Business Loans in Malaysia: Everything You Need to Know

Equipping yourself with knowledge of business loans in Malaysia is crucial, especially if you own a business or planning to start one. This is because, every Malaysian business, from established enterprises to growing startups, needs money to thrive. They need access to capital to fund operations, pay employees, maintain livelihood, or expand their business. This is where business loans come in, providing a crucial financial boost to fuel your ambitions. However, navigating the world of business loans can seem intimidating and confusing with too much and too little information to go on. This comprehensive guide will equip you with the knowledge to apply for business loans in Malaysia confidently.

What is a Business Loan?

A business loan is a financial product that banks and some financial institutions offer to help businesses grow. These loans provide a lump sum of money that you repay with interest over a set period. That is to say, business loans in Malaysia can be important for various purposes, such as:

By choosing the right loan and utilizing the funds effectively, you can help your business grow exponentially. In other words, identifying what your business needs is just as important as it can help you choose what type of business loans you should apply for. Business loans in Malaysia can come in different types, catered to different needs and purposes.

Types of Business Loans in Malaysia

1. Term/Fixed Loans

This is the most known type of business loan provided by banks and financial institutions. It provides a lump sum of cash upfront that you repay with interest over a fixed period of time (e.g., 3 years, 5 years). However, the interest rate can be varied or fixed. If the interest rate is fixed, the term loan is often referred to as a fixed loan.

2. Business Premises Financing

Secondly, this loan is specifically designed to help businesses acquire or renovate commercial property. For example, it allows you to finance the purchase price or construction costs of your office, warehouse, or retail space.

3. Equipment Financing

Thirdly, as the name suggests, this loan helps businesses finance the purchase of essential equipment for their operations. For instance, this could include machinery, vehicles, software licenses, or other business-critical assets. The equipment itself often serves as collateral for the loan.

4. SME Loan

Next, this category of loans caters specifically to small and medium-sized enterprises (SMEs). That is to say, this also means that SME loans typically offer smaller loan amounts, easier application processes, and potentially more favorable interest rates compared to traditional term loans.

According to the SME Bank’s website, SMEs are defined as businesses with sales turnover not exceeding RM50 million OR full-time employees not exceeding 200 workers for the manufacturing sector. Meanwhile, for services and other sectors, SMEs are defined as businesses with sales turnover not exceeding RM20 million OR full-time employees not exceeding 75 workers. In other words, SME loans can be more beneficial for your business especially if you fit the criteria as an SME. Read more on how SME loans can help your business here.

5. Export Financing

Next, this specialized loan supports businesses involved in international trade. For example, it can help finance activities like pre-shipment costs, receivables financing, and letters of credit to facilitate exporting goods and services.

6. Business Overdraft Loan

This flexible financing option allows businesses to access a pre-approved line of credit. This means that you can withdraw funds as needed, up to a certain limit, and only pay interest on the amount utilized. This is suitable for managing short-term cash flow needs.

7. Bridging Loan

Next, this is a short-term loan designed to “bridge” the gap between your current financial situation and a future source of income. In other words, it can help cover unexpected expenses or temporary cash flow gaps while waiting for payments from customers.

8. End-Financing

This type of loan is commonly used in the property development sector. It’s designed to bridge the gap between a developer’s expenses and the sale of completed properties.

9. Blanket Hire-Purchase

Finally, this financing option allows businesses to acquire multiple assets under a single loan agreement.  Therefore, instead of separate loans for each piece of equipment, you can finance various items with a single loan, simplifying the process and potentially offering more favorable terms.

Why Should You Apply for Business Loans in Malaysia?

Businesses should apply for business loans for a variety of reasons, depending on your needs and purposes. In other words, business loans can help your business achieve growth and stability, or overcome challenges. Here are some of the top reasons why you should apply for a business loan.

1. Fueling Growth

Business loans can provide a significant injection of capital that can be used for various growth opportunities. For instance, this could include venturing to new locations, purchasing new equipment, investing in marketing and advertising, or developing new product lines. Without a loan, these investments might be hard to achieve and can affect the business’s potential.

2. Managing Cash Flow

Businesses often experience fluctuations in their cash flow. Sometimes, businesses have to wait for payment from their customers. Fortunately, a business loan can bridge temporary gaps and ensure smooth day-to-day operations. In other words, this is particularly helpful for covering unexpected expenses or fulfilling large orders that require upfront payment.

3. Starting a Business

Launching a new venture requires a significant initial investment. Business loans can help cover essential costs like renting a space, purchasing inventory, hiring employees, and covering marketing expenses. Therefore, this allows aspiring entrepreneurs to turn their ideas into reality without needing to rely solely on personal savings.

4. Taking Advantage of Opportunities

Businesses may encounter unexpected opportunities that require quick action. Therefore, a readily available business loan allows them to seize these opportunities without waiting to save enough capital. For example, the opportunities could be the chance to purchase valuable equipment at a discount, secure a prime location for a new store, or invest in a promising new market trend.

5. Building Credit History

Responsible repayment of a business loan helps establish a positive credit history for the company. Therefore, this can be beneficial in the future when seeking additional financing or applying for credit cards with better terms. However, you have to make sure that your company will be able to repay the loans applied to reap this benefit. Otherwise, applying for a loan you cannot repay will backfire on your business.

To conclude, getting business loans in Malaysia can be beneficial (or even crucial!) for the growth of your business. It can provide significant assistance and help ease some, if not most, of your company’s financial burdens. You can read more on how business loans can benefit your business in this article. Now, let’s move on to where you can apply for a business loan in Malaysia.

Where Can You Apply for Business Loans in Malaysia?

There are a lot of banks and financial institutions, whether government-backed or even private that offer business loans. That is to say, it is important to identify the right institutions for your financial loans depending on your needs and the nature of your business. For example, some financial institutions backed by the government are purposely for helping SMEs and some for new business. In other words, finding the right institutions can help your business find the most suitable business loans for you so that your business has the right financial backing and can grow further. Here we list some of the business loans from government-backed financial institutions.

1. TEKUN Nasional

TEKUN Nasional, formerly Yayasan TEKUN Nasional, is an agency under the Ministry of Entrepreneur Development and Cooperatives that provides easy and quick financial loans for Bumiputera entrepreneurs looking to set up and improve their businesses.

There are several business financing schemes provided by TEKUN among others:

2. PUNB

Secondly, The National Entrepreneurs Corporation Berhad (PUNB) offers various financing initiatives such as PROSPER Financing which is a shari’ah-based financial product. PROSPER is then distinguished into different financing schemes depending on the business needs. PUNB also offers corporate development and entrepreneur development training programs like the JUMPER Program. Furthermore, some of the participants of these programs are then eligible to apply for other financing schemes like JUMPER Financing, specifically for their JUMPER Program alumni. Click on the buttons below to learn more about their financing schemes.

For more information, visit the Official Portal of the National Entrepreneurs Corporation Berhad (PUNB).

3. TERAJU

Next, the Bumiputera Leadership Agenda Unit (TERAJU) is a strategic unit in the Prime Minister’s Department of Malaysia that leads, spurs, and coordinates Bumiputera’s participation in the nation’s economy in line with the National Transformation Plan.

Click on each of the buttons to learn more.

Visit the official TERAJU portal to learn more.

4. MARA

Majlis Amanah Rakyat (MARA), offers business financing schemes of up to RM5 million. MARA offers several schemes based on the type of business.

Some of the financing schemes provided by MARA are as shown below. Click on each of the buttons for details on each scheme:

5. SME Corp.

Next on the list, SME Corporation Malaysia provides the Business Accelerator Programme (BAP) – an integrated aid scheme to increase the capabilities of SMEs, including micro businesses, business advisory services as well as financial aid. The program supports a variety of initiatives to raise capacity to allow SMEs to grow locally and internationally. In addition, BAP also offers financial aid through joint grants and easy loan schemes to enable SMEs to celebrate new expansion opportunities. Furthermore, this famed financial institution, along with SME Bank and Bank Rakyat, handles the disbursement of BAP’s easy loans. Joint grants, on the other hand, are handled solely by SME Corp. Malaysia.

Other than SME BAP, SME Corp also provides capital financing for micro-businesses such as the Micro Biz Financing (MBF), Geran Perniagaan Belia Mikro@TUBE and Bumiputera Enterprise Enhancement Programme (BEEP) PLUS. Click on each of these buttons to learn more.

Visit the Official Portal of SME Corp. Malaysia for more information.

How to Apply for Business Loans in Malaysia?

Applying for a business loan involves careful preparation and proper planning. To help you get through this complicated endeavor, here’s a step-by-step guide to increasing your chances of success:

1. Determine What You Need from Business Loans in Malaysia

Firstly, clearly define the purpose of the loan and why you need it. In other words, plan properly and forecast the impact of the business loans on your business including their pros and cons. Furthermore, check your company’s budget and calculate the exact amount you require and make sure that the amount is enough to take care of whatever you need it to but not too much that it will burden you in the future.

2. Choose the Right Business Loans in Malaysia for You

Second, compare offerings from various banks and financial institutions. Consider factors like interest rates, repayment terms, and eligibility criteria. Then, choose the one that caters to your business goals and the nature of your business. You can also try getting multiple opinions from professionals or maybe even hire a financial advisor.

3. Gather the Required Documents to Apply for Business Loans in Malaysia

Next, prepare all necessary documentation, such as business registration, financial statements, tax returns, and personal identification for directors.

Here’s a list of common documents required when you apply for a business loan:

• Section 78 and Section 51 or Form 24 of the Companies Act
• Section 46(3) or form 44 of the Companies Act
• Section 14 and Section 58 or form 49 of the Companies Act
• Form 32(a) of the Companies Act
• Form Annual Return
• Memorandum of Article Association (MNA)
• Audited Account of three(3) years
• Bank Statement of six(6) months
• MOF Certificate
• I/C of Director
• A copy of Director, Shareholder and Management Team Profile
• A copy of Letter Offer (LO) from other Banking Facility (If any)
• Company Profile
• A copy of Estimated Project Cash Flow*
• A copy of Quotation from Supplier*
• Copies of Contract or Tender*

*Only if your company is a construction company. However, do take note that this list of documents is just a guide and may not reflect the real documents required by different banks in Malaysia.

4. Submit and Follow Up on your Business Loans Applications

Lastly, submit your application with all supporting documents and follow up with the lender to ensure they have everything they need. If you are missing anything important, provide and update them on the required documents promptly. Late documents often lead to late application approvals.

How can Commerze Capital Help You Apply for Business Loans in Malaysia?

Financial Advisory Service

Commerze Capital offers financial advisory services to help you grow your business and overcome your financial burdens. In other words, you may discuss all your financial issues with us and get help resolving them while catering to your specific financial needs. We are professionals in providing advice on making sound credit decisions to avoid getting caught in a complicated situation. Furthermore, instead of going bank by bank or institution to secure a business loan, our financial advisory team can help you secure business loans in Malaysia without all the complications you have to endure. Our team has vast networks with bankers and over-reaching connections with different banks and financial institutions.

Conclusion

Business loans in Malaysia can be a great way for businesses to get the capital they need to grow and succeed. There are a variety of different types of business loans available, so it is important to choose the right one for your needs. For example, some of the things to consider include the interest rate, repayment terms, and eligibility criteria.

In conclusion, besides the various government-backed financial institutions offering business loans, Commerze Capital can be your one-stop solution for securing financing in Malaysia. We provide financial advisory services to help you navigate the complexities of business loans in Malaysia. Our team of experts can assess your specific needs and recommend the most suitable loan option. We can also help you gather the required documents and even connect you with our network of bankers, helping you secure the loan that will fulfill your business needs. This can save you significant time and effort compared to approaching banks and institutions individually.