What Is The Advantage of SME Financing and SME Loans ? A Short Introduction to Government and Bank SME Financing and Loan Schemes, Application Processes, Eligibility and Approval Time

Reading time: around 3 minutes

There are a variety of SME financing and SME loan options available in the market, including large personal loans, collateral-free SME loans from banks, the government-subsidised SME Financing Guarantee Scheme, etc. Each of these financing options has its advantages and limitations regarding application threshold, interest rate, fund usage, etc. If you are considering expanding your business or are in need of substantial business capital, you should first identify your business needs and the purpose of the loan, take note of the following information to choose the most suitable SME financing and SME loan option for your company.

What is the advantage of SME financing and SME Loans? A short Introduction to government and bank SME financing and loan schemes, application processes, eligibility and approval time.

Benefits of SME Financing or SME Loans for Business Development

A financing loan refers to the borrowing of additional funds to support a company’s operations or Fixed Asset Investment. Once a more stable cash flow and cash on hand1 is secured, SMEs can enjoy a greater flexibility to expand their business. For example, they can research and develop new products, expand to new markets, enhance productivity, etc., which can then facilitate the company’s growth. 

Identify The Need For Additional Funding Before Deciding on an SME Financing Plan 

Working capital financing aims to help businesses meet their short-term operational needs, such as paying for inventory purchases, rent, wages and other day-to-day expenses. It offers liquidity, and ensures constant operation and cash flow management1. Once SME owners clarify  what the extra capital is for, they can move forward to understand the two main types of financing options: government-guaranteed loan schemes and personal loan.

Overview of Government-Subsidised SME Financing Guarantee Schemes

The SME Financing Guarantee Scheme is a government-guaranteed financing/loan scheme carried out by the Hong Kong Mortgage Corporation Insurance Limited (“HKMCI”), a wholly-owned subsidiary of the Hong Kong Mortgage Corporation Limited (“HKMC”). There are various guarantee products under the scheme which are categorised by the percentage of guarantee coverage: 80% Guarantee (SFGS 80), 90% Guarantee (SFGS 90) and Special 100% Loan Guarantee% (SFGS 100)2

Among them, the Special 100% Loan Guarantee is a product that was specially introduced following the outbreak of COVID-19, with a unique offer to each business enterprise eligible for the guarantee scheme a borrowing limit equivalent to the sum of wages and rents for 27 months, or HK$ 9,000,0003, whichever is lower. The repayment period can be extended to 10 years4. The annual interest rate follows, or is equivalent to, Hong Kong Prime Rate minus 2.5% per annum4.   The government guarantees 100% coverage of the loan, and the borrower may apply to pay interest only up to the first 12 months after the date of Drawdown5

For example, DBS SME Banking’s SME Financing Guarantee Scheme offers up to 42 months in aggregate principal memorandum period allowance6, which aims to ease the capital pressure for SMEs with relatively high cash flow.

Open your DBS Business Account Online and Enjoy Various SME Welcome Rewards^ Open Your Account in as fast as 1 working day***

Eligibility for Government SME Loan Schemes (“SFGS”)

To apply for the 80% or 90% Guarantee Products, as well as the Special 100% Loan Guarantee, the enterprise must fulfil certain criteria. Please click here for details. 

Bank and Government SME Loan Schemes Approval Procedure 

Under normal circumstances, the HKMCI will notify and issue a Notification of Results to the participating lender after receiving the application7. If the application is approved, the company borrower has to wait for the participating lender to prepare the necessary documents for signing. After the participating lender submits the signed documents to the HKMCI, the HKMCI will issue a Guarantee7

Apply for a SME Business Instalment Loan via DBS SME Banking’s Online Loan Application Platform. Preliminary approval in as fast as 3 working days#.
#The preliminary loan amount approval's 3-working day process time is calculated from the first working day after the loan application is submitted. The applicant will be notified individually of the indicative loan approval result in the next working day after the preliminary loan amount approval is completed. The preliminary approval time does not include the approval time from The Hong Kong Mortgage Corporate Limited. The preliminary approval amount of an indicative loan is only applicable to successful submission via online submission in DBS Online Loan Application Platform and fulfilment of all documents and requirements requested by the Bank. Such indicative loan amounts are subject to the Bank’s further approval and final decision, the final decision may be different from the preliminary loan approval8.

Documents Required for an SME Loan Application

To apply for DBS SME Banking’s SME Business Instalment Loan, you will need to submit the following documents8

●    Company registration documents and business profile;
●    Latest financial reports;
●    Latest bank statements and loan information from major Banks (if any);
●    Business owners' information.

Things to Pay Attention to When Applying For an SME Loan

With the many SME financing options available for SMEs, you should pay attention to the features of different schemes when applying for a loan, including the loan amount, interest rate, limitations on fund usage, eligibility, and application deadlines, etc. Click here to learn more about SME financing and loan.

Borrow or not to borrow? Borrow only if you can repay!

DBS Business Account
Open your DBS Business Account Online and Enjoy Valuable Welcome Rewards^. Open Your Account in as fast as 1 working day*** or click here to learn more account features. Now, SME customers can open a DBS Banking business account via either website version or DBS IDEAL Mobile App. Enjoy seamless business banking services anywhere, anytime. With DBS IDEAL Mobile App, you can safely handle everything from filling out application forms, tracking application status, checking approval status, to managing your company's daily financial needs.

^Terms and conditions apply.
*** Account opening can be completed in as fast as 1 working day for Hong Kong-incorporated entities with all shareholder/director/sole proprietor/partner holding a Hong Kong Permanent Identity Card. For Hong Kong-incorporated entities with at least 1 shareholder/ director/ sole proprietor/ partner holding the People’s Republic of China Resident Identity Card, account opening can be completed in as fast as 5 working days. Subject to eligibility and conditions.

1Source:  Forbes - 5 Things Business Owners Should Know About Working Capital Advances (https://www.dbs.com.hk/sme/disclaimer.page?url=https://www.forbes.com/sites/forbesfinancecouncil/2023/08/10/5-things-business-owners-should-know-about-working-capital-advances/?sh=7e7c0cd73b62)
2Source: The Hong Kong Mortgage Corporation Limited - SME Financing Guarantee Scheme Factsheet P.1 (https://www.dbs.com.hk/sme/disclaimer.page?url=https://www.hkmc.com.hk/files/product/6/20231006_factsheet/SFGS%20Factsheet_Eng_Final_clean.pdf)
3Source: The Hong Kong Mortgage Corporation Limited - SME Financing Guarantee Scheme Factsheet P.2 (https://www.dbs.com.hk/sme/disclaimer.page?url=https://www.hkmc.com.hk/files/product/6/20231006_factsheet/SFGS%20Factsheet_Eng_Final_clean.pdf)
4Source: The Hong Kong Mortgage Corporation Limited - SME Financing Guarantee Scheme Factsheet P.6 (https://www.dbs.com.hk/sme/disclaimer.page?url=https://www.hkmc.com.hk/files/product/6/20231006_factsheet/SFGS%20Factsheet_Eng_Final_clean.pdf)
5Source: The Hong Kong Mortgage Corporation Limited - SME Financing Guarantee Scheme Factsheet P.5 (https://www.dbs.com.hk/sme/disclaimer.page?url=https://www.hkmc.com.hk/files/product/6/20231006_factsheet/SFGS%20Factsheet_Eng_Final_clean.pdf)
6Source: DBS SME Banking - DBS SME Financing Guarantee Scheme 
7Source: SME Financing Guarantee Scheme (SFGS) Application Procedures (https://www.dbs.com.hk/sme/disclaimer.page?url=https://www.hkmc.com.hk/files/product_file/6/1051/SFGS%20Application%20Procedures%20202004_Eng.pdf)
8Source: DBS SME Business Instalment Loan

^Terms and conditions apply.
***Subject to eligibility and conditions.

Subscribe to DBS BusinessClass

Stay updated with latest industry trends and insights in Asia, connect with a network of entrepreneurs, and gain access to exclusive event invitations.

How your phone and bank can be your travel bffs

Connect  to thousands of entrepreneurs in Asia

Learn about market trends and insights

Network at exclusive events

Consult global business experts and seasoned advisors

DBS Business Account

Open your account in 3 steps and as fast as 1 working day***