Malaysian SMEs contribute to 33% of the country’s gross domestic product (GDP) and 58% of the national workforce. By 2020, Malaysia also aims to push SME contribution to GDP to 41% and SME contribution to national exports at 23%. Despite being the backbone of the economy and government ambitions to push greater future productivity, Malaysian SMEs still face a big problem: limited financing access. Debt investment financing is the best solution for SME funding needs. Debt investment financing allows small business owners to gain capital faster. Why do we say that debt investment financing is the best answer for SME financing?
No collateral required
The limited access to financing faced by Malaysian SMEs is caused by a mismatch between the financial products offered by traditional institutions and the needs of an SME. SMEs tend to lack enough assets or collateral to satisfy requirements by institutions such as banks. More traditional financing products also require a lengthy application and disbursement process, making it difficult for SMEs who need fast financing to fulfill their capital needs.
Debt investment financing, on the other hand, is a suitable financing option for SMEs as it requires no collateral. Debt financing is more based on whether an SME is deemed worthy or credible enough for the requested funding. To get funds from the financing, SMEs need to propose their capital needs to a financing platform. If the business is considered solid, the financing company will pool the requested funds from a group of individual investors.
According to a Deloitte and Visa study, around 58% of Malaysian SMEs did not apply for financing because long processing time is a deterrent for them. Some bank financing needs 2-3 months for funding approval, but SMEs usually need quick financing for working capital and cash flow. Without enough capital, an SME is in a perilous position.
One of debt financing’s selling points is a simple and fast application process, typically online-based. Most lending activities are provided by FinTech companies. You can easily go to a lending company’s website, register and signup for an account, and complete an application for SME financing within 10 minutes.
A reliable debt financing company will also be beneficial to investors. A credible debt financing company will rigorously assess all SMEs before accepting their financing proposal and disbursing funds.
See how debt financing can help small businesses and SMEs with financing? Learn more here.