Medium-sized industrial companies facing a shortage of bank loans should look instead to refinancing themselves through private equity sales, according to Horwath Capital Asia managing director Francis Kung Tung. Speaking at a Federation of Hong Kong Industries-sponsored seminar, the firm said the difficult borrowing conditions did not have to be a burden on companies. Mr Tung said medium-sized family-controlled companies were often loathe to seek outside equity help for fear of diluting their stake. He said the benefits from increasing their shareholder base far outweighed the negative factors. Higher gearing, interest costs and capital repayments from bank borrowings slowed growth, he said. The capital could otherwise be used to expand net asset value and to create shareholder value, he said. 'People have to understand that having a relatively smaller stake in a company with a high market value is much better than having a 100 per cent stake in a low market-value company,' Mr Tung said. He said there were about 70 to 80 specialist direct investment funds in the SAR, the largest of which were from HSBC and Citibank. Besides institutions, Mr Tung said there were many local companies looking to expand their exposure by taking stakes in competitors or related companies. Private equity placements best fit growing companies within two to three years of qualifying for a stock exchange public listing, he said. Peter Wong, executive director at LK Machinery, a private firm which completed a $50 million private placement through Horwath earlier this year, said the firm hoped to use the experience gained from their placement to help towards a listing in the next several years.