21 April 2020
Helping SMEs to market
An ability to adapt to challenges and move forward to seize the opportunities that inevitably appear during worldwide shake-ups is a feature of Hong Kong’s nimble, world-facing economy.
But businesses in the city are currently facing a uniquely demanding set of challenges – the United States-Mainland China trade conflict that started up in 2018, the social unrest which broke out the following year and COVID-19 outbreak that appeared early this year.
Recognising this, the Hong Kong Special Administrative Region (HKSAR) Government has rolled out a series of measures to support enterprises facing operational difficulties, especially since the COVID-19 outbreak which has effectively put many economies across the globe into an induced coma.
Loan guarantee scheme launches
Giving a further boost to small enterprises, HKMC Insurance Limited (HKMCI), a wholly owned subsidiary of the Hong Kong Mortgage Corporation, has announced that the Special 100% Loan Guarantee under the SME Financing Guarantee Scheme (SFGS) will start receiving applications from Monday, 20 April.
HKSAR Financial Secretary Paul Chan said: “I announced the introduction of the Special 100% Loan Guarantee in the 2020-21 Budget, with the objective of easing the cash flow problems of enterprises adversely affected by the COVID-19. In light of the prolonged impact of the COVID-19 on the economy, the second round of the Anti-epidemic Fund further enhances the Special 100% Loan Guarantee, thereby benefitting more enterprises. We believe the launch of the Loan Guarantee will be a timely response to the pressing needs of many enterprises."
HKMCI welcomes all lenders under the SFGS to participate in the Special 100% Loan Guarantee and the following lenders will receive applications: Bank of China (Hong Kong), Bank of Communications (Hong Kong), Chong Hing Bank, DBS Bank (Hong Kong), Hang Seng Bank, Nanyang Commercial Bank, OCBC Wing Hang Bank, Standard Chartered Bank (Hong Kong), The Bank of East Asia and HSBC. Other lenders have indicated their interest in joining.
The Special 100% Loan Guarantee is applicable to all sectors. The loans will be fully guaranteed by the government. Eligible enterprises should have been operating for at least three months as at the end of December 2019, and have suffered at least a 30% decline in sales turnover in any month since February 2020 compared with the monthly average of any quarter in 2019. Interest will be prime minus 2.5 percentage points (which puts the current rate at 2.75%). All guarantee fees will be waived. Loans are capped at the rent and employee wage bill for six months or HK$2 million, whichever is lower. Enterprises may also apply for a six-month principal moratorium to alleviate instant burden on repayment. Subject to approval of funding by the Finance Committee of the Legislative Council, the maximum loan amount per enterprise will be increased to HK$4 million, and the principal moratorium arrangement will be extended to the first 12 months.
The government will further enhance two programmes – the Dedicated Fund on Branding, Upgrading and Domestic Sales (BUD Fund) and the SME Export Marketing Fund (EMF). The Hong Kong Export Credit Insurance Corporation (HKECIC) has also launched a new round of measures to support the export trade of Hong Kong. All the new enhancement measures will be rolled out within this month to provide timely assistance to enterprises.
HKSAR Secretary for Commerce and Economic Development Edward Yau said: “Hong Kong’s economy is in a severe situation. The US-[Mainland] China trade conflict since 2018, the social incidents in the latter half of 2019 and the COVID-19 outbreak together pose unprecedented challenges to the business environment. Notwithstanding that the government has since last year launched several rounds of relief measures and substantially raised funding support to help shore up affected enterprises, having regard to the rapidly deteriorating business environment, we consider it necessary to introduce further support measures to tide enterprises over this difficult time and get well prepared for long-term economic development. The new enhancements represent the government's positive responses to views put forward recently by the business sector.”
For the BUD Fund, the cumulative funding ceilings for each enterprise to undertake projects in the mainland; and projects in other economies with which Hong Kong has signed Free Trade Agreements, were HK$2 million respectively. The government has now removed these two individual ceilings in order that enterprises can flexibly use the total funding of up to HK$4 million to expand into those markets.
Sourcing from cyberspace
Many Hong Kong businesses, especially small and medium-sized enterprises (SMEs), are heavily dependent on overseas trade. Many are dependent on trade fairs and exhibitions to form and strengthen links with buyers and business partners. An abrupt end to travel between countries has led exhibition organisers such as the Hong Kong Trade Development Council (HKTDC) to launch shows into cyberspace.
Mr Yau said enterprises participating in virtual exhibitions organised by government-related organisations or reputable exhibition organisers with good track records will be eligible for funding support under the BUD Fund and the EMF.
Noting that online was the best option to fulfil sourcing needs during the prime global spring sourcing season, the HKTDC has launched its debut Spring Virtual Expo offering a simple and easy one-stop online sourcing experience to connect buyers and suppliers and enable them to do business as usual with a simple click. Readers can check out [http://info.hktdc.com/virtualexpo/] products in a wide range of categories and engage with suppliers before attending the nine physical fairs to be held concurrently in July.
Mr Yau said the HKECIC has immediately implemented a new round of support measures for one year to strengthen support for policyholders, in particular the Small Business Policy (SBP) holders (policyholders with annual sales turnover of less than HK$50 million), providing greater protection to small and medium-sized exporters.
The new measures include free pre-shipment cover on approved buyers for SBP holders in all HKECIC-insured markets, a 20% increase in credit limits of all buyers for SBP holders in all HKECIC-insured markets, with a maximum of HK$5 million.
The HKECIC will also extend the premium payment period for SBP holders for one month, provide them with an extra 20% premium discount which effectively raises the total discount for each SBP holder to 50%, and waive the annual policy fee of HK$1,500 for all policyholders.
The across-the-board the payment period will be extended to 120 days for each approved credit limit (instead of 60 to 90 days). Additional premium payments for changes to payment terms due to buyers' requests as a result of the pandemic situation will be waived. Claims for payments of HK$1 million or less will be handled expeditiously and processed within five days.
Processing claims in cases of payment difficulty will be simplified and flexibility exercised. All policyholders will have an additional 10 free buyer credit assessments.
These HKECIC measures will benefit about 2,600 policyholders, including approximately 1,250 SBP holders.