Key Takeaways
- SME business loan provides essential funding for business growth, cash flow management, and opportunities to seize new projects with flexible terms.
- Businesses can choose from term loans, working capital loans, or equipment financing, depending on their needs.
- SME business loan requires sound financial records, but defaulting can lead to legal action, reputational damage, and asset seizures.
Securing an SME business loan can be a game-changer for small and medium enterprises in Malaysia, empowering businesses to access the capital needed for growth, expansion, or daily operations.
With a wide range of loan options available, understanding the features, benefits, and eligibility criteria is essential. Read this guide to learn all the key details about SME business loans in Malaysia and navigate your financing options with confidence.
What Are SMEs?
SME stands for Small and Medium Enterprises, referring to businesses that meet specific size criteria, typically defined by their number of employees, annual revenue, or assets. They play a pertinent role in providing goods, services, and employment opportunities.
Often considered the cornerstone of many economies, SMEs significantly contribute to employment, innovation, and gross domestic product (GDP) growth. In Malaysia, SMEs are classified based on two main criteria:
1. Manufacturing Sector
- Small: Annual sales turnover of RM300,000 to RM15 million OR 5 to 75 employees.
- Medium: Annual sales turnover of RM15 million to RM50 million OR 75 to 200 employees.
2. Services and Other Sectors
- Small: Annual sales turnover of RM300,000 to RM3 million OR 5 to 30 employees.
- Medium: Annual sales turnover of RM3 million to RM20 million OR 30 to 75 employees.
What Is an SME Business Loan?
An SME business loan is a financial product specifically designed to help small and medium enterprises secure funding. As a vital tool for business growth, it enables SMEs to expand, stay competitive, and adapt to the demands of today’s dynamic markets.
An SME business loan can be used for a variety of purposes, including:
- Business expansion
- Improving cash flow
- Covering operational costs
- Addressing unforeseen emergencies
What Is Not an SME Business Loan?
An SME business loan is distinct from personal loans and cannot be used for personal expenses such as purchasing a car, paying private bills, or other non-business-related purposes. Additionally, SME business loan is not interest-free and must be repaid according to the agreed terms and conditions.
Types of Businesses Eligible for an SME Business Loan
The following business structures are typically eligible to apply for an SME business loan:
- Sole Proprietorship
- Partnership
- Private Limited Companies (Sdn Bhd)
- Limited Liability Partnerships (LLP)
Types of SME Business Loan
1. Term Loan
Purpose: Provides a fixed lump sum of financing for businesses.
Loan Tenure: Up to 7–10 years.
Interest Rate: 3.75%–12.5% per annum (effective rate).
Loan Amount: Up to RM2 million.
Drawdown Method: One-time disbursement into the company’s account.
2. Working Capital Loan
Purpose: Covers operational costs and cash flow needs.
Loan Tenure: Typically up to 5 years.
Interest Rate: 6%–10% (may vary).
Loan Amount: Up to RM500,000 for start-ups; higher for established businesses.
Drawdown Method: Incremental disbursements based on approved limits.
3. Overdraft or Line of Credit
Purpose: Offers flexible borrowing for short-term needs.
Loan Tenure: Renewable annually.
Interest Rate: BLR + 0.5% to 2%.
Loan Amount: Up to RM3–5 million (clean/pledged FD).
Drawdown Method: Borrow and repay as needed up to the credit limit.
4. Equipment Financing
Purpose: Facilitates the purchase of machinery, vehicles, or tools.
Loan Tenure: Up to 5–7 years.
Interest Rate: Effective 5%–8%.
Loan Amount: Based on the value of the equipment.
Drawdown Method: Funds are paid directly to the vendor.
5. Trade Financing
Purpose: Supports import/export activities, such as Letters of Credit (LC) or invoice financing.
Loan Tenure: Short-term, up to 1 year.
Interest Rate: COD 5.5% + 1.25%–2.5%.
Loan Amount: Up to RM3–5 million (clean/pledged).
Drawdown Method: Facility-specific, based on trade documents.
6. Government-Backed SME Business Loan
Purpose: Provides lower-interest loans with guarantees such as CGC or SJPP.
Loan Tenure: Up to 7–10 years.
Interest Rate: Effective 6%–8% (flat rates may also be available).
Loan Amount: Typically RM500,000–RM2 million.
Drawdown Method: Terms set by the respective government programme.
7. Microfinancing
Purpose: Supports small and rural businesses or start-ups.
Loan Tenure: 1–5 years.
Interest Rate: 8%–12%.
Loan Amount: Up to RM50,000–RM100,000.
Drawdown Method: Lump sum disbursement into small business accounts.
Read More: Personal Loan with Co-signer or Guarantor: Do You Need One for Bad Credit?
Purpose and Benefits of Applying for an SME Business Loan
SME business loan is an essential financial tool for small and medium enterprises, providing the necessary funding to sustain operations, drive growth, and seize new opportunities. Here’s a breakdown of its purpose and key benefits:
Why Companies Borrow SME Business Loans
1. Expand Business Operations
To open new branches, purchase additional inventory, or enter new markets.
2. Maintain Cash Flow
To cover operational expenses like payroll, utilities, and supplier payments during slow sales periods.
3. Upgrade Equipment and Technology
To invest in machinery, software, or tools that enhance productivity and efficiency.
4. Seize Growth Opportunities
To fund promising projects or meet sudden demand for products or services.
5. Refinance Existing Debt
To consolidate or replace high-interest loans with more favourable terms.
6. Support Start-ups
To finance initial costs such as product development, marketing, or hiring.
7. Trade and Export Activities
To facilitate imports, exports, and supply chain operations.
8. Handle Emergencies
To address unexpected costs like repairs, supplier delays, or economic disruptions.
Benefits of SME Business Loan
1. Access to Capital
Provides the funds businesses need to grow without waiting to accumulate profits.
2. Flexible Financing Options
Offers a variety of loan types (term loans, working capital, lines of credit), allowing businesses to select the most suitable option.
3. Improved Cash Flow
Helps businesses manage cash flow gaps, ensuring smooth day-to-day operations.
4. Affordable Interest Rates
Government-backed loans often come with reduced rates, easing the financial burden on SMEs.
5. Builds Business Credit
Regular repayments improve a company’s credit profile, simplifying future borrowing.
6. No Equity Dilution
Loans allow businesses to retain full ownership, unlike seeking investors.
7. Tailored for SMEs
Loan terms, amounts, and repayment schedules are specifically designed to suit small business needs.
8. Encourages Growth
Enables businesses to take calculated risks and invest in long-term growth strategies.
9. Quick Approval for Certain Loans
SME-specific financing programmes often have streamlined approval processes.
10. Boosts Competitiveness
Provides smaller businesses with the resources to scale and compete with larger companies.
Disadvantages of SME Business Loan
1. High-Interest Costs
SME business loans can come with high interest rates, adding to your long-term financial burden.
2. Repayment Risks
Missing repayments can damage your business credit score, making it harder to secure future loans.
3. Complex Application Process
Applying for an SME business loan can be time-consuming and requires extensive documentation. The process from application to approval and disbursement can take up to two months.
When Should You Take an SME Business Loan?
Consider taking an SME business loan under the following circumstances:
- When you are expanding your business and require additional funding.
- To address short-term cash flow issues that are disrupting daily operations.
- To kick-start a new project or seize a promising growth opportunity.
When Should You Avoid SME Business Loan?
It may be best to avoid taking an SME business loan in these situations:
- When your business already has sufficient cash flow to meet operational and growth needs.
- If the project returns are too low to comfortably support the loan repayments.
Read More: Personal Loan No Credit Check Malaysia: How to Get One
Common Pitfalls of SME Business Loan
1. Hidden Charges
Some SME business loans may include undisclosed fees or additional costs that can increase your financial burden. Always review the loan terms carefully.
2. Fraud Risks
Be cautious of unlicensed lenders or agencies that use fraudulent documents to apply for loans on your behalf. Always work with licensed and reputable lenders.
3. High Interest Rates
Certain SME business loans may have unexpectedly high interest rates. Ensure you read the terms and conditions thoroughly before signing.
Differences Between SME Business Loans and Personal Loans
1. Purpose
An SME business loan is strictly for business purposes, such as expansion, equipment purchase, or operational costs, while a personal loan is designed for individual needs.
2. Loan Amount
An SME business loan typically offers higher loan amounts compared to a personal loan.
3. Interest Rates and Tenure
An SME business loan often comes with lower interest rate and repayment term ranging from 1 to 10 years, whereas a personal loan usually has a higher rate and shorter tenure.
Which Banks Are More Likely to Approve SME Business Loans?
In Malaysia, banks such as Maybank, CIMB, and Public Bank are known for having higher approval rates for SME business loans. However, approval depends heavily on the applicant’s financial profile, including creditworthiness, business performance, and documentation quality.
Who Qualifies for an SME Business Loan?
| Criteria | Sdn Bhd Companies | Enterprise or Sole Proprietor |
| Business Age | Minimum 1–3 years | |
| Monthly Sales | RM30,000 and above | RM50,000 and above |
| Loan Type | SME Business Loan or P2P (conditional) | |
| Good Financial Records | Required (CTOS/CCRIS assessment) | |
| Documents Required | Audited financial reports, bank statements | Management accounts, Borang B, etc. |
Types and Features of SME Business Loan
1. Term Loan
Loan Amount: Up to RM2 million
Tenure: 5–10 years
Interest Rate: Effective 8.45%–12.5%
Guarantee: CGC/SJPP-backed
Best For: Businesses with strong credit history and established operations.
2. Overdraft
Loan Amount: Up to RM3 million (clean) or RM5 million (with pledged FD).
Interest Rate: BLR + 0.5% to 2%.
Best For: Flexible cash flow management for short-term needs.
3. Tradeline (Invoice Financing)
Loan Amount: Up to RM3 million (clean) or RM5 million (with pledged FD).
Interest Rate: COD 5.5% + 1.25% to 2.5%.
Best For: Businesses requiring short-term financing secured by invoices.
P2P Financing for Smaller or Younger Businesses
Eligibility
- Companies aged less than 3 years or those with lower monthly sales (RM10,000–RM49,000 for Enterprises; RM10,000–RM29,000 for Sdn Bhd).
Benefits
- Less stringent requirements for traditional financial documentation.
- Faster approval processes compared to conventional loans.
Industries Excluded from SME Business Loan
| For Companies < 3 Years | For Companies > 3 Years |
| Investment Holding | |
| Money Lender | |
| Licensed Gambling/Gaming | |
| Construction (P2P eligible) | Pawn Shops |
SME Business Loan Amount Estimation
1. Maximum Loan Amount Calculation
- Formula: (Total 6-month Bank Statement) × 2 × 30%
- Example: If the total 6-month bank statement is RM500,000:
- RM500,000 × 2 = RM1 million
- RM1 million × 30% = RM300,000 (maximum loan amount).
2. Loan Cap Based on Company Age
- 1–2 Years: Up to RM500,000.
- 2–3 Years: Up to RM800,000.
- 3+ Years: Up to RM2 million.
Read More: What Happens When You Default on a Secured Loan & Unsecured Loan in Malaysia
Why Do I Need an SME Business Loan?
1. Funding Support
SME business loan provides much-needed financial assistance for growth opportunities or emergencies.
2. Flexible Repayment Terms
Long repayment tenures help reduce the financial burden on businesses.
3. Credit Improvement
Timely repayments improve your company’s credit score, making future borrowing easier and more affordable.
Why Is Getting an SME Business Loan So Difficult?
Here are some common reasons why banks reject SME business loan applications:
1. No Record of Transactions
If you don’t deposit your business revenue into your bank account, lenders cannot verify your income.
2. Mixing Business with Personal Accounts
Using your business account for personal expenses undermines your credibility and financial transparency.
3. Low Ending Balances
Maintain 10–30% of your monthly sales as your account balance to demonstrate financial stability.
4. Tax Issues
Proper tax filings are essential to prove that your business is legitimate and profitable.
5. Licensing Gaps
Ensure your business has the necessary licences. For instance, second-hand car dealers require a police licence due to being in a high-risk industry.
Why Do You Need an SME Business Loan Consultant? Can’t You Submit Directly to the Bank?
Hiring an SME business loan consultant can save time, effort, and money. Here’s why:
1. Expert Guidance for High Commitments
- If you have significant financial commitments, only 1–2 banks out of 10 may consider your application. Consultants help:
- Strategically lower your financial commitments.
- Present a better proof of income to improve your chances of approval.
- Without professional guidance, you may resort to high-interest alternatives like P2P loans, which can lead to a debt spiral.
2. Customised Loan Packages
- There is no “one-size-fits-all” loan. A consultant matches you with the right loan package to suit your needs.
- For example, if you require a large loan with a longer repayment tenure to fund a new project, they can help you avoid low-interest loans that offer insufficient funding.
- Choosing the wrong loan wastes valuable opportunities and resources.
3. Protection Against Scams and Unlicensed Lenders
- A reputable consultant ensures you only deal with legitimate and licensed lenders, protecting you from fraud.
4. Maximising Your Loan Amount
- Consultants understand the loan system and help you secure the highest possible loan amount.
- For instance, while you might qualify for RM500,000 on your own, a consultant may secure a higher amount by targeting the right banks in the correct sequence.
5. Tailored SME Financing Based on Your Business Blueprint
- Consultants tailor financing solutions to match your business operations and future plans.
- They identify suitable products like invoice financing, which doesn’t count as a loan commitment, allowing you to stagger loans for sustainable growth.
- Their focus is on ensuring the long-term success of your business.
Read More: How to Get Larger Personal Loan Malaysia with Credit Scores
Why Should I Use Bluebricks to Apply?
1. Comprehensive Solutions
Bluebricks offers end-to-end financing options, including SME business loans, government guarantee schemes, P2P lending, and factoring.
2. Wide Network
We collaborate with multiple banks and financial institutions to secure the best deals for you.
3. Higher Approval Rates
Our expertise and connections improve your chances of getting approved.
4. Desired Loan Amount
We help you secure the funding your business needs to meet its financial goals.
5. Financial Planning Support
As your outsourced finance partner, we assist with 1–3 year business planning and tailor financing solutions to achieve your objectives.
Why Is This Partnership Valuable to Bluebricks?
A good SME business loan consultant focuses on building long-term relationships and creating a win-win partnership.
- As your business grows, you’ll require additional funding to expand further.
- Bluebricks helps you secure those loans while growing alongside your business.
We believe in fostering long-term partnerships because successful businesses can thrive for decades. Your success is our success.
Why Do I Need to Pay a Fee?
The fee covers comprehensive services to save you time and improve your chances of success:
- End-to-End Service: Includes document preparation, coordination with banks, and expert financial advice.
- Time-Saving: Streamlines the process and expedites approvals.
- Cost-Effective: Helps secure low-interest loans, reducing your financial burden over 5–10 years.
Why Are Your Fees So High?
Our fees are based on the level of complexity and effort required:
- CTOS Score: A lower credit score may require more work to process and improve your application.
- Income Verification: Additional steps may be needed to verify income or address tax filing issues.
- Loan Amount: Larger loans typically result in lower service fees as a percentage of the total.
Read More: Securing Personal Loan for Bad Credit in Malaysia
How to Apply for an SME Business Loan
1. Document Collection
Gather the necessary documents, including bank statements, financial reports, and other required paperwork.
2. Bank Selection
Bluebricks works with 11 banks and alternative financial institutions, such as P2P lenders and factoring companies, to find the best loan solution for your business.
3. Proposal Explanation
We provide a clear and detailed loan recommendation tailored to your specific financial requirements.
4. Submission
Complete your loan application and submit all required documents to the selected financial institution.
5. Approval and Disbursement
Once approved, receive the funds to meet your business goals and support your operations or growth plans.
Documents Checklist
| Entity Type | Required Documents |
| Sdn Bhd (Private Limited) | 1. The latest 6 months’ bank statements (all active and savings accounts). 2. Last 2 years’ audited reports. 3. IC copies of all directors or shareholders. 4. Signed and stamped consent forms by directors. 5. SSM registration documents. |
| Sole Proprietorship/Enterprise | 1. The latest 6 months’ bank statements (all active and savings accounts). 2. The latest 3 years’ management accounts. 3. Latest 3 years’ Borang B (tax returns). 4. IC copies of all partners. 5. SSM registration documents. |
| Partnership/PLT/LLP | 1. The latest 6 months’ bank statements (all active and savings accounts). 2. Latest 3 years’ management accounts. 3. The latest 3 years’ Form P (partnership tax returns). 4. IC copies of all partners or shareholders. 5. Signed & stamped consent forms. 6. SSM registration documents. |
Key Differences Across Entity Types
| Criteria | Sdn Bhd | Sole Proprietorship/Enterprise | Partnership/PLT/LLP |
| Financial Reporting | Requires audited financial reports. | Requires management accounts. | Requires management accounts and partnership-specific tax forms. |
| Registration Documents | SSM and ICs of directors or shareholders. | SSM and ICs of partners. | SSM and ICs of partners or shareholders. |
| Tax Documentation | Form C. | Borang B required for the last 3 years. | Form P required for the last 3 years. |
Additional Information
1. Bank Statements
Ensure all bank statements are comprehensive, covering the last 6 months for all active and savings accounts.
2. Audited Reports
Sdn Bhd companies must submit 2 years of audited financial reports to verify business stability.
3. Tax Returns
Enterprises and Partnerships should provide 3 years of tax documentation (Borang B or Form P).
4. Consent Forms
Required for Sdn Bhd and Partnerships/PLTs from all directors and shareholders.
Tips for Faster SME Business Loan Processing
- Ensure all documents are up-to-date, accurate, and well-organised.
- Verify that IC copies are clear and stamped where required.
- Double-check SSM registration forms for missing or incorrect information.
- Submit statements for both active and savings accounts to provide a complete view of your cash flow.
What Should You Be Aware of When Applying?
1. Complete Financial Records
Ensure that your financial records, including tax filings and bank statements, are accurate, up-to-date, and comprehensive.
2. Hidden Fees and High-Interest Terms
Review the loan terms carefully to avoid unexpected fees or unfavourable interest rates.
What Are the Interest Rates and Tenure?
- Interest Rates: Typically range from 4.5% to 12.5% per annum.
- Tenure: Loan repayment periods can vary from 1 to 10 years, depending on the loan type and lender.
What’s the Maximum Loan Amount?
The maximum loan amount is calculated using the formula:
(Total 6 months’ income) × 2 × 30%.
For example, if your 6-month income totals RM500,000:
- Maximum Loan Amount = RM500,000 × 2 × 30% = RM300,000
Common Consequences of SME Business Loan Defaults
1. Legal Actions
- Banks or financial institutions may file lawsuits or initiate bankruptcy proceedings.
- For partnerships and sole proprietors, legal action directly targets individuals.
2. Reputational Damage
- Defaulting businesses often suffer reputational harm, affecting relationships with suppliers, clients, and lenders.
3. Difficulty in Securing Future Loans
- Poor CTOS/CCRIS scores can make it nearly impossible to secure financing in the future.
4. Interest and Penalties
- Overdue payments attract late payment charges, penalties, and compounding interest, further increasing the debt burden.
5. Forced Liquidation
- For Sdn Bhd companies, creditors may force the sale of business assets to recover the outstanding debt.
Drawbacks of SME Business Loan Defaults by Business Structure
| Business Structure | Drawbacks of Loan Default |
| Sole Proprietorship/Enterprise | – Personal Liability: The owner is personally liable, and personal assets (e.g., house, car, savings) can be seized to settle debts. – CTOS/CCRIS Impact: Negative credit scores affect future financing eligibility. – Legal Action: Direct lawsuits against the owner for debt recovery. |
| Partnership | – Shared Liability: All partners are jointly and severally liable, meaning any partner may be held responsible for the entire debt. – Personal Asset Risk: Partners’ personal assets can be seized. – Business Continuity Risk: Financial stress may strain or damage relationships between partners. – Credit Rating Damage: All partners’ credit scores are negatively affected. |
| Sdn Bhd (Private Limited) | – Limited Liability Protection: Directors and shareholders are typically protected, but personal guarantees can expose them to liability. – Business Asset Seizure: Creditors may seize company assets, including inventory, machinery, and bank balances. – Credit Blacklisting: Severely impacts company creditworthiness, limiting access to future financing. – Winding-Up Proceedings: Creditors may initiate liquidation to recover debts. – Director’s Risk: Personal guarantees may result in directors’ personal assets being at risk. |
Ways to Mitigate SME Business Loan Default Risks
1. Cash Flow Management
Regularly manage and monitor cash flow to ensure sufficient funds are available for loan repayments.
2. Insurance for Loans
Consider loans that offer insurance coverage to protect against defaults in the event of unforeseen circumstances.
3. Debt Restructuring
If you’re struggling financially, negotiate with the bank for lower payments or an extended repayment tenure.
4. Avoid Over-Leveraging
Only borrow what your business can realistically repay based on projected revenue and cash flow.
What Is an SME Loan Agency?
An SME loan agency provides expert assistance in navigating the complex loan application process.
Why Do You Need an SME Loan Agency?
1. Expert Loan Solutions
They help identify the most suitable loan options tailored to your business needs.
2. Better Loan Terms
Agencies can secure higher loan amounts and negotiate lower interest rates on your behalf.
3. Simplified Process
They manage the intricate application steps, saving you significant time and effort.
4. Higher Approval Rates
Professional guidance increases your chances of securing approval from banks and financial institutions.
What to Watch Out for When Dealing with Loan Agencies?
1. Legitimacy and Professionalism
Ensure the agency is licensed and operates professionally.
2. Upfront Fees
Avoid agencies that demand upfront payments before delivering their services.
Benefits of Hiring an SME Business Loan Agency
- Saves time and lessen the stress of managing the application process.
- Provides expert financial advice and improves loan approval success rates.
Drawbacks of Hiring an SME Business Loan Agency
- Agencies charge a service fee for their assistance.
What Does an SME Business Loan Agency Do?
- Document Preparation: Organises and compiles all necessary paperwork.
- Bank Coordination: Handles communication and submission to financial institutions.
- Follow-Up: Monitors the application progress and resolves any issues.
Case Studies: Common SME Business Loan Challenges and Solutions
Case Study 1: High Credit Card Utilisation
- Problem
- A client was denied an SME loan due to high credit card usage.
- Solution
- We advised the client to apply for a new credit card with a higher limit to reduce the credit utilisation ratio and improve their credit score and loan eligibility.
Case Study 2: Low-Declared Income
- Problem
- Many clients declare low profits to minimise taxes, which negatively impacts their loan eligibility.
- Solution
- We reviewed and advised clients on their upcoming income tax filings to ensure declared profits meet bank requirements.
- For clients with weak revenue over the past 6 months, we presented their 1-year bank statements to banks, providing a more accurate picture of their income.
Bluebricks SME Business Loan Services
Services Offered
- Comprehensive Loan Solutions: Assistance with bank loans and financing from licensed institutions such as P2P lenders and factoring companies.
- Target Loan Amounts: Help secure the funding necessary to achieve your business goals.
- Optimal Loan Tenure: Ensure loan terms are aligned with your financial capacity and plans.
- Interest Rate Comparison: Compare rates across multiple banks to secure the best possible deal.
Our Process
1. Document Collection and CTOS Score Check
Gather all required documents and assess credit scores.
2. Proposal Within 3–5 Days
Recommend solutions after evaluating options from 11 banks.
3. Agreement and Submission
Provide explanations, sign agreements, and submit applications.
4. Approval and Disbursement
Once approved, disburse funds directly to the bank.
Our Promise
- No Upfront Payments: We only charge fees upon successful approval.
- Licensed Financial Institutions: All loans are from legitimate banks and institutions.
- Quick Processing: Streamlined application and approval process.
Our Charges
Our fees range from 7% to 10%, depending on the following factors:
1. CTOS Score
The complexity of your credit history determines the effort required.
2. Income Verification
Additional work may be needed to verify income or assist with tax filings.
3. Loan Amount
Larger loans typically result in lower fees as a percentage of the total.
SME Business Loan Malaysia – FAQ
Yes, an SME business loan is a type of business loan. In Malaysia, all loans provided to companies are categorised as business loans.
Businesses under one year old may need to explore alternative financing options, such as P2P lending.
Approval depends on your CTOS score and repayment ability.
Loan approval will depend on the severity of your credit history. Some banks may be more lenient than others.
Expenses
• Enterprise
If your business profit is below RM200,000, it is better to remain as an Enterprise because of lower operational costs.
• Sdn Bhd
If your profit exceeds RM200,000, consider registering a Sdn Bhd to enjoy more tax and operational benefits.
Bank Financing
• Enterprise
Harder to secure SME business loans.
Banks are more likely to reject applications due to high personal or partner commitments.
Maximum loan amounts are usually capped at RM500,000.
• Sdn Bhd
Banks are more likely to approve larger loans, with maximum amounts reaching RM2 million.
Switch when your annual sales exceed RM1,000,000.
1. At this stage, you are in a stronger position to secure larger SME business loans.
2. Ensure your sales are sufficient to cover the higher operational costs of running a Sdn Bhd.
No, banks require proof that you’ve been running the company for at least three years before they will consider approving an SME business loan.
• Enterprise: Yes, entirely. For Enterprises, business finances are treated as personal finances, so personal loans significantly impact loan approval.
• Sdn Bhd: It partially affects your chances. While Sdn Bhd is a separate entity, banks will still evaluate your personal credit score, especially if you have excessive personal borrowing.
If you own a company, an SME business loan is usually the better option as it offers higher loan amounts and lower interest rates compared to personal loans.
However, personal loans may be more suitable for emergencies as they do not require company financial documents and business partners’ consent.
It’s unlikely for you to get an SME business loan because P2P loans typically have short repayment terms and high interest rates, increasing your financial commitments. These factors negatively impact your company’s financial health and gearing ratio, reducing your chances of approval.
Yes, indirectly.
While P2P loans do not directly appear in CTOS, banks can see repayments to P2P lenders in your bank statements. These repayments are still counted as part of your financial commitments.
It’s risky and often not worth it. If your loan applications fail, you could end up with significant debts. Banks have advanced systems to detect fraud or high-risk behaviour. If caught, you could face lawsuits and lose more money.
Your shareholding structure can impact loan eligibility:
• If you have silent partners or investors with a significant shareholding (over 20%), they may need to act as guarantors for the loan.
• To avoid this, classify their shares as preference shares, which do not require them to guarantee loans.•
Yes, it’s possible, especially for service-based businesses (not trading or construction).
• Personal loans calculate only 10% of your sales as income (e.g., RM100,000 sales = RM10,000 income).
• SME business loans calculate 20% of your sales, making it easier to qualify.
No, banks do not limit loans to wealthy companies. However, they prefer businesses that:
• Make consistent profits: This reassures the bank that the loan will be repaid on time.
• Have strong cash flow management: Good income and expense management demonstrates repayment ability.
Even if your business isn’t “rich,” strong financial practices can significantly improve your chances of loan approval.
If customer payments are delayed and you’re unable to cover all your commitments, here’s what you should do:
1. Housing Loan Repayments
• Banks place a high priority on housing loan repayments when evaluating SME business loan applications.
• Timely housing loan repayments enhance your financial stability and credibility.
2. Credit Card Payments Can Wait
•Once you receive overdue customer payments, settle your credit card balance.
• Why prioritise housing loans over credit cards?
– Credit card balances are usually smaller (e.g., RM40,000) and easier to pay off.
– Housing loans typically have much larger amounts (e.g., RM500,000), and defaulting on them has greater consequences.
The Key Takeaway
Prioritise paying off your housing loan to maintain a strong financial profile for SME business financing. Once your cash flow improves, focus on settling smaller debts like credit cards to clear your CTOS profile and prepare for future loan applications.
Case Study: Prioritising Debt Repayment in Cash Flow Problems
Scenario: If you are running a business as a Sdn Bhd and face cash flow challenges, leaving you unable to pay all debts—including company and personal bank loans—which should you prioritise?
Answer: Personal loans first.
• SME business loans still evaluate the personal CTOS scores of directors and shareholders. However, personal loans are approved without considering company CTOS scores.
• In extreme cases, if funding is urgently required to sustain your company, you may be able to secure a personal loan to provide temporary relief.
Our Recommendation:
• Use company loans for business expansion (“attack”) to grow your operations.
• Use personal loans as a defensive strategy (“defend”) to manage immediate personal liabilities or short-term cash flow gaps.
