Policy Address 2025: Hong Kong relaxes loan application period alleviating capital pressure for SMEs

Hong Kong to reduce capital pressure for Small and Medium-sized Enterprises by extending principal payment as well as application for guarantee products, said John Lee Ka-chiu during his fourth Policy Address speech on Wednesday.

Application period for principal moratorium arrangement and 80% of Guarantee Products under the SMEs Financing Guarantee Scheme will be extended for one year and two years, respectively, said Lee.

“The biggest problem SMEs face is that they have no way to borrow money,” said Cheung Ki-ling, Associate Professor in the Department of Information Systems, Business Statistics & Operations Management at Hong Kong University of Science and Technology. He explained that the decrease in customers and consumption has led to a decrease in income, so they have less to pledge as collateral, making it difficult for banks to lend them money.

“(These policies) give companies more opportunities to obtain government-guaranteed loans,” wrote Tam Yiu-chuen Sam, Steering Chairman of the Hong Kong Federation of Commerce for Small and Medium Enterprises, in a written response. He explained that the measures allow SMEs longer timeframes to apply for funding while easing their capital pressure.

Previously, the government’s policy had postponed the application for principal moratorium for up to 12 months in November 2024. As of March 2025, the number of small and medium-sized enterprises was 356,128, according to the government website.

However, Cheng Chung-pong, chairman of the Hong Kong Small and Medium Enterprises Association, called for more measures to support local SMEs.

"The support for our small and medium-sized enterprises is not that great," said Cheng. "On the contrary, I have seen a lot of mention in the policy on how to help mainland businesses." 

“I think the government and banks still need to review which industries truly need priority support, to prevent the number of bankruptcies from increasing,” said Cheng.

Hung Si-gaai, vice-general manager of PuraPharm Corporation Limited, a local Chinese medicine formula granules business, said many policies favour emerging enterprises and technology companies. She felt that the Policy Address offered little support for relatively mature companies like hers. 

Cheung explained that the government does not want companies to go bankrupt, which is why they ask them to pay the interest first. He said this is just delaying the problem, but he thinks it is hard for the government to do more due to fiscal constraints.