Some legislators expressed concern yesterday over the safeguard measures for a proposed HK$10 billion loan-guarantee program to help small and medium-sized enterprises (SMEs) get through the financial crisis.

In a meeting of the Legislative Council's Commerce and Industry Panel, they said the measures proposed by the government demanding that applicants meet certain requirements are overly rigid, and they feared some SMEs wouldn't be able to meet the conditions.

The program, proposed Monday, aims to help between 11,000 and 15,000 SMEs secure loans. The government will guarantee up to 70 percent of the value of the loans given to SMEs by financial institutions.

To keep businesses from abusing the plan, SMEs would likely be required to have operated for at least a year and not have defaulted on other loans. And loan recipients wouldn't be allowed to pay off other loans with their new one.

Import and export sector legislator Wong Ting-kwong expressed concerns that poorly performing SMEs, whose owners don't have assets to serve as the loan security, may not benefit from the plan.

"Some companies of the service industry are losing money, and they are on the brink of collapse," Wong said, adding that the banks may not give loans to those companies.

Industrial sector Legislator Lam Tai-fai said it isn't fair for SME owners to be required to use personal assets as loan security.

"It is a heavy burden on SMEs," he said. "The banks have already demanded the SMEs use equipments and manufacturing premises as the security.

"If they need to use their personal assets as security, they will be forced to declare bankruptcy if they fail."

Secretary for Commerce and Economic Development Rita Lau insisted that the safeguard measures are necessary, but she added that the government and the Hong Kong Monetary Authority will discuss the issue with banks and handle each case individually.

Lau said the government may consider expanding the loan guarantees and inject more capital if the business sector welcomes it.

(HK Edition 11/13/2008 page1)