Malaysian SMEs - Time to Utilize the Government-Guaranteed Business Loan Scheme

COVID-19 continues to create seismic shifts in economies worldwide. Its unpredictability and waves of infections have left very few businesses and industries feeling any sense of normalcy. For many, adaptation to a new reality is the only way to survive.  Where some businesses have completely shut, others have arisen due to necessity. Despite being on the opposite ends of a ‘healthy business’ spectrum, there is one constant that could greatly benefit both: a business loan.

More than ever, business loans are a necessity for survival, yet in a cruel twist of fate, they are even harder to be approved for. This makes sense, as the ongoing pandemic creates too much risk for lenders to feel comfortable approving any loan; most lenders are equally not in a great financial position and would prefer to protect.  Ultimately, this can only lead to more businesses closing and is not a viable option.

Rather than wait out the pandemic, the Malaysian government has taken meaningful action and has developed a series of schemes to help guarantee business loans, meaning small to medium enterprises (SMEs) in Malaysia have a new option to stay afloat. 

Understanding the Different Schemes

With support from the Malaysian government, SMEs will have their loans backed in replacement of traditional collateral. The exact percentage covered depends on which specific scheme is applied for. These different schemes cover different business sectors and specific types of use for each loan.

Depending on the needs of a business, they can choose to apply for the business loan that best suits them. This undoubtedly eases the financial tension on many SMEs and gives them the flexibility to take a loan to stay afloat or make meaningful improvements to their burgeoning business. 

Why Offer This Scheme

The reasoning behind offering this series of schemes goes beyond just relief from COVID-19. While the Movement Control Order (MCO) implemented to limit the transmission of COVID-19 forced a lot of businesses to make significant adjustments to stay open, those necessary adjustments have substantial long-term benefits as well. 

The adjustments of reference concern facets of a business such as digitalization and automation, processes that will help a business optimize their resources but are costly ventures. The MCO essentially forced SMEs to evolve – a task that was impossible for most. Recognizing this, and the severe loss in revenue that the MCO and COVID-19 otherwise created, the Malaysian government has stepped in to mitigate.

Who Can Apply

Any SME or start-up registered in Malaysia is able to take advantage of one of the government schemes for a business loan; the deadline to register is December 31, 2020. With the target of promoting small businesses and stimulating a struggling economy, and with the secondary benefit of preparing these businesses for a digitized and optimized future, these government schemes are a worthy option for any business.