One of the biggest challenges faced by small businesses in Malaysia is the lack of access to capital or funding. Recognising this issue, the Malaysian government has incorporated both new and existing financial schemes in the Budget 2024, aimed at assisting businesses of all sizes, ranging from home-based businesses to multinational corporations.

Sufficient funding is important not only for maintaining your day-to-day operations but also for capturing opportunities that come your way. Loans are often utilised for business growth, enabling the purchasing of assets such as equipment or office spaces to keep up with increased sales. Additionally, loans serve as a valuable resource for working capital, acting as a safety net during slower seasons.

In 2022, Malaysian micro, small, and medium enterprises (MSMEs) contributed to 38.4% of the country’s GDP and employed approximately 48.2% of the workforce, as per the Department of Statistics Malaysia in 2022. Being the backbone of our nation’s economy, small businesses have access to various government initiatives aimed at supporting their venture. If you are looking to raise funds for your business, it is beneficial to stay informed about available government loans and grants that could help optimise your capital structure.

Pros and cons of applying for government loans and grants

Government-assisted loans and grants are a great choice for financing your business operations and growth. Before exploring the available initiatives, let us first identify the pros and cons associated with securing these loans and grants.

Pros of government loans/grants

• Government loans offer low-interest or interest-free financing.

• Grants, as opposed to loans, do not need to be repaid and are often tax-free.

• Securing grants demonstrates the credibility of your business.

• Securing and effectively utilising grants increases the likelihood of receiving new grants in the future.

Cons of government loans/grants

• Loans and grants must be used for their designated purposes.

• Applications involve paperwork and undergo strict evaluation.

• A strong proposal may be required, given the high competition in applying for government support.

• Some initiatives are reserved for specific demographics or organisations.

Available business loans and grants from the government

1. MSME Digital Grant: MADANI

Introduced in Budget 2024 to promote digital adoption for small businesses, this grant covers up to 50% of the invoiced amount or RM5,000 per business for digital services provided by selected digital partners (e.g., Maxis, Unifi, SiteGiant, EasyStore).

Purpose – Purchase of digital services or systems, including electronic point-of-sale, customer relationship management, HR payroll, digital marketing and sales, accounting, Internet of Things, cybersecurity.

Eligibility – SMEs registered with SSM and are owned in 60% by Malaysians; businesses that have operated for at least 6 months with an annual turnover of at least RM50,000; businesses that have not previously obtained Digitalisation Matching Grants.

2. SME Automation and Digitalisation Facility (ADF)

The ADF was introduced by the Central Bank of Malaysia (BNM) in 2021 with the aim of encouraging SMEs to automate processes and digitalise operations. This term-loan facility has a balance of RM914 million (as at October 2023), and can be applied through BSN Malaysia.

Purpose – Purchase of equipment, machinery, computer hardware and software, IT solutions, and other intangible assets to increase productivity and efficiency.

Eligibility – SMEs registered with SSM / authorities or district offices in Sabah and Sarawak / statutory bodies for professional service providers; 51% of shareholding must be held by Malaysian residents; shareholding by PLC and GLC must not exceed 20%.

3. Micro Enterprises Facility (MEF)

Budget 2024 has announced a RM200 million increase in allocation for the MEF. This facility provides collateral-free financing of up to RM50,000 for each micro-enterprise or entrepreneur, with a financing tenure of up to 5 years. Applications for MEF can be submitted through participating financial institutions.

Purpose – Capital expenditure and working capital.

Eligibility – Micro-enterprises that meet the definition by the National Economic and Social Development Council (NESDC); Malaysian micro-entrepreneurs including self-employed individuals, gig workers from digital platforms, and participants of the iTEKAD programme.

4. Business Recapitalisation Facility (BRF)

The BRF is introduced by BNM to provide financing to SMEs while managing their level of indebtedness. This facility offers a maximum financing amount of RM5 million per SME, and they can be in the form of equity financing or a mix of debt and equity. Applications for BRF can be submitted through participating financial institutions, including OCBC.

Purpose – Capital expenditure and working capital.

Eligibility – MSMEs from all economic sectors; 51% of shareholding must be held by Malaysian residents.

5. All Economic Sectors Facility (AES)

Established by BNM, the AES facility enhances the access of financing for SMEs in all economic sectors, specifically for the purpose of business growth. This facility offers a maximum financing amount of RM5 million, a financing rate of 7% p.a., and a maximum tenure of up to 5 years. Applications for AES can be submitted through participating financial institutions, including OCBC.

Purpose – Capital expenditure and working capital.

Eligibility – SMEs registered with SSM / authorities or district offices in Sabah and Sarawak / statutory bodies for professional service providers; 51% of shareholding must be held by Malaysian residents; shareholding by PLC and GLC must not exceed 20%.

6. Low Carbon Transition Facility (LCTF)

Budget 2024 has allocated an additional RM100 million under the LCTF, aimed at promoting sustainability and green certification among MSMEs. This facility is open to all SMEs that are committed to achieve low carbon operations. Applications for LCTF can be submitted through participating financial institutions.

Purpose – Capital expenditure or working capital to facilitate low carbon and sustainable operations.

Eligibility – SMEs in all sectors

Click here for a complete list of SME financing facilities from BNM.

7. TEKUN Nasional Micro Financing Schemes

TEKUN offers a range of micro-loans to support small businesses led by specific groups, including Bumiputera, women, the Indian community, and others. Some of the notable initiatives are the TemanNita Financing Scheme, TEKUN NIAGA Financing Scheme, and Teman TEKUN Financing Scheme.

Their common eligibility requirements are – Entrepreneurs must be aged 18-60; have a valid permit / license / business registration; have a dedicated business premise / mobile business; existing business financing with other institutions does not exceed RM50,000.

Click here for a complete list of initiatives under TEKUN.

Still not sure how to apply for government-assisted loans?

Access government financing schemes for your aspirations through OCBC Bank Malaysia. Here are two readily available options:

1. SME Financing Scheme

   Funded by BNM, this financing scheme is designed to support the growth of SMEs. This loan offers a customisable financing amount ranging from RM50,000 to RM5 million, along with a flexible repayment period of up to 8 years.

   Purpose – Purchase of equipment, machinery, renovation costs for owner-occupied business premises, and working capital.

   Eligibility – SMEs registered with SSM / authorities or district offices in Sabah and Sarawak / statutory bodies for professional service providers; 51% of shareholding must be held by Malaysian residents.

2. Credit Guarantee Corporation (CGC) Guarantee Scheme

   The CGC Guarantee Scheme provides financial support to viable SMEs that lack collateral for existing financing facilities. This scheme offers partially secured or collateral-free financing of up to RM1 million in the form of term loan and overdraft. Additionally, it offers guarantee coverage of up to 70% and a comfortable repayment period of up to 10 years.

   Eligibility – SMEs registered with SSM / authorities or district offices in Sabah and Sarawak; 51% of shareholding must be held by Malaysian residents.

Securing government loans or grants could be invaluable in financing your business assets operations, and improving cash flow. Yet, gaining easy access to essential funds is just the beginning of your journey toward business success.

At OCBC, we understand that navigating the financial landscape can be daunting. Our dedicated team is here to guide you every step of the way, providing personalised support and deep business expertise to help you meet your entrepreneurial needs.

For further enquiries, consult with an expert from the OCBC team today. Let us harness for your business plan its full, unbridled potential.