the approval of a concessionary low-interest loan guarantee commitment of $20 billion by the Legislative Council Finance Committee.

Under the Commerce & Economic Development Bureau’s SME Financing Guarantee Scheme, the Government will provide a 100% guarantee for approved loans taken out by eligible enterprises.

Loans that originate from banks will be transferred to the Mortgage Corporation after drawdowns, and all default risks will be borne by the Government with a 100% guarantee, greatly enhancing the chances for businesses in securing loans.

The Government plans to roll it out within April to provide timely assistance to tide over enterprises during this difficult time.

Secretary for Commerce & Economic Development Edward Yau said the COVID-19 infections have dealt a severe blow to the economic activities and business sentiment in Hong Kong.

He noted that many enterprises suffer from a further plunge in business turnover, resulting in a liquidity problem. The situation is particularly acute amongst the small and medium enterprises.

Mr Yau emphasised that there is an urgent need to further enhance the assistance to SMEs to reduce business closures and layoffs.

He said application requirements and procedures have also been simplified and that banks simply need to check loan applicants’ eligibility when processing applications.

With a low interest rate fixed at prime rate minus 2.5% per annum, guarantee fees waived and an option for a principal moratorium for the first six months, the new guarantee product will alleviate the burden of SMEs, he added.

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