Hong Kong Funding for SMEs

15 minute read

Based on a number of factors, Hong Kong has been recognized as one of the leading business hubs in the world. This region is so attractive when it comes to doing business that hundreds of entrepreneurs decide to set up their businesses or branch out in Hong Kong every year.

However, something that attracts serious business people is the Hong Kong funding support that can be acquired by businesses. The Hong Kong government puts in a lot of effort to make the business environment of this region even better. That is why Hong Kong’s authorities offer government funding schemes, programs, and accelerators for startups, medium-sized businesses, and even already established Hong Kong enterprises.

Factors To Consider When Applying For Government Funding Schemes

As a business owner, it is up to you to prepare properly for the business environment of Hong Kong. One major part of this is evaluating all important factors when applying for government grants, funds, and other types of financial support that are supposed to help your business.

Keep in mind that the type of funding you can get will vary depending on the type of your business, industry, and business goals. In other words, not all businesses can apply for every type of grant.

Business Structure

If you have a small business, the chances are that you will seek a Hong Kong small business grant. A small business grant is, in its essence, an amount of money given to a small business owner for free. Its purpose is to help an individual launch, develop, or expand their business. Contrary to a loan, a grant does not have to be paid back but often come with restrictions regarding how the money can be spent. Bear in mind that just because a grant is ‘free’ money, it does not mean that it is easy to acquire. A serious entrepreneur takes decent amounts of time and all the necessary measures to prepare well before applying for a grant.

Know that these grants are highly competitive, so make sure to apply only for grants that you are eligible for. Furthermore, you can seek a wide range of grants. Some are private grants from corporations, while some come from the Hong Kong government. This means that the government funding is not the only source of money to look for. There are private organizations that offer various grants too.

Nature & Industry Of Business

The process around a business grant is a long and complex process. Therefore, it is important that you only apply for the ones that are specific to your industry.

This is the first parameter when narrowing down the list. Select a few grants, and check the details and deadlines of each grant carefully. If you meet the general industry requirements, go an extra step, and make sure your goals are aligned with those of the government grantor.

As a business, the organization awarding a grant has to be aware of the problem you are trying to solve using the selected grant. Additionally, you should research similar problems that are being solved by other businesses and the amount invested. This will help you prove eligibility in landing the grant.

Finally, once you find a grant that suits your business well, the next step simply requires you to verify that your organization can meet the grantor’s required conditions.

Your Business Objectives

It is of the utmost importance to check if the funding opportunity is well-aligned with your business objectives and the general business mission. It happens quite often that businesses only see money and they completely forget about their core mission. Do not sacrifice your business mission just to get a grant.

If you decide to sacrifice your mission for money, you might find yourself in a difficult spot struggling to explain what you do and why you want to do it. On top of that, funders can see through a business’s request when it does not align well with their stated mission, so keep that in mind as well.

Types of Hong Kong Government Grants that SMEs Can Apply For

There are numerous different grants for different businesses and the government even offers various schemes for non-profit organizations.

SME Government Grants – Financing & Guarantee

  • The first one to look for, if you need this type of grant, is the SME Loan Guarantee Scheme. This scheme helps SMEs land loans from participating lending institutions for acquiring business installations and equipment or for meeting the working capital requirements for general business.
  • The next funding scheme worth mentioning that belongs to this category is the Microfinance Scheme. This scheme was designed to assist people that wish to start their own business or become self-employed. If you want to improve your current skills through training, this might help you achieve that too.

SME Government Grants – Market Development

  • The first grant from this category that should be mentioned is the SME Export Marketing Fund since it is the most prominent grant of this kind. This SME fund is designed to encourage SMEs to expand markets outside of Hong Kong. This is achieved by participating in export promotion activities.
  • Another similar grant is the one provided by the BUD fund. This is a fund created only for branding, upgrading, and domestic sales. In case you need improvement in these areas, the BUD Fund will assist you.

SME Government Grants – Retail Technology Adoption

  • The Retail Technology Adoption scheme is an assistance scheme for manpower demand management. It is designed to support retail enterprises to adopt technologies for manpower demand management purposes.

SME Government Grants – Research & Development

Let’s move on to grants that are designed to support research and development (R&D).

  • The most notable grant of this kind is the Innovation and Technology Support Programme (ITSP). It is designed for local public research institutes and R&D Centers to get aid for the research and development efforts.
  • A good alternative to the ITSP is the Partnership Research Programme (PRP). The PRP supports research and development projects too.

Enterprise Support Scheme (ESS)

This funding scheme is designed to stimulate the private sector to invest in research and development for locally incorporated companies.
Its key features include the following:

  • The support scheme provides funding support on a dollar-for-dollar matching basis.
  • Its maximum funding support stands at $10 million per project.
  • Its maximum project duration is 24 months.
  • The intellectual property rights stay with the recipient company.
  • The recoupment of the government’s contribution is not necessary.
  • It is not mandatory to share commercialized research and development results.

Grants Facilitating Technology Adoption

In case you are looking to improve productivity or upgrade the business processes in your company, one of the best ways to get aid is to apply for the Technology Voucher Programme (TVP). Bear in mind that the Innovation and Technology Commission has relaxed the restriction pertaining to related entities for the TVP.

Related entities, defined as organizations set up as different legal entities but having the same persons holding 30% or more ownership in each organization are no longer treated as one single entity for the purpose of calculating the cumulative funding amount under the TVP. This change came into effect in August 2020.

Patent Application Grant

If you have an invention that you want to show to the world, this grant will help you do that. It is designed to assist both local companies and individuals to apply for patents or their own inventions.

All applications for functional patents and inventions with technology elements and potential industrial application are eligible. Cosmetic designs will not be supported.

The implementation agent of this support scheme first conducts a patent search and technical assessment to ensure that there is a chance of acquiring a patent before the whole procedure takes place.

Hong Kong Grants To Consider

There are a number of excellent grants that should be considered but bear in mind that these are designed to support the growth of competitive industries. In other words, these revolve around high-potential industries and they are allocated to businesses that show signs of prosperity.

Hong Kong’s Export Marketing Fund (EMF)

The Hong Kong Export Marketing Fund (EMF) aims to provide financial support to SMEs in export promotion activities. This grant is also supposed to encourage companies to expand their business operations across borders.

To apply for this SME funding support option, your business must have a physical office in Hong Kong. If it is in the manufacturing sector, your business has to employ at most 100 locals, while non-manufacturing companies need to have a maximum of 50 locals.

It is possible to apply for up to HK$800,000 in total funding support. Half of this sum can go to the development and improvement of company websites along with mobile applications.

The online process comprises of a few steps:

  1. Filling in the government e-form
  2. Uploading the necessary documents in the e-form and submitting them
  3. Getting the ‘Declaration for Application’ from the portal, signing it, and including a company stamp
  4. Submitting the Declaration for Application to the SME Export Marketing Fund Branch of the Trade and Industry Department

SME Loan Guarantee Scheme

Since we are facing a global pandemic that is already affecting economies all around the world, it is definitely worth checking out this support scheme. It is designed for small and medium-sized companies that are facing cash flow issues due to the economic effects of the COVID-19 outbreak.

If your business aims at applying for an SGS grant, it has to be an SME (based on the Government of Hong Kong SAR standards), it has to have a big part (if not all) of its operations in Hong Kong (registered under the Business Registration Ordinance), and it must not be associated with the PLI.

To apply for an SGS grant, make sure to apply for a Business Installations and Equipment Loan or a Working Capital Loan from a PLI. A bank shall then determine if your enterprise is qualified for the loan. Finally, if it is approved, the SME pays guarantee fees to the bank.

Social Innovation & Entrepreneurship Development Fund (SIE Fund)

The Social Innovation and Entrepreneurship Development Fund (SIE Fund) was created to provide resources to organizations that deal with poverty and social exclusion through innovative solutions.

The SIE Fund is allocated through a number of different intermediaries that administer programs in the priority fields of Capacity Building and Innovative Programmes. This support scheme is a 3-month program that supports early-stage social enterprises looking to grow and scale their impact on poverty alleviation.

The program is looking for organizations that support poverty alleviation in one or more ways, have at least two full-time co-founders, and have already launched their services or at least have prototypes of those products or services.

Innovation and Technology Fund (ITF)

They are mainly applied to support R&D projects executed by universities, industry support organizations, industry and trade associations, or private sector companies that contribute to innovation and technology upgrading in the industry in Hong Kong.

The schemes below are the ones covered by the ITF Hong Kong:

  • Innovation and Technology Support Programme (ITSP)
  • Guangdong-Hong Kong Technology Cooperation Funding Scheme (TCFS)
  • Partnership Research Programme (PRP)
  • Enterprise Support Scheme (ESS)
  • Research and Development Cash Rebate Scheme (CRS)
  • Midstream Research Programme for Universities (MRP)
  • Public Sector Trial Scheme (PSTS)
  • Technology Voucher Programme (TVP)
  • Researcher Programme
  • Postdoctoral Hub
  • Reindustrialisation and Technology Training Programme (RTTP)
  • Technology Start-up Support Scheme for Universities (TSSSU)
  • The Innovation and Technology Venture Fund (ITVF)
  • General Support Programme (GSP)
  • Patent Application Grant (PAG)

Keep in mind that there are no application fees for these grants by the Innovation and Technology Fund.

Hong Kong SME Financing Guarantee Scheme (HKSFGS)

The Hong Kong SME Financing Guarantee Scheme (HKSFGS) was introduced by the Hong Kong Mortgage Corporation Insurance Limited. This scheme was launched to absorb some of the economic effects felt by companies in the last several months.

Under the scheme, the guarantee commitment has been increased to HK$50 billion. Eligible SMEs receive a maximum loan amount of HK$4 million and can benefit from the principal moratorium arrangement for the first year.

To qualify for the loan, your business must be at least three months old (and operating as of December 2019). To be eligible, a business needs to prove at least a 30 percent decline in sales turnover.

SMEs from all sectors are eligible to apply, especially those most impacted by the coronavirus outbreak. These include retail outlets, travel industry agencies, restaurants, cinemas, entertainment facilities, and transport operators. The total loan amount guaranteed by the Hong Kong government is HK$20 billion.

Bear in mind that the HKMC Insurance Limited has released guidelines for three different Guarantee Products.

Wrap Up

It is clear that setting up a business in Hong Kong is never a bad idea, not even in trying times such as the ones we are going through now.

As an entrepreneur, you can set up a company easily, enjoy various grants, pay lower taxes (compared to the rest of the world), and you will always be protected by the region’s fair and transparent legal system.

If this sounds like a good idea, feel free to reach out to Sleek. Our incorporation services are there for you every step of the way to help and guide you through the business development process.

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