SME Loan in Malaysia: What Is It and How Can It Help You?

SME Loan in Malaysia is a powerful tool that can assist your organization in not only surviving but also developing in today’s ever-changing business environment. Whether you want to establish a business, accelerate expansion, or fund prospects, most SME Loans in Malaysia can meet your needs and financial objectives.

What is an SME Loan?

A Business Loan is a financial product that banks and some financial institutions offer to help businesses fund their operations and grow. These loans provide a lump sum amount of money that the business will have to repay over a set period of time with interest.

SME Loans, on the other hand, are business loans that cater specifically to small and medium enterprises. 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.

That is to say, SME loans in Malaysia usually provide a smaller loan amount, with an easier application process and more favorable conditions compared to traditional bank loans. In short, if your business fits the criteria as an SME, then SME loans in Malaysia might be the best solution for your business’s financial needs.

How Does SME Loan in Malaysia Can Help You?

SME Loan can help you in a lot of ways, depending on what your business needs. It can help you start new ventures, fund ongoing operations, and even optimize the financial stability of your company.

1. Grow New Ventures using SME Loan in Malaysia

Starting a new venture requires a huge amount of money to invest in. For a small business, it is often hard and challenging to find the capital needed to fund these new operations. Hence, SME Loan in Malaysia can provide the much-needed assistance for you. You can utilize them to kickstart a new venture, starting from financing the essential costs such as renting a new office/business space, purchasing inventory and items, and hiring employees. Therefore, aspiring entrepreneurs like you can apply for an SME Loan provided by these financial institutions to turn your aspirations into reality.

2. Fund Business Expansion with SME Loan in Malaysia

Businesses will not only have to survive. They need to grow over time to keep up with the growing needs of their customers. As the market grows, businesses will need to expand by introducing new products, or offering new services. These efforts will require a substantial amount of money. Fortunately, SME loans can help bridge this financial gap by providing the necessary funds to finance your business expansion.

3. Better Cash Flow

Having a loan will also smooth out your cash flow. Cash flow, especially for small companies, is subject to fluctuations and irregularities due to payment terms from the customers. If a small company is awarded from government agencies or other big awarding companies, invoice payments can take up to 90 days. This is where SME Loans in Malaysia can come in handy. They can bridge the gap between these payments. Thus, it will help your company to manage your cash flow much more efficiently. Alternatively, small companies can opt for invoice factoring from third-party financial institutions too. Read more on that here.

4. Utilizie Opportunities using SME Loan in Malaysia

Oftentimes throughout your company’s life, you will face several opportunities that cannot be missed. These once-in-a-lifetime opportunities can be crucial to your company’s growth. However, sometimes it needs a lot of capital investment to fully utilize the opportunity. This is where SME Loans come in. They provide additional capital to your company. This is so that you can grab these opportunities and make the most out of them. For example, the opportunities could be the chance to buy valuable pieces of equipment in bulk at a discount. It can also mean securing a strategic location for a new store or investing in a new market trend.

Types of SME Loan in Malaysia

1. Term/Fixed Loan

This is the most popular sort of business loan offered by banks and financial organizations. It provides a large sum of cash upfront that you repay with interest over a set length of time (e.g., three or five years). However, the interest rate can be either fixed or varied. When the interest rate is fixed, the term loan is commonly referred to as a fixed loan.

2. Business Premises Financing

Next, if your business is looking to purchase or re-establish commercial property, then this type of loan might be the perfect one for you. For example, you can use it to finance the purchase or building of your office, warehouse, or retail space.

3. Equipment Financing

Third, as the name implies, this loan assists firms in financing the purchase of necessary equipment for their operations. This could include machinery, automobiles, software licenses, and other business-critical assets. The equipment itself is often used as collateral for the loan.

4. Export Financing

Next, this specialized loan helps enterprises that engage in international trade. For example, it can assist in financing activities such as pre-shipment expenditures, and receivables financing. They can also help with letters of credit in order to enable the export of goods and services.

5. Bridging Loan

This is a short-term loan intended to “bridge” the gap between your current financial state and a future source of income. In other words, it can help cover unforeseen expenses or short-term cash flow shortages while waiting for customer payments.

6. Business Overdraft Loan

This flexible financing solution enables firms to obtain a pre-approved line of credit. This means you can withdraw cash as needed, up to a specified limit, and pay interest only on the amount used. This is appropriate for meeting short-term cash flow requirements.

7. Blanket Hire Financing

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.

Where Can You Apply for an SME Loan in Malaysia?

1. SME Corp.

Next on the list is SME Corporation Malaysia, which offers the Business Accelerator Programme (BAP), an integrated aid scheme designed to help SMEs, especially micro-enterprises, improve their skills through business consultancy services and financial aid. The program funds several activities to increase capacity, allowing SMEs to expand both locally and worldwide. In addition, BAP provides financial assistance to SMEs through joint grants and simple credit schemes, allowing them to capitalize on new growth prospects. Furthermore, this well-known financial institution, along with SME Bank and Bank Rakyat, oversees the issuance of BAP’s easy loans. Joint grants, on the other hand, are handled entirely by SME Corp. Malaysia.

Aside from SME BAP, SME Corp offers capital funding for micro-businesses through the Micro Biz funding (MBF), Geran Perniagaan Belia Mikro@TUBE, and Bumiputera Enterprise Enhancement Programme (BEEP) PLUS. To learn more, click on each of the following buttons.

2. TEKUN

TEKUN Nasional, originally Yayasan TEKUN Nasional, is an agency under the Ministry of Entrepreneur Development and Cooperatives that provides affordable and quick financial loans to Bumiputera entrepreneurs wishing to start and grow their enterprises.

TEKUN offers a variety of company financing options, including:

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.

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:

Alternatives other than SME Loan in Malaysia

SME Loan is a great way to finance your business due to its relatively more favorable nature for small and medium enterprises. However, suppose you decide not to utilize SME loans in Malaysia for reasons such as disadvantageous repayment terms or unfavorable interest rates. In that case, you can opt-in for other alternatives as well. For example, invoice factoring, pre-financing, and financial advisory are readily available to help your business grow.

1. Invoice Factoring

Invoice factoring is a financing process where a business sells its unpaid invoices to a factoring company. SMEs often opt for invoice factoring because invoices can take a long time to be paid by the contract awarders especially if the contract awarders are government agencies, GLCs, or PLCs. Fortunately, invoice factoring offers a quicker way to obtain the invoice amount. There are a lot of benefits in invoice factoring, including a healthier cash flow for your business and more growth opportunities. You can read more about invoice factoring and how it works, here.

2. Pre-Financing

Pre-financing works similar to how invoice factoring works but instead of issuing invoices after the work is done, pre-factoring is done before initiating the project in order to secure the capital needed to start it. For example, if an amount of RM250,000 is needed to start a particular project, then the financing body will provide the money for your business. Also known as contract financing or supply financing, it usually disburses the capital directly to your suppliers.

3. Financial Advisory

Financial Advisory is also an excellent choice if your company needs additional capital to fund your business. Most financial advisors can connect you with other financial institutions, banks, or investors who are willing to help you and your ventures. They offer valuable financial advice, and can further help you to secure loans to finance your business.

Conclusion

To conclude, SME Loan in Malaysia is a powerful tool for your company to not only survive but also thrive in the ever-challenging world of business. That is to say, whether you want to start a venture, fuel growth, or fund opportunities, most SME Loans can cater to your needs and financial goals. Alternatively, you can opt for invoice factoring, pre-financing, and financial advisory services. Commerze Capital offers these services and is always ready to help you to achieve your dreams and realize your business aspirations.