Last Updated on March 18, 2023 by Aftab Mughal
Getting a business loan in Malaysia is a popular option for any business owner because it can provide them with the capital they need to grow their business. However, before borrowing money from a business loan, it’s important to know how much you’re eligible to borrow.
Each financial institution has its own lending criteria, and the amount you are allowed to borrow will depend on your credit score, the size of your business, your financial history, and other factors. So, it’s important to speak with a financial institution to get an idea of how much you can borrow.
What are the benefits of getting a business loan in Malaysia?
When starting a business, there are a lot of costs to consider. One way to finance these costs is by obtaining a business loan. Business loans are a financing solution that can provide business owners with the capital they need to get their businesses up and running. They can also help businesses grow and promote business expansion with more money to spend on marketing, inventory, and other expenses.
How much can you borrow from a business loan?
Business loans are very versatile. The amount you can borrow for business financing for your business venture depends on the size of your company, annual turnover and various other factors.
If we look at Syarikat Jaminan Pembiayaan Perniagaan’s (SJPP) offerings of Working Capital Guarantee Schemes, small businesses can get apply for anywhere between RM50,000 to RM10 million.
Types of business loans in Malaysia
Grow Your Business With A Business Loan
There are a variety of different business loans available in Malaysia. The most common type is the unsecured business loan, which does not require any form of security or collateral. This type of loan is supported only by the borrower’s creditworthiness instead of collateral. This makes it extremely hard to get approved for this type of loan unless you have a strong credit history.
Another common type of business loan is the secured business loan. This type of loan requires the borrower to give up collateral as a form of security, such as real estate or equipment. One advantage of a secured loan is that it usually has a lower interest rate than an unsecured loan.
There are also a number of government-backed business loans available in Malaysia. These loans are offered through agencies such as SJPP. The advantage of these loans is that they offer lower interest rates and longer repayment periods than conventional loans.
An overdraft loan is a popular option among SMEs. This type of loan allows you to withdraw more than your current account balance to an approved limit by the financial institution.
A fixed loan is similar in nature to a term loan. It is a fixed amount that is granted for a specific amount of time with scheduled payments with interest.
Revolving Credit Loan
A revolving credit loan is a suitable option for short-term capital funding. It is popular because it provides flexible fund withdrawal whenever you need and you can repay it through monthly instalments or partial repayment of the principal amount.
Financial Guarantee Loan
In the event of a default, this loan offers a financial guarantee which includes a performance guarantee, security deposit guarantee, advance payment guarantee and financial guarantees issued to insurance companies.
Capital Venture Loan
Finally, there are also capital venture loans available for startup companies that are in the early stages of development. These loans are typically offered to businesses with high growth potential and offer a higher interest rate than traditional business loans.
What are the eligibility requirements?
The eligibility requirements for business loans vary across different loan packages. However, there are a few requirements that stay the same throughout each package. For example, your business needs to be operational for at least a year to qualify for a business loan.
If you want your business to operate in Malaysia, then it should be majority owned by national citizens. To promote Malaysian business development, you’ll need at least 51% of your company to be owned by a Malaysian.
For SMEs applying for a business loan, you’ll need to be officially considered an SME based on the following criteria. According to SME Corp, a Micro SME in any industry cannot have more than RM300,000 in sales turnover and cannot exceed five full-time employees.
In the manufacturing industry, small SMEs cannot have a sales turnover over RM15 million, and medium SMEs cannot exceed RM50 million. Small SMEs also cannot have more than 75 full-time employees, while medium SMEs have a limit of 200.
In other industries, small SMEs cannot have a sales turnover of more than RM3 million and fewer than 30 full-time employees. Medium SMEs cannot exceed RM20 million and cannot have more than 75 full-time employees.
What factors do lenders look at?
Financial institutions are always keen to give out loans as it is a strong source of income for them. However, they need to be careful and make sure they only hand out loans to trustworthy businesses that will be able to pay it back. So, when handing out a loan, there are several things that the lender will take into account.
The most important factor is the credit history of the business. The lender will want to know how reliable the business entity is in making timely payments. They will also look at the financial statements of the business to make sure that it is profitable and has enough cash flow to make loan payments.
The second is the collateral that the business can offer. The lender will want to make sure that they are able to get their money back if the business defaults on the loan.
You should bring all the necessary documents, such as financial statements, business plans, and other relevant documents, along with you during the application. Financial institutions will want to see how profitable the business entity is and how stable its revenue is. Look at this list of documents that financial institutions commonly require so you can be fully prepared.
What to consider before taking out a business loan?
When considering a business loan, weighing all the pros and cons is essential.
When considering a business loan, it is important to weigh all of the pros and cons. Make sure you are aware of the interest rates and fees that will be associated with the loan. Be sure also to have a clear plan for how you will use the loan and make sure you can repay it promptly. You can check out online tools such as a business loan calculator to help you weigh your options.
As a business owner in Malaysia, one of the most important questions you may have is how much you can borrow from a business loan. The amount you can borrow will depend on a variety of factors, including the type of loan you are applying for, the lender you choose, your business’s creditworthiness, and your ability to repay the loan.
In Malaysia, there are various types of business loans available, including term loans, revolving credit facilities, and overdrafts. Term loans are the most common type and are typically used to finance capital expenditures, such as equipment or property. Revolving credit facilities and overdrafts, on the other hand, are more flexible and can be used for day-to-day expenses or short-term funding needs.
When it comes to determining how much you can borrow, lenders will typically look at your business’s financial statements, including your income statement, balance sheet, and cash flow statement. They will also consider your business’s credit score, which is a measure of your creditworthiness based on your payment history and financial stability.
Taking out a business loan in Malaysia can be an amazing way to get your business up and running, but it is important to ensure you are fully prepared before moving forward.