ALTHOUGH access to financing has eased over the years, the fact that it remains a key challenge for small and medium enterprises may boil down to one reason: a lack of understanding over banking requirements or practices.

This is likely why SMEs still find it difficult to obtain financing and their applications are rejected even though the majority of financing applications do get approved.

Among the most typical reasons for banks to reject a financing application is the lack of sufficient track record from the applicant. This is due to the common rule of thumb for banks, which require applicants to be in business for at least three years or more. Equally important is that the businesses must also have good cash flow management.

Ensuring consistent and on-time transactions for vendor or client payment schedules is a good indication of a company’s ability to repay their future SME financing.

Apart from the financial health of the business, the applicant’s personal credit score also plays a role in the banks’ due diligence process, which many business owners may not be aware of. This means that if their personal financial records are in the red, it is unlikely that banks will approve the financing.

Banks require a large number of documents for submission of business financing applications, especially when it comes to private limited (Sdn Bhd) companies. However, many fail to prepare the necessary documents owing to bad documentation practices.

The onus is on SMEs to ensure important documentation is kept up-to-date and complete, enabling good governance for the business at all times.

Right help: SMEs can seek advice from an SME business financing expert to resolve the underlying issues behind financing rejections.

Lastly, it also boils down to business viability. If a company’s business model or nature is deemed too risky, banks are unlikely to extend financing for fear that the applicant would struggle to meet their financing obligation.

Instead of playing the guessing game, a wiser approach would be for SMEs to seek advice from an SME business financing expert. They are well-equipped to help business owners identify and resolve the underlying issues behind financing rejections.

Recognising the importance of SMEs in Malaysia, the government and financial institutions have made constant efforts to improve SMEs’ access to financing, therefore placing businesses in a better position to grow.

One option that SMEs can consider is the CIMB SME Quick Biz Financing/-i, which provides working capital financing without collateral to improve the company’s cash flow.

The CIMB SME Quick Biz Financing/-i enables eligible SMEs to apply for financing of up to RM1mil via a hassle-free application process with minimal documentation, which decorative panel board manufacturer Veneer Mark Sdn Bhd as well as measuring equipment, machinery and related components player Ginmaro Technology Sdn Bhd can attest to.

For those looking to expand, the CIMB SME Biz Property Financing may be the suitable solution as it is intended to finance the purchase of properties, undertake refinancing and even provide working capital.

The facility, which has a highly competitive margin of up to 160%, gives SMEs access to a large financing amount of up to RM10mil to take their business to the next level.

These financing facilities are open to all Malaysian-owned SMEs that have been in operation for a minimum of three years.

For more information, visit https://www.cimbbank.com.my/en/business/products/sme-banking/sme-financing.html

This article is the first part of a special series focusing on SME financing, courtesy of CIMB Bank.

https://www.thestar.com.my/business/smebiz/2020/05/09/breaking-down-financing-woes