Date
17 November 2017
Jackey Chu, managing director of Bibby Financial Services (Asia) Ltd., says Hong Kong SMEs can only approach banks for financing under a government guarantee scheme. Photo: HKEJ
Jackey Chu, managing director of Bibby Financial Services (Asia) Ltd., says Hong Kong SMEs can only approach banks for financing under a government guarantee scheme. Photo: HKEJ

Factoring services propel growth of Hong Kong SMEs

Small and medium enterprises (SMEs) form a vital component of Hong Kong’s business force. There are about 330,000 SMEs in Hong Kong which account for 98 percent of the total business units, creating job opportunities for 1.3 million people, as of June 2017. They constitute about 46 percent of total employment excluding the civil service, according to the Hong Kong Standard Industrial Classification (HSIC) from the Census and Statistics Department.

In her maiden policy address, Chief Executive Carrie Lam Cheng Yuet-ngor proposed new taxation measures, among which the tax rate for the first HK$2 million of profits will be halved to 8.25 percent from 16.5 percent.

The tax cut is no doubt good news for SMEs. Nonetheless, SME owners in general don’t think the government is offering them much support in other areas.

In a survey conducted by Bibby Financial Services Group (BFS) in September, only 21 percent of Hong Kong’s SMEs find the Hong Kong government policy favorable to their businesses compared with 78 percent of Singapore SMEs that found their government supportive.

Jackey Chu, managing director of Bibby Financial Services (Asia) Ltd. said a possible reason for this gap in attitudes toward government policy is stringent requirements and compliance for Hong Kong’s SMEs to get financing under government guarantee schemes.

Chu said that in Hong Kong, SMEs can only approach banks for financing under a government guarantee scheme. While there is a similar program in Singapore, that program includes both bank and non-bank financial institutions such as factoring houses, which are more flexible.

Regarding the accessibility of finance, 19 percent of Hong Kong SMEs rated poor, compared to just 9 percent in Singapore.

Meanwhile, a global SME survey, which covered 1,600 SMEs, found 55 percent of respondents named collecting payment from customers on time as the most problematic part in managing cash flow.

SMEs in Singapore and Hong Kong showed the longest waiting period for payment from their customers, spanning 45 days and 41 days, respectively.

BFS’ business is precisely focused on tackling this issue. Bibby Financial Services (Asia) Ltd., the Hong Kong branch of BFS, derives most of its revenue from different service charges of its factoring services.

SMEs can get immediate cash advance up to 90 percent of an invoice value, minus a service fee, from BFS (Asia), which also provides collection services, credit insurance and online accounts receivable management.

“In terms of our clientele, the trading sector takes around 30 percent, manufacturing around 40 percent, the rest from the servicing sector,” said Chu. He said the servicing sector includes recruitment, information technology, logistics and cleaning service fields. In particular, Chu noted a growing trend in the recruitment industry in Hong Kong.

Others SME challenges

According to the survey, 49 percent of all the SME respondents regarded inadequate skilled staff as the biggest challenge to their business, followed by rising overheads or costs (48 percent), and government regulation or legislation (44 percent).

In the case of Hong Kong, half of the SMEs surveyed considered rising overheads the biggest challenge to their businesses over the coming 12 months.

Chu said cost, comprising office rent, labor costs and raw materials, is the most pressing issue currently confronting local SMEs.

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JC/RT/RA

EJ Insight writer

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