Ever wondered how Malaysia’s SMEs — the unsung heroes of Malaysia’s economy — navigate roadblocks in their journey to success, such as securing loans?
Picture this: a startup in the construction field with dreams of constructing architectural wonders and elevating cityscapes. You’ve got a brilliant business idea, the drive to succeed, and a vision to become the next big thing. In the world of SME construction, securing financing can be a real challenge. Why? Well, the construction industry is often viewed as a risky business by banks and financial institutions.
This is where SMEs often find themselves at a crossroads. These innovative startups and neighbourhood businesses don’t always fit the mould of collateral, cash flow, or credit scores that big, traditional banks prefer. It’s like trying to fit a round peg into a square hole.
But what if I told you that despite these hurdles – lack of collateral, unpredictable cash flows, and the burden of higher interest rates, there’s a financial lifeline, a secret weapon, that can help you not just survive but thrive?
In Malaysia, Indonesia, Singapore, the Philippines, and Thailand – all part of the ASEAN region – less than 60% of SMEs enjoy adequate access to bank loans, leaving approximately 50% of these businesses underserved or entirely without financial support from their banking partners.
Not all hope is lost however. Multiple entities, including Intelligent Consultancy have been working to help SMEs get the fiscal support and solutions they need.
Riding the financial waves with flexibility
The SME world is no stranger to market shifts. With over 98.5% of small businesses and RM500 billion contribution to our country’s GDP, markets change, trends evolve, and competition is fierce. Imagine business loans as sturdy umbrellas, ready to shield SMEs from the sudden downpour of unforeseen expenses. They serve as your financial safety net, cushioning you against instability.
Just like construction startups with grand architectural dreams, a family-owned restaurant has a vision too. But to bring this vision to life, it requires a financial lifeline—a way to navigate through quiet periods. While holidays and special occasions bring in packed tables and revenue, the slower months pose a financial challenge. The revenue surge during peak times offsets costs, but when the holidays end, maintaining a steady cash flow becomes a pressing concern. Expenses like rent, utilities, and staff salaries persist, but diner revenue takes a nosedive.
In both cases, whether you’re building cityscapes or serving up delectable dishes, financial flexibility is crucial. So, where does the concept of business loans fit into this narrative?
With a track record of assisting thousands of Malaysian SMEs in securing business financing solutions, Intelligent Consultancy firmly believes that smaller businesses should have equitable access to business loans. These loans serve as a lifeline during the off-season, bridging the financial gap when cash flow is insufficient to meet expenses like rent and salaries. Whether the goal is to expand a restaurant or hire additional staff to meet high demands, business loans offer the necessary capital to leverage profitable opportunities.
Are lower interest rates the game changer for SMEs?
Lower interest rates on bank loans are like a golden ticket for small businesses. A lower interest rate leads to resources being freed up, sparking potential smart investments, which can, in turn, help SMEs expand. A lower interest rate means that the once-distant dream of an entrepreneur is closer to becoming a reality.
The result? New locations, increased market share, and a competitive edge that leaves competitors in the dust. So, are lower interest rates the ultimate SME power play? You bet they are.
In SME financing, one size does not fit all, and that’s where the flexibility of business loans shines. One standout feature is the ability to opt for fixed monthly payments. This option provides stability and predictability, much like a well-planned budget. SMEs can map out their financial obligations with confidence, knowing exactly what they’ll pay each month.
Another suitable option would be the interest-only payments – much like a strategic pause for your financial journey. Just as a composer uses rests to create rhythm, this option lets SMEs focus on what matters most at a given moment.
Opting for an interest-only payment for a year, a tech startup company can realign their financial resources whether it’s covering essential operational costs, investing in recovery efforts, or simply maintaining cash flow stability.
As we explore between fixed monthly payments and interest-only payments, it’s all about choosing what fits your business best.
And as someone who’s been there and done that, who’s faced the highs and lows of entrepreneurship, I get it. The most valuable lessons often come from the toughest experiences.
By Keith Khor, Founder and CEO of Intelligent Consultancy a financial advisory firm
