The thing is, it’s the same across the board – if you don’t properly allocate for your student loan repayments, you’d struggle. If you don’t assess your income for property mortgage repayments, you’d struggle. In terms of business loans, if you overoptimistically fail to properly plan your business, there’s a high chance that you would end up struggling, with or without a business loan.
It’s all in the mindset
Despite what one may think, the governmental business loan is not a trap so they can pounce on the opportunity to ruin you should you miss a payment. The fact is that the government needs its citizens to become entrepreneurs to contribute towards the country’s economy.
In 2012, the SME segment in Malaysia contributed 32.7% of Malaysia’s GDP, and our government aims to increase that to 41% by the year 2020. For that reason, Bank Negara Malaysia is facilitating loans with interest rates as low as 4-6%, with rebates from the Credit Guarantee Corp Malaysia Bhd (CGC) of an average of 3.9%. Furthermore, the developmental financial institution aims to provide RM2.7 billion worth of financing this year, exclusively for SMEs.
If you’re currently operating a business already, you might be thinking, “yeah, all well and good, but I don’t actually need a business loan.” It’s no surprise; because if your sales are lagging, you’re either scared to death of the idea of increasing your monthly expenses, or just happy with your current sales because they cover your monthly costs. In that sense, you wouldn’t actually feel the need for more funds. This is where you need to open your mind to the flip side – could you tap on the potential of your business as well as lower costs with more employees and better equipment?
Beyond that, if you had more funds when you started off, would you have gotten a leg-up on your current competitors? Another point to consider is that if your company were registered under ‘sendirian berhad’, the liabilities that would arise should you default on your loan would be limited to your business entity, and not extend to yourself.
Know your industry
In Malaysia, SME funding depends on the nature of the business, in that respective ministries handle financing for those that fall under them. Below is a list of ministries that are involved in funding Malaysian SMEs:
- Ministry of International Trade and Industry (MITI)
- Ministry of Finance (MOF)
- Ministry of Agriculture and Agro-based Industry (MOA)
- Ministry of Science, Technology and Innovation (MOSTI)
- Ministry of Rural and Regional Development (MRRD)
- Ministry of Domestic Trade, Cooperative and Consumerism (MDTCC)
- Ministry of Plantation Industries and Commodities (MPIC)
- Ministry of Domestic Trade Co-Operatives and Consumerism (KPDNKK)
Now, under these ministries, SME funding is further divided into governmental bodies, resulting in quite a few funding schemes, which in turn, provide to the few specific sectors under them.
The reason for this information is that should you be interested in taking up a business loan, knowing which ministry, body and funding scheme you fall under would ease the process. For the full list and further details of available funds, visit www.smeinfo.com.my.
List of governmental financial institutions and schemes by sector
Credit Guarantee Corporation assistance
As mentioned earlier, on top of SME funding, there exists an organisation that provides guarantee service to SMEs, easing the loan process – the Credit Guarantee Corporation, or CGC. With a majority shareholding by Bank Negara Malaysia, the corporation plays a developmental role in assisting SMEs obtain funding from financial institutions through its guarantee schemes.
The organisation assesses an applicant’s risk and credit rating, and subsequently assists in improving creditworthiness and bankability for more favourable financing and credit terms on their own merit. Basically, if you’re not eligible for a loan, these guys can help. On top of that, they provide rebates, easing the burden of loan repayments. For more information on the schemes provided, visit www.cgc.com.my.