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Things SMEs Should Consider Before Taking A Loan


SMEs were amongst the most affected by the pandemic. In order to bounce back, taking a business loan might be the solution. However, there are a few things to consider before taking this route.

Small or medium-sized enterprises (SMEs) are the backbone of the Malaysian economy. They represent a staggering 98.5% of all businesses in Malaysia. In 2018, approximately RM521.7 billion or 38.3% of national GDP was contributed by SMEs. Furthermore, SME businesses account for 66.2% of Malaysia’s total employment.

A business will be deemed as an SME if it meets either one of the two specified qualifying criteria, namely sales turnover or full-time employees, whichever is lower.

Details of the new definition are as follows:

  • Manufacturing: Sales turnover not exceeding RM50 million OR full-time employees not exceeding 200 workers

  • Services and Other Sectors: Sales turnover not exceeding RM20 million OR full-time employees not exceeding 75 workers

Businesses also need financing

Funds from government schemes

As mentioned earlier, SMEs contributed to 38.3% of the national GDP in 2018. Recognizing the importance of this sector, the Malaysian government has implemented various types of business schemes specifically for start-up businesses and SMEs.

Finding investors

There are two main types of investors who can help your business, namely ‘angel investor’ and ‘venture capitalist’. The former, angel investors, are directly involved in your business. The latter, venture capitalists, on the other hand, work for venture capital companies, where they invest money into the business.

Get SME / business financing

These are loans or financing specifically catered to businesses and SMEs. There are many banks and financial institutions that offer this service.

What to consider before taking an SME or business loan

Before you take an SME / business loan, you need to consider the following:

Why do you need financing /  a loan?

Among the factors that require you to take out financing include:

Manpower requirements

This is probably the most important factor that determines the success of a business. In fact, this statement is also supported by the CEOs of the world's leading companies. Hence, allocating a lot of money in this direction is an arrangement that should be taken by all traders.


Skills from all aspects of the business (management, marketing, location, innovation, etc.) are essential to achieving success. You or an employee may need to attend relevant courses to ensure you stay competitive.

Purchase of assets

Also important in a long-term business plan.

Technological improvements

As we are already in the Industrial Revolution 4.0, the latest technology is also important for a business.

Marketing needs

New businesses need effective marketing strategies to seize the attention of customers. In fact, the latest marketing is focused on digital methods.

How much can you afford to make a monthly payment?

The larger the amount of financing and the shorter the payment period, the higher the monthly repayment that needs to be made. Is your business income able to cover the cost of those payments? Make sure you get a return that gives you a long-term profit.

Can you provide a guarantor or collateral?

Usually, the bank will give you more attractive terms if you can afford to provide a guarantor or collateral

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