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FAQs on SME Loans & Financing

    What information would I have to provide to the financial institution to obtain a credit facility?
      Most financial institutions would have an application checklist that lists out the documents required. You should ask the financial institution for their checklist.
    Would I be able to get financing if I am going into a business for the first time?
      Financial institutions are in the business of providing financing and will consider granting loans to any business which is viable even though it is a new business. However, financial institutions will look at the track record of the company or the applicant's personal accounts when reviewing a loan application.

    Why does a financial institution need a business plan? Who can assist me to prepare a business plan?
      In a business plan, the financial institution can obtain information regarding the business of the borrower such as background of the borrower and the industry, the financial position of the borrower, the business projection of the borrower, business strategies and operational requirements of the borrower. You should ask your financial institution for assistance in preparing the business plan if you have difficulty in preparing one. Almost all commercial banks have a dedicated Small and Medium Enterprises (SMEs) Unit which were established to attend to the needs of the small and medium enterprises which can provide such advisory service.

    Do I need to provide financial institutions with a business plan for small amount of loans such as a loan of RM10,000?
      The need for a business plan depends on the financial institution concerned. You should consult your financial institution on the matter.

    Will the chances of small and medium enterprises obtaining loans from financial institutions diminish if there is no collateral?
      No. The purpose of asking for collaterals is to ensure that borrowers are committed to repay the loans taken. The main criteria financial institutions look into in assessing a loan application is the viability of the business of the applicant.
    What if financial institutions insist on collateral?
      To assist viable small and medium enterprises with insufficient collateral, the Government has established the Credit Guarantee Corporation to provide guarantee on loans taken from financial institutions. The guarantee will supplement the collateral requirement which may differ from financial institution to financial institution. Currently the Credit Guarantee Corporation manages six guarantee schemes, details of which can be obtained at
    What are the reasons for a financial institution to reject a loan application?
      Common grounds for declining credit applications include:

      Applicant does not have ability to repay the facilities applied for
      Purpose of borrowing not in line with facilities applied for
      Unsatisfactory financial results of the applicant

      Applicant has other substantial borrowings resulting in high gearing (i.e. amount of loan is higher than capital)

      Unsatisfactory conduct of current account by the applicant
      Unsatisfactory repayment records with other lenders
      Applicant has cases which are pending legal action
      High business risk such as over dependence on single buyer or supplier

      Lack of financial commitments from business owners (i.e. not willing to commit additional working capital)
      Weak management of the applicant

      Sole proprietor/partners/directors/shareholders/guarantors etc. facing bankruptcy actions from other parties
      It is a requirement by Bank Negara Malaysia that financial institutions should inform the borrowers formally in writing, clearly identifying the areas in which the borrower failed to satisfy. This will ensure that the borrowers are aware of the reasons for the rejection as well as assist the borrower to improve in the areas concerned for future loan applications.
    Can I apply for loans with more than one financial institution?
      Yes. However, you may be charged a processing fee if you do not accept the loan when it is approved.
    What can I do if the financial institution rejects my loan application?
      Every financial institution has its own set of credit guidelines and credit evaluation criteria. When a financial institution conveys its decision to you and the reason(s) for the rejection, you should liaise with the institution to see what you can do in order for them to reconsider your application and thereafter, take necessary action to meet the financial institution's requirements. Alternatively, you can apply for a loan from another financial institution.

    Can a financial institution reduce the amount of credit facility (e.g. overdraft facility, trade lines) granted to me earlier?
      All financial institutions carry out periodical review of their credit portfolio and based on their assessment, may decide to reduce the credit exposure to any borrower. Financial institutions may do this for several reasons including non-utilisation of the facility (overdraft and trade lines) or bad conduct of the account (overdraft).

      This right is normally provided for in the letter of offer or other loan documents. However, financial institutions would normally convey their decisions to reduce the credit facility to the borrower in advance to enable the borrower to make alternative arrangements. Not withstanding that, a financial institution may consider any appeal/request from borrower to reinstate the credit facility if the situation merits it.

    I have difficulty in meeting my current repayment but I can afford a lower repayment. What should I do?
      You can approach your financial institution and request to restructure or reschedule your loan. This will usually be in the form of a lower monthly instalment and extending the repayment period of the loan. However, you must provide your financial institution with full facts of your financial position to enable them to assess your position.
    Where can I lodge a complaint against my financial institution?
      All banking institutions have been required by Bank Negara Malaysia to establish a complaints unit within their respective institution. You should first try to resolve your complaint with your financial institution. However, if you are still not satisfied with the reply, you can refer your problem to Bank Negara Malaysia. For matters relating to Bumiputera business loans, you can also refer your problem to ERF Sdn. Bhd. (a special-purpose vehicle established by Bank Negara Malaysia to undertake the role of a one-stop centre on Bumiputera financing issues).
    Where can I get financial advisory services relating to my business needs?
      Almost all commercial banks have established a dedicated Small and Medium Enterprise (SME) Unit that provides financial advisory services to small and medium enterprises. In addition, Bank Negara Malaysia has established a SME Special Unit to assist viable small and medium enterprises through providing information on the various sources of financing available, facilitating the loan application process, addressing difficulties faced by small and medium enterprises in securing loans from financial institutions and providing advisory services. The unit can be contacted at:

      Development Finance and Enterprise Department
      Level M Block C
      Bank Negara Malaysia
      Jalan Dato' Onn
      50480 Kuala Lumpur
    What is the function of ERF Sdn. Bhd.?
      ERF Sdn. Bhd. is a one-stop center established by Bank Negara Malaysia to provide financing and advisory services to Bumiputera small and medium enterprises.

    How can I get access to special funds by the Government / Bank Negara Malaysia?
      The special funds provided by the Government/Bank Negara Malaysia are channelled to the public via financial institutions, collectively known as participating financial institutions or the respective agencies appointed by the Government. The criteria and objectives of the funds including the lending rates are set by the Government/Bank Negara Malaysia who will monitor the utilization of the funds.

    What are the roles of the participating financial institutions with respect to the special funds?
      The roles of the participating financial institutions are to evaluate the loan applications and determine the eligibility as well as the viability of the projects to be financed by the applicants. Small and medium enterprises should submit their loan applications for the special funds through the participating financial institutions.

      Although the loans are fully funded by the Government/Bank Negara Malaysia, the decision to approve or reject a loan application is at the discretion of the participating financial institution concerned since the credit risks are borne by the participating financial institution. In addition, the participating financial institutions also administer the repayments from the borrowers.
    Are there specific forms to be completed when applying for special funds?
      No. There are no standard forms for these funds. Applicants should use the application forms issued by the respective participating financial institutions.

    What if the applicant does not meet the collateral requirement imposed by the participating financial institutions?
      The requirement for collateral is based on the credit assessment and the applicant's risk profile. The main criterion is project viability. Other factors, such as applicant's character and integrity, capacity to repay, capital commitment and condition of the business, will also be considered. The participating financial institution may also reject the application if it does not contain sufficient information for a credit assessment to be made. To assist the small and medium enterprises, the Credit Guarantee Corporation also provides several credit guarantee schemes for the benefit of applicants with little or no collateral.

    Since the funds are provided by the Government / Bank Negara Malaysia, are the customers required to repay the loans?
      Customers are contractually bound to repay their loans. This is especially important to enable the Government/Bank Negara Malaysia to continue to assist deserving customers as the size of funds will be depleted if borrowers fail to repay their loans. A borrower will need to sign a loan agreement which will spell out the terms and conditions including actions which the participating financial institution may take in the event of default.
    Can I get a new loan if my existing loan has been classified as non-performing?
      An adverse credit record would affect the credit evaluation of your loan application. You should discuss the matter with the financial institution concerned and work out a repayment scheme with the financial institution. Once your account has been regularized, your credit record will reflect an improved position.
    Why do financial institutions require three years financial statements?
      Financial institutions usually request three years financial statements to enable them to make comparisons in determining the trend of the business growth to assess the borrower's repayment capability.
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