Despite tough economic times during the pandemic, existing SMEs and businesses are recovering due to government initiatives and policies. Plus, the startup scene is evolving with the rise of digitalisation, business transformation and innovation. With our expertise and personalised service, we will work closely with you to identify the best business loan options that meet your specific needs, budget, and eligibility.
If you’re an ambitious entrepreneur with a brilliant idea for a new business but lack the necessary funds, you’re not alone. Many individuals face this challenge when starting a new venture.
Fortunately, a startup business loan can provide the financial support you need to turn your vision into reality. A startup business loan is a financing option that helps entrepreneurs and new business owners secure much-needed capital for various purposes, such as covering a business’ overhead expenses during the first six months.
There are various financing sources for businesses to acquire funding. Here are some of the conventional sources of capital:
SMEs and startups can take advantage of financial aid provided by government agencies and programmes. You may receive matching grants or subsidies if your business meets the programme criteria.
Notable examples include the Business Accelerator Programme 3.0 and MDEC digital grants.
Also known as private investors or seeds investors, angel investors offer funding for earlier stages of business. In exchange for their funds and network, they receive a minority stake or equity in the company.
Unlike investment companies or angel investors, venture capital firms seek companies that have already started and have the potential for high returns. Apart from funding, venture capitalists usually work closely with entrepreneurs to ensure the growth of their investments.
Business owners can opt for secured loans, which require collateral as the borrowing condition. The loan amount depends on the asset value, and the lender may foreclose or acquire the nominated assets if the borrower defaults on the secured loan.
Businesses can gain access to funds to cover operational and payroll expenses using a working capital financing loan. With this financing solution, companies have the necessary cash flow to support business expansion or ensure the sustainability of their business.
The business capital sources above are great ways to finance your business. However, before applying for one, here are some advantages and disadvantages you should know.
Conventional funding solutions usually have little to no interest rates. Moreover, grants from government agencies or departments usually do not need to be repaid and are exempt from tax.
Conventional funding solutions usually have little to no interest rates. Moreover, grants from government agencies or departments usually do not need to be repaid and are exempt from tax.
Most business capital solutions have strict criteria and require a sound business plan. A sound business plan would show potential investors that you researched to understand the market, establish current and future goals, and calculated the projected capital needs.
Some funding options are also difficult to obtain. In the case of government funding, there is high competition, with only limited funding amounts available.
Business owners need to apply for funding early because conventional business funding solutions usually take longer for loan processing and disbursement.
Some funding options are also difficult to obtain. In the case of government funding, there is high competition, with only limited funding amounts available.
Business owners need to apply for funding early because conventional business funding solutions usually take longer for loan processing and disbursement.
Personal loans are unsecured loans which do not require security or collateral. As the bank accepts higher risks, the loan amount is smaller, and the loan terms are less favourable than secured loans.
While personal loans have higher interest rates and a shorter repayment period, businesses can opt for personal loans if they need funds urgently. This is because the application process for personal loans requires less documentation.
Most importantly, banks often consider the business owner’s creditworthiness an important factor in approving a business loan. Ensure you maintain a good personal credit score and, if applicable, a positive business credit history.
Financial institutions are reluctant to finance businesses with a high debt servicing ratio, as they may be deemed too risky to qualify for a loan.
The bank will access your financial track records and review your CCRIS and CTOS scores, taking note of late or overdue transactions and your remaining monthly balance. They will use this information to assess your credit risk and determine whether you are a trustworthy borrower.
You should check your credit rating regularly and not just before applying for a business loan. If you notice your credit score deteriorating, do not delay and immediately seek a professional consultant. This is important to allow your credit score more time to recover from a bad financial situation.
An incomplete submission is one of the most common reasons for a rejected new business loan application. Neglecting to provide all required documents may not only prolong the evaluation process but also result in outright rejection.
New business loans are a practical means of covering expenses for launching a small business. Factors to consider before applying for a startup business loan in Malaysia include:
Here’s what you can do to be a successful new business loan borrower:
To secure a loan for your startup, it's crucial to conduct a thorough analysis of both your company's and your personal credit needs and the potential benefits.
You should be well-versed in your business’s existing debt and credit scores, as they significantly impact the loan approval process.
Business owners should consistently build their credit lines and adhere to repayment schedules.
Doing so generates higher returns and establishes a solid financial track record or credit history.
Managing relationships with multiple lenders can be time-consuming and resource-intensive.
Therefore, to streamline the process, hiring a professional loan agent can help you obtain customised loan offers tailored to your specific needs.
While having a high credit score can enhance your chances of securing a new business loan, it’s not an absolute requirement.
If your business lacks a credit score, your personal credit history can be used as an alternative as well.
