Entrepreneurs need money to fund their businesses. Not all of them but some of them. It can be hard to scale up your business without sufficient funds, and sometimes relying on investors is just not the way to go.
In Malaysia, there are several ways for a business to get financial assistance, between business loans, crowdfunding and now Peer-to-peer financing, entrepreneurs definitely have more options. One of these options is SME grants, which are basically government grants.
What is an SME grant?
Colloquially described as a government grant for small businesses, an SME grant is a sum of money that has been allocated or given to a business to further their growth. Just like how it was in the previous years, SME grants in 2021 are distributed by governments, corporations, foundations and even trusts. In Malaysia, the majority of SME grants stem from our government, but we have seen occurrences of independent grants being added to the mix.
Unlike regular business financing or funding, grants are not meant to be paid back. Not to be confused with a donation, a business grant is distributed to an SME on a set of principles often pertaining to the profit or growth margin of said company. This means that if someone were to give your SME a grant, then they are probably invested in some aspect of your business and need to see it grow.
Malaysia’s 2021 Business Stimulus Package
With the emergence of a global pandemic, small businesses worldwide have suffered a multitude of losses, resulting in a frankly tumultuous economy. The Covid-19 outbreak hit Malaysia in February 2020, resulting in a Movement Control Order (MCO) implemented on the 18th of March 2020. Within the first week of this MCO, several SMEs saw a 50% drop in their businesses, followed by a myriad of sales and cash flow issues.
It has been 19 months of re-learning how to navigate global economic markets and it is no different here in Malaysia. As we enter the endemic phase there is still much that needs rebuilding.
In an effort to protect the economy and mitigate the impacts of the pandemic, our Malaysian government set forth an RM250 billion Malaysia’s Prihatin Rakyat Economic Stimulus Package (PRIHATIN) on the 27th of March 2020. Following that in April, the Prime Minister later unveiled an additional RM10 billion stimulus package for Malaysian SMEs.
2020 has come and gone, in 2021 the Government released yet another stimulus package to aid Malaysian businesses and keep our economy afloat. Going from RM10 million to RM36.5 million, the new scheme is meant to assist SMEs in 2021 who have at least 51% Malaysian shareholding.
From the first economic stimulus package, RM 100 billion was allocated to support businesses while the remaining values of RM 128 billion went to public welfare and RM 2 billion was dedicated to strengthening the country’s economy.
Let’s first address the RM10 billion stimulus package for SMEs. This additional stimulus went on to progress the following initiatives.
1. Higher Wage Subsidies.
In the first economic stimulation package, a wage subsidy programme was introduced, a programme of which was extended from the Employee Retention Programme (ERP). ERP was implemented by the Malaysian Human Resource Ministry via the Social Security Organisation (Socso) as part of PRIHATIN.
If you didn’t already know what the wage subsidy programme entailed, here’s a nifty little picture to explain it.
(source: Wage Subsidy Programme)
The Higher Wage Subsidies were extended to employers who had experienced a 50% decrease in revenue since the 1st of January 2020. These employers once identified, vetted, and were found to be eligible, would be entitled to 3 months of financial assistance to retain their employees.
Only local companies operating with local employees who have a monthly earning of RM4,000 or below are entitled to this stimulus perk. Requirements are as follows.
|Number of Staff (Company Size)||Claim Value (RM per Pax)|
|More than 200 Staff
(Maximum number of staff a company can claim for has increased to 200 employees)
|76 to 200 Staff||RM 800/-|
|75 Staff or Less||RM 1,200/-|
To be eligible for application, employers and businesses need to be registered with the Companies Commission of Malaysia or the local authorities before 31st July 2021. The company or business also needs to be registered with SOCSO.
Another requirement, if a business applies for this program, is that they must retain their employees for a minimum of 6 months including the 3 months from the initial wage subsidy.
Choosing to participate also means there are restrictions on what you are not allowed to do as a company.
- The Company must not lay off employees
- The Company will not instruct its staff to take unpaid leave for three months following the programme implementation
- The Company will not deduct employee salaries.
Here’s the good news if you are a business in need of help from this subsidy. The deadline for application is 30th October 2021, which means you still have time to apply.
To apply, you will need to prepare the following documents:
- List of Current Employees
- Business bank account number (attach 1st page of bank statement)
- Business Registration Number (BRN). BRN is Company Number. Example: 1234560-X
- SSM Registration Cert such as Form 9 or Section 13 (CA 2016)
- Declaration PKU 50 Form; and
- For companies with more than 76 employees, supporting documents such as Statement of Profit and Loss and Revenue Report are required. These documents need to be verified by management.
- You will need to submit your application via PERKESO. Have more questions? Check out their FAQ (English).
2. PRIHATIN Special Grant
The government of Malaysia introduced a PRIHATIN Special Grant in 2021 that’s worth RM 2.1 billion that allocates RM 3,000 to micro-enterprises or small businesses.
All eligible micro-enterprises or small businesses registered with Lembaga Hasil Dalam Negeri (LHDN) are entitled to take part in this business grant. A list of eligible micro-enterprises can be found with your local authorities and SSM. Unfortunately, applications for this Phase 1 of this grant closed in July 2021.
However, depending on when you’re reading this, Phase 2 was enacted in September 2021. If you have registered, payments started going out on the 22nd of November 2021. In total, Ismail Sabri said the total allocation that has been and will be channelled to more than 1 million micro SMEs under GKP since Covid-19 hit the country is RM6.08 billion.
3. No Interest Rates
Loan schemes put forth by both Bank Simpanan Nasional and Tekun Nasional were converted to abolish interest rates attached with the loans.
Tekun Nasional is an entrepreneur development institution that provides micro-credit facilities to local businesses looking to grow. TEKUN Niaga financing scheme is a financing facility based on tawarruq which involves 2 separate sales contracts. They offer 2 tiers of financing from small to medium enterprises ranging from RM10,000 to RM100,000. To learn more about TEKUN Niaga, click the link to visit their FAQ.
4. A moratorium for Business Loans
Aside from banks, alternative financing for businesses also provided a 6-months moratorium on any business financing they had provided.
Under the Money Lenders Act 1951, registered money lenders who provide credit facilities to businesses were urged to provide a moratorium on repayments, starting from the 1st of April 2020.
Banks also followed suit, taking the edge off many small businesses that needed the extra income.
5. No Rent
A lot of small businesses struggled due to having to pay rent on their location, despite a lockdown. Therefore, under the stimulus package, SMEs in the retail sector operating on Government-Linked Companies (GLC) premises, were given rental discounts or full waivers.
Not to worry, private spaces owners were also urged to follow suit to help support local SMEs. If private premises reduced their rent by at least 30% they would be entitled to additional tax reductions, so long as they stick to the parameters introduced.
6. Extension of Financial Statement Filing
Typically, companies and businesses file their annual Financial Statement at the end of September. However, as part of the stimulus package, The Government has agreed to extend the financial statements filing period to January 31, 2021.
Remember to apply for this extension with SSM, with a fee of RM100 to secure your extension.
Government Grants and Funding for Malaysian SMEs
Stimulus Package aside, there are other government grant products that include loans for small businesses and personal loans for self-employed Malaysians that have been available before the Covid-19 pandemic hit. Here are a few options you could look into for your SME.
1. Soft Loans for SMEs (SLSME)
If you are a start-up or a fairly young SME, check out SLSME. This business grant by the government of Malaysia allows you access to funds from RM 50,000 to a maximum of RM 5 million. Remember that grants are given with specific intention, so the range that you have access to varies depending on what you need the grant for.
To be eligible for Soft Loans for SMEs, you must be registered as an;
- SMEs incorporated under the Companies Act 1965
- SMEs incorporated under Registration of Business Ordinance 1956
- Malaysians held at least 60% of equity
- Owns a valid premises license.
- Owns SMEs with shareholdings not exceeding 20% held by public-listed companies. Only if applicable
SLSME focuses primarily on sectors such as Manufacturing, Manufacturing-Related Services and or anything in the Services industry but EXCLUDES insurance and financial services.
2. Soft Loans Scheme for Services Sector (SLSSS)
Similar to the other government grant in Malaysia that shares a similar name, SLSSS also provides financing aid to start-up enterprises, small businesses and SMEs in the services sector. It is recognised as a financial loan for capital expenditure or working capital, with an interest rate of 4% per annum (as of 2021).
The maximum amount an SME can apply for from this programme is RM 5million.
3. Young Entrepreneurs Fund (YEF)
As the name suggests, the Young Entrepreneurs Fund is meant to provide financial assistance to young entrepreneurs in Malaysia. Think of it as a personal loan for the self-employed in Malaysia, which can be used either as a business start-up fund or to fulfil the needs of their existing enterprises. The YEF can often offer up to 100% working capital.
This Young Entrepreneurs Fund focuses mainly on Shariah Financing product options. For example, Bai’ Inah, Bai’ Bithaman Ajil, Ijarah, Ijarah Thumma Bai’ and Bai’ Istina.
If you have an SME in this industry, YEF can offer working capital up to 100% or capital for Business Operation Assets. Depending on the condition of the equipment, they will finance between 70% to 95% of the cost at an interest rate of 5% per annum.
To be eligible for financial assistance as an entrepreneur in Malaysia, you will need to be,
- Malaysian citizens aged between 18 to 30 years old, owning a business.
- Business is registered with Suruhanjaya Syarikat Malaysia (SSM) – including sole-proprietorship, partnership firm or Sdn Bhd company.
- Partnership firm / Sdn Bhd company: the applicant must obtain more than 51% shares or majority shares in the company.
- Own at least an entrepreneurship or vocational certificate.
- Start-up companies that operated less than 1 year will be considered.
4. Bumiputera Enterprise Enhancement Programme (BEEP)
The Bumiputera Enterprise Enhancement Programme or BEEP is a specialised SME funding grant in Malaysia that aims to develop competitive, resilient, and dynamic Bumiputera SMEs. Their approach is to strengthen the SMEs core business and capacity, to help increase productivity and offer solutions.
BEEP offers financing solutions to Bumiputera SMEs to help with,
- Packaging and labelling
- Certification and Quality Management System
- Advertising, Promotion and Branding
SMEs who fall into this category, you can proceed to apply for this grant via SME Corporation Malaysia.
The eligibility criteria are as follows:
- Should be registered under SSM / Professional Bodies / Authorities or District Offices in Sabah and Sarawak.
- Fulfilled the definition of SME in terms of annual sales turnover and scope.
- Bumiputera owns 60% of the equity
- Own a valid business premise license
- No conflict of interest with the supplier.
- Under operation for at least 6 months
- Have a SCORE / M-CORE assessment.
5. SME Emergency Funds (SMEEF)
Regulated by Malaysia Industrial Development Finance (MIDF), the SME Emergency Funds is less of a grant and more like a soft loan. Its sole purpose is to help businesses that are affected by natural disasters. For example, if your business, premises, or equipment is damaged or destroyed in a flood, storm, drought, beach erosion or landslide, then you as an SME can apply for a soft loan with SMEEF.
As it is a soft loan, the financing amount goes from RM 50,000 to RM 100,000 only and can be used to replace or purchase machinery, equipment, raw materials, and consumables, or to refurbish your business premises.
To check your eligibility for this product, your SME.
- Should be registered with SSM under Companies Act 1960 or Business Registration Act 1956.
- Should at least 60% of the equity funds be based in Malaysia.
- Owns a valid business premise
- Should operate the business in disaster areas (declared by National Security Council or other district offices)
- Own the evidence that the business has been affected by the natural disaster.
- Owns a letter issued by District Officers.
- Owns a verification report from SME Corp Malaysia.
6. PROSPER Usahawan Muda (PUMA)
PUMA provides young Bumiputera entrepreneurs in Malaysia with financial assistance schemes to begin their businesses while taking care of their training. PUMA is the organisation that will provide training modules to these businesses.
It helps provide young businesses in Malaysia with a start-up fund to develop their entrepreneurial skills and the best ways to approach the business markets. Offering guidance and advice where necessary. PUMA provides funding up to RM100,000.
PUMA has a few specifications you will need to meet if you are planning to pursue this funding. The following is a list of eligibility criteria that might be helpful.
- Applicant must be a Bumiputera
- Applicants must be in the range of age between 18 years old until 35 years old.
- Applicant must be ready to prepare and capable to invest money, at least RM500
- Applicant must be ready to attend every training developmental program organized under this fund scheme
- Applicants must have good and clean financial records.
- Enterprise: Should be incorporated in Malaysia and registered under SEM, own every license that is required to start-up the business, not illegal and follow the Shari’ah compliant.
Smaller soft loans and grants aside, there are more funding options for SMEs that are much lesser known in Malaysia. In the next section, we’ll explore some of those options.
Specialised SME Grants
It’s not exactly easy to find information on business grants in Malaysia. Mostly because it is rare for these grants to be marketed online. Another factor is that applying for the grant can be a long and strenuous process, approval can be brutal too. However, all good things are worth the wait.
Let’s take a look at a few of these specialised business Grants that your SME might need to grow your business.
1. Business Scale-Up Programme (Biz-Up Programme)
Business Scale-Up Programme (Biz-Up Programme) is an integrated assistance programme for the purpose of enhancing the capabilities of SMEs via business advisory services and financial support. Acting as an advisory board, this programme is aimed at helping SMEs scale up, to grow and expand both locally and globally.
Offered by the SME Corporation Malaysia (SME Corp), the grant given goes up to a maximum of RM400,000 (as of 2021).
This SME Corp grant is only applicable for a selected number of industries. As of 2021, if your SME is part of Industry 4.0, Automation, Digitalisation, Logistics, Retail, Wholesale, Smart Cities or Agarwood then you are indeed the target market for this grant.
Specifics for this grant also include the breakdown of what your grant gets you. Depending on which grant amount you apply for up to RM400,000, the coverage varies.
Depending on when you’re reading this, the dates for application closed in July 2021. However, there is another currently ongoing programme in the next point.
2. Business Accelerator Programme (BAP 3.0)
Business Accelerator Programme is an assistance programme aimed to enhance the capabilities of SMEs through business advisory services and financial support. The programme supports a wide range of capabilities, building initiatives to assist SMEs expand their businesses both locally and globally.
Financial assistance and advice provided by government bodies and officials, for improvement activities. The objective being to increase business productivity and profitability. ‘
Some things to note:
- Applications can only be made online*
- It is compulsory to obtain SME Status Certification.
- It is recommended to apply for SCORE when applying for this assistance.
To learn more, check out this link.
3. Smart Automation Grant (SAG) Penjana
Offered by the Malaysia Digital Economy Corporation (MDEC) this tech-centric start-up fund plays a critical role in the advancement and digitalisation of Malaysian businesses. With this programme, SMEs will be able to kickstart their digital adoption journey and continue to strive in the online world we live in today.
SAG is a specific matching grant that only allows for the grant to be used for services that will help with your business automation and platform upgrading. The grant finances 50% or up to RM200,000 of the project costs upon successful application. As mentioned, some grants are given with specific intentions, Smart Automation Grant has an expected outcome from your SME.
Some of the expected outcomes are an increase in revenue, savings in your SME business costs, and the reduction of man-hours, amongst other things. So remember to keep that in mind when completing your application.
To be eligible for this grant, you will need to fulfil the following criteria.
- Incorporated in Malaysia under the Companies Act 1965 of the Companies Act 2016.
- Has an issued and paid-up capital of at least RM50,000
- Has a minimum of 51% equity held by Malaysian(s)
- Not be the subject of a liquidation/winding-up order
- Has no going concern issue and/or not dormant and
- Has entered into a written contract or a committed arrangement technology partner for the development and implementation of the project
- If previously has received any MDEC/government grant, the applicant must demonstrate the completion and success of the funded project/s
To apply, you can check out MDEC’s site and make your application there.
In closing, there are many more business grants out there available to Malaysian SMEs, so if you are an SME looking to grow, make sure you do your research. That being said, we at Funding Societies Malaysia also support growing Malaysian SMEs and businesses.
Funding Societies is Malaysia’s leading P2P Financing platform, with thousands of investors waiting to help grow Malaysian SMEs and our local businesses. We offer financing up to RM1 million over a range of industries. Check out the links below, if you want to learn more about how we can help boost your SME via P2P Financing.
We hope you found this article insightful, and wish you good luck on your business journey!Get Financing with Funding Societies
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