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Applications for Government guaranteed loans start on May 5

Applications for full Government guaranteed low-interest loans under a $3.5 billion scheme will be accepted from next Monday (May 5) until July 31.

Announcing details of the scheme today, a Government spokesman said that the scheme aims at providing short-term cash flow relief to certain industries which are experiencing serious cash-flow problems as a result of the significant business downturn since the outbreak of the Severe Acute Respiratory Syndrome.

"The scheme will also help preserve jobs as loans under the Scheme must be used to pay staff salaries," the spokesman added.

The following businesses are eligible for applying for loans under the scheme:

  • Restaurants and hotels: restaurants, fast food shops and other eating and drinking places licensed by the Food and Environmental Hygiene Department, as well as hotels and guesthouses licensed by the Home Affairs Department.
  • Travel agents and tourist coach operators: travel agents licensed by the Registrar of Travel Agents, and tourist coach operators licensed by the Transport Department.
  • Retail: all businesses with fixed premises and primarily engaged in the businesses of selling tangible goods/products to the general public as end-users or consumers rather than for resale purposes. Establishments must have more than half of their turnover derived from sale of such tangible goods/products.
  • Cinemas and Karaokes: All cinemas licensed under the Places of Public Entertainment Ordinance and karaoke establishments regulated under the Karaoke Establishment Ordinance.

Except for restaurants, all companies under the above mentioned industry categories should have been operating and holding a valid Business Registration Certificate for one year in order to qualify. For restaurants, the qualifying operation period is six months.

Applicants can be sole proprietors, partnerships or corporations. Companies which are listed on the Stock Exchange of Hong Kong Ltd, whether on the Main Board or the Growth Enterprise Market, or similar exchanges in Hong Kong or any overseas exchanges are not eligible under the Scheme. There is no restriction as to the minimum or maximum number of employees.

Applicants are expected to provide evidence to show that they have suffered from at least 30% decline in sales receipt in April this year as compared with the monthly average of the previous three months.

The guarantee ceiling for each application will be:

  • $1 million for restaurants and hotels
    (per business premise)
  • $500,000 for travel agents and tourist coach operators
    (per business premise)
  • $300,000 for retail businesses, cinemas and karaoke
    establishments (per business premise)

Subject to the specified limits, an applicant can apply for a loan covering three months of his firm's salary payments. Interest shall be charged on the loan at the rate of three percent per annum below the prime lending rate as quoted from time to time by the lending institution, and such interest shall be payable monthly in arrears.

The lending institutions will offer a six-month grace period for repayment of the principal of the loan. The loan shall be repayable from the 7th month on a reducing balance basis after the date of initial drawing over a maximum of 24 monthly instalments.

There will not be any charges or fees, except normal tariff charges in relation to the loan disbursement methods, e.g. setting up of autopay accounts.

Applicants should approach their lending institutions where they maintain their operating account for application forms and details of the supporting documentation required. They can also browse the website of the Hong Kong Association of Banks for such details from May 1.

As the loans will be solely used for payment of staff salaries, applicants will have to produce a statement of the employers' contribution to the Mandatory Provident Fund Scheme or Occupational Retirement Schemes as proof of employment relations and the size of workforce.

Each application will require a personal guarantee from the establishment's shareholder. If there is more than one shareholder, a joint guarantee for the full amount of the loan will be required from shareholders holding a total of 90% or more equity in the business. Such guarantors should be the beneficial owners of the business.

Once the loan is approved by the lending institution, all drawings shall be paid to the respective payroll accounts of the applicant's employees and/or by way of money orders/cheques drawn in favour of the relevant employees of the applicant. In the latter event, proceeds of the drawing will only be released after presentation by the applicant of cheques payable to employees which the lending institution will then pay into the employees' respective accounts.

The Labour Department will upload a list of participating lending institutions onto its homepage on Friday (May 2) afternoon. This list will be updated from time to time.