SME Funding in Malaysia

What is SME?

Small and medium-sized enterprises, or SMEs, are companies with revenues, assets, or staff counts below a predetermined level.

These companies are frequently seen as the beating hearts of Malaysia’s developing and emerging economies.

SME companies not only create a large number of jobs but also tend to be entrepreneurial in nature, which fosters innovation.

Your company must generally meet two requirements in order to be classified as a SME: your yearly sales turnover and the number of full-time employees you have.

Additionally, this indicates that each economic sector is different:

According to the definition, all SMEs in Malaysia must be registered with SSM or other organizations that function similarly, such as the authorities or district offices for Sabah or Sarawak or the statutory organizations for businesses that offer professional services. 

However, subsidiaries of and publicly traded on the main board business entities are not considered SMEs.

• Main Board companies with a public listing
• International businesses (MNCs)
• GLCs (government-linked corporations)
• Syarikat Menteri Kewangan Diperbadankan (MKDs)
• Government-owned businesses

It is also important to note that, depending on your financial year or accounting period, your company will no longer qualify as an SME if it exceeds the limit set under those two criteria for two consecutive years.

Does SME matter in Malaysia?

Around 98.5% of company enterprises in Malaysia are SMEs, according to research by SME Corporation.

According to the Department of Statistics report from 2019, these SME companies contributed RM552.3 billion, or over 40% of Malaysia’s total GDP, to the nation’s GDP.

Meanwhile, the employment rate for SMEs is rising in Malaysia, where it accounts for 48.4%, or about 7.3 million, of all workers employed by SME businesses in 2019.

SME GDP growth in Malaysia has surpassed the nation’s overall economic growth up until this point, making SMEs one of the most significant commercial organizations in Malaysia.

The challenges faced by SMEs

For many entrepreneurs, starting a business is a significant accomplishment, but keeping one going presents greater difficulty.

Several issues should arise as your company expands, and without the right and necessary remedy, there is a great likelihood that your company will fail.

SME business owners struggle with a number of issues, including a shortage of competent personnel and human resource limitations.

These problems then result in low productivity and low-quality output throughout the management, including production, impeding the future expansion and growth of the business.

The restricted or impossible use of technology in business by SMEs is another problem.

Technology is crucial to one’s business in today’s quickly evolving globalized world. They help you save time and effort and improve the safety of your business.

Since the majority of tasks today require the newest technological equipment, entrepreneurs cannot discount the advantages that technology offers.

Together with the few difficulties already highlighted, the majority of SMEs struggle with a similar problem: a lack of access to cash and financing.

The key component of a business’s ability to expand, cover ongoing expenses, and/or acquire long-term assets is its access to finance.

Without enough funding, SMEs in Malaysia struggle to be profitable, develop effectively, and succeed.

Where can I apply for financial assistance?

Development Financial Institutions (DFI) are another option available to SME business owners besides applying for funding from the market’s commercial banks.

They are financial service providers that provide specialized financial assistance and are supported by the government. 

Take a look at some of the DFIs you have available to you for financial support:

• Bank Rakyat
• Bank Pembangunan Malaysia Berhad
• Agrobank
• SME Bank
• BSN
• EXIM Bank

The government also acknowledges the value of SMEs to Malaysia’s economy.

As a result, they have introduced a number of government grants or incentives over the years to help SMEs with their business endeavors. 

You may want to think about applying for one of the following government grants or funding options:

• Soft Loan Schemes for Services Sectors
• Soft Loan for SMEs
• Tabung Usahawan Siswazah (TUS)
• Young Entrepreneur Fund (YEF)
• Tabung Pembangunan Pengangkutan Awam
• Bumiputera Enterprise Enhancement Programme
• SME Emergency Fund
• Business Start-Up Fund (BSF)
• TEKUN Financing
• Skim Kredit Pengeluaran Makanan (SKPM)
• Rural Economy Funding Scheme (SPED)
• PROSPER Usahawan Muda (PUMA)

Why should I apply for an SME loan?

Applications for SME loans are made for a variety of reasons by aspiring business owners.

Aside from the obvious ones, like launching a firm, other applications are made as a focused financial assistance strategy to finance their subsequent business endeavor.

Let’s look at the following examples:

Situation 1

Haziq recently received his degree from a Malaysian state university. He made the decision to open a vape shop with a friend while looking for a permanent position in his field.

To launch his business, he made the decision to submit an application to the SME Bank Business Accelerator Program. Haziq is permitted to borrow up to RM 1 million at a fixed profit rate for a maximum repayment term of 7 years.

Situation 2

Nadiah is an excellent baker. Moist chocolate cake and chocolate brownies are two of her favourite recipes. She spends her free time baking for her pals while attending a public institution. Her cakes became very popular later.

She started to accept orders twice as often as before, but she is unable to handle them because of a lack of utilities. She submitted an application for Capital by Boost Credit and was successful in starting a small bakery in the Klang Valley.

Situation 3

In rural Selangor, Nazri is the owner of a small farm. He raises a few different vegetable varieties and sells them at the neighborhood market. Fortunately, he received a request for vegetables from a major store.

He was unable to complete the request in a timely manner due to his ability, though. He later sought for an HSBC Working Capital Term Loan for SME and was successful in growing both his farm and his company.