More than 1,250 small and medium-sized enterprises are likely to benefit from the $2.5 billion credit guarantee scheme each year.
The Trade and Industry Bureau told the Legislative Council panel on trade and industry that the maximum guarantee for each company was $2 million or 50 per cent of the approved loan, whichever was less.
Under the scheme, the Government will act as a guarantor for the loans. The scheme is one of the nine measures announced by Tung Chee-hwa last month to ease economic problems.
The bureau said all companies registered in Hong Kong were eligible to apply. The scheme is scheduled to be operational next month.
To increase the liquidity of the banking system, the Government would also, if requested, deposit with the bank an amount equivalent to the guarantee.
The administration is also willing to accept a spread of three per cent between the interest a bank charges successful applicants and the interest it pays to the Government for the deposit.
A ceiling of $200 million will be imposed on each participating bank.
The scheme will be discussed by the Legco panel today.