Small and medium-sized enterprises (SMEs) will be able to borrow up to $8 million from today to finance their businesses under an extension of a government-backed loan scheme. However, industry representatives still say many SMEs will have to meet stiff criteria for loans. 'We think the extensions to the scheme are good, but it is still too difficult for some companies to borrow money from banks,' said Hong Kong SME Association chairman Simon Shi Kai-biu. 'When banks consider SME loan applications, they will lend if either the company is performing financially, or if the company does not have any active orders for its products [such as when it first starts up],'' Mr Shi said. 'If companies are both performing financially and have active orders, why would they need to borrow?' The SME Loan Guarantee Scheme, which replaces the SME Business Installations and Equipment Loan Guarantee Scheme, will also allow companies to borrow an additional $2 million to finance their day-to-day expenses and to factor their accounts receivable. The government will guarantee up to half of each loan for a maximum of two years. The amount allowed to be borrowed for big-ticket items has gone up from $2 million to $4 million, while the government guarantee period for those loans will be extended from three to five years. In November last year, the government came under fire from law-makers who highlighted the plight of some SMEs that were forced to finance their working capital by borrowing from loan sharks at exorbitant rates. In June 2000, the Hong Kong Monetary Authority released a survey on SME funding that indicated there was a gap between SMEs' demand for bank credit and the supply of funds by banks. SMEs complained that banks generally adopted conservative lending policies. The Monetary Authority also noted that falling property prices during the Asian financial crisis had made it difficult for SMEs to obtain bank finance. While SMEs are smaller than companies listed on Hong Kong's stock exchanges, the 300,000 SMEs in Hong Kong are considered to be the backbone of the economy, so much so that since 2001, the government has committed $7.5 billion to four lending schemes for SMEs.