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Types of Business Loans in Malaysia

Types of Business Loans in Malaysia

  • 1 August 2023
  • By OCBC Business Banking
  • 10 mins read

Malaysia is a well-developed country, and as such, there are plenty of opportunities for businesses to get funding through loans. A business loan for companies can be beneficial to fund your business needs. However, there is a dilemma faced by many business owners when it comes to expanding their current businesses, especially when it comes to financing them in the most effective way.

Typically, one might associate business loans with physical banks. Picture the 7 a.m. queues and extensive paperwork; the process itself can be a long journey. However, in today's digital era, applying for an online business loan can be done from the comfort of one's home, allowing you to access lending products and schedule appointments for loans – all in just a few clicks.

Why Business Loan?

The question now is, are business loans for new companies worth getting? To increase the size of your business, a business loan may be a good idea if you are looking for access to capital or inventory and equipment purchases. Business loans are a common source of funding, but even within this category, businesses will have a large range of choices, as well as benefits. Some of the advantages of bank loans are:

  • You do not lose equity or control of your company. Having an investor on board will strengthen your business’s financial support to help with the cash flow of your company.

  • A loan can offer a safety net for rainy days. Having some back-up emergency funds is always advisable as a precautionary measure in the event of an unfortunate incident.

  • When you repay your loans on time, you build trust with your lenders by strengthening their confidence in you. As a result, more lucrative opportunities will be made available to you in the future.

What are the Different Types of Business Loans in Malaysia?

There are many different types of loans in Malaysia. Each one has its own perks, so it is important to find the one that suits your needs the best. But before you jump in, be sure to do some research to find the type of loan that is right for your business needs.

OCBC offers a variety of business loans for SMEs to meet their goals. Here are a few options to look out for:

1. Term Loan

A term loan offers a lump sum of cash upfront in exchange for specific borrowing terms. Typically meant for small businesses with great financial statements, this type of loan differentiates itself from secured business loans by not requiring any collateral. A collateral-free loan, also known as an unsecured loan, is a loan that doesn’t require any type of collateral. This means that businesses can obtain the loan without having to provide any guarantee in the form of assets, such as property, stocks, or other valuables. Since collateral-free loans are unsecured in nature, they can come with certain terms and conditions.

OCBC BizFinancing stands out as the best small business loan for startups and emerging businesses. You can enjoy a fast, flexible and convenient way to finance your needs, with a maximum tenure of 5 years and financing ranging from RM50,000 to RM600,000. It is an ideal choice for Malaysian-owned companies with a minimum of three years in business operations.

2. Business Premises Financing

This type of financing helps you own a commercial/industrial space with flexible repayment options. OCBC Commercial Property Loan is the all-in-one commercial mortgage that makes acquiring new business premises easier. It is available for businesses registered with Suruhanjaya Syarikat Malaysia (SSM) and individuals purchasing for their own business operations.

For companies, the financing extends up to 140% of the property value or purchase price, with a cap at RM5,000,000. Individuals, on the other hand, can secure financing up to 85% of the property value or purchase price, capped at RM4,000,000, proving that there are multiple ways to grow your business.

3. Equipment Financing

If you are seeking the best working capital loans, OCBC Industrial Hire Purchase can help you purchase or lease physical assets for your business’ needs. It may be an option if you need to finance large equipment purchases but lack the capital, as the financing value extends up to 90% or RM5 million.

This process is even more cost-effective since there are no legal fees involved. The versatility of OCBC Industrial Hire Purchase extends as they cover industrial machineries, commercial vehicles, and heavy equipment. Now you can think about buying industrial goods for your business without the need for a huge sum of cash, up front.

4. Financing Scheme Support for SMEs

Financing for SMEs is a government financing scheme funded by Bank Negara Malaysia (BNM) to boost SME business growth and expansion. These include support for startup costs, new business grants, or freelance grants. There are multiple government grants available for each sector, each with an allocated budget of billions intended for eligible individuals and businesses through application of the grants.

The prime goal of the Malaysian government grant is to provide access to financing at a reasonable cost for SMEs in all sectors of the economy. Numerous programmes and subsidies have been implemented to encourage the nation's economic and financial progress. With up to RM5 million of financing and a repayment period of up to 8 years, all you need to do is take the initiative to apply and receive the grant to financially aid your business goals.

5. Export Financing

Export financing is a cash-flow solution for exporters selling goods overseas. The primary aim of export financing is to provide financial support to businesses that deal in the international market. It allows businesses to access working capital before clients pay for goods purchased. Exporters can reinvest the funds in business operations while maintaining their cash flow cycle.

One of the most important benefits for exporters is the security of their payments. As soon as the counterpart enrols in financing, they will receive a cash advance. However, there is a risk of the exporter repaying the debt at maturity if the buyer misses out on the payment.

There is often a big gap between exporting goods and international financing, which weakens the exporter's financial situation. With OCBC Bank's Export Credit Refinancing, exporters can obtain credit against the bills sent for collection if goods are exported to different countries. It is suggested that exporters opt for export financing when setting up a new business.

6. Business Overdraft

The best business line of credit lenders will have a combination of low rates, fast funding speeds, and flexible repayment terms. Just like OCBC Bank's Business Overdraft, you can gain access to funds whenever you need them.

Additionally, your overdraft allowance or business line of credit limit resets after you pay down and clear your balance due. That means that you will only get the interest in the amount you withdraw, so these options are great if you don’t know how much funds you will need. It is also good to keep in mind that most business lines of credit are unsecured loans This means that you won’t need to provide any assets as collaterals.

Ready to Apply for a Business Loan?

Now that you understand the various types of business loans, it is time to choose the best one for your business. Choosing a business loan from the many available options can feel overwhelming, thus by understanding your business needs, you can narrow down your choices to find the right fit.

Taking out a loan from a bank is an alternative you can avail yourself of when your business is doing well or when you are anticipating an expansion. With so many funding options, it has never been easier for aspiring entrepreneurs to get their business idea off the ground.

Contact OCBC Team to Consult with an Expert

To guide you through this big decision-making process, it is beneficial to seek the expertise of the OCBC team. Get in touch with us and we can provide you with tailored insights and advice according to your business requirements and needs.


The information provided herein is intended for general circulation and/or discussion purposes only. Before making any decision, please seek independent advice from professional advisors. No representation or warranty whatsoever in respect of any information provided herein is given by OCBC Bank and it should not be relied upon as such. OCBC Bank does not undertake any obligation to update the information or to correct any inaccuracy that may become apparent at a later time. All information presented is subject to change without notice. OCBC Bank shall not be responsible or liable for any loss or damage whatsoever arising directly or indirectly howsoever in connection with or as a result of any person acting on any information provided herein. Reference to any specific company, financial product or asset class in whatever way is used for illustrative purposes only and does not constitute a recommendation on the same.