The Bank of East Asia (BEA) has become the second bank to set up a fund for loans to small and medium-sized businesses, announcing that HK$1 billion will be earmarked to support the government's special loan guarantee scheme. 'We may increase the top limit [of the fund] if needed,' said Adrian Li Man-kiu, the bank's general manager and head of the corporate banking division. The bank said priority would be given to applications relating to the new small and medium-sized enterprise loan guarantee scheme, announced by Chief Executive Donald Tsang Yam-kuen on Monday, under which banks can offer local firms loans of up to HK$6 million with the government guaranteeing 70 per cent. Mr Li said the interest rates would be lower than normal. The bank's move comes four days after HSBC committed HK$4 billion for loans to local SMEs as part of a US$5 billion global fund to give struggling firms access to credit. BEA said all loan applications would be processed within three business days. It has set up a telephone hotline for SMEs to inquire about the scheme. Ken Chiu Siu-kan, vice-chairman of the Hong Kong Association of International Co-operation of SMEs, welcomed BEA's move to set aside HK$1 billion for loans. But he was worried that small companies in the service sector, which may want to get unsecured loans, would be unable to obtain them from banks.