Cash flow still a major issue for SMEs
PETALING JAYA — Small and medium enterprises (SMEs) are still experiencing cash flow issues and are hoping that the Malaysian government can assist in resolving the problem by providing them with more consistent financing, say business groups.
They said businesses find it more challenging to get approval for their SME business loans because lenders tend to look at credit history, past business performance records and market experience when approving a loan.
Malay Chambers of Commerce Malaysia (MCCM) president Norsyahrin Hamidon said micro, small and medium enterprises (MSMEs) could not apply for loans from commercial banks owing to incomplete financial reporting by businesses.
“Over the last two years, MSMEs have been busy reviving their businesses. We are grateful to the government for providing enormous amounts to assist SMEs in financing their operations, but the documentation required by financial institutions has left many SMEs facing unsuccessful loan applications,” he said.
He said many MSMEs need help to obtain loans from financial institutions and some had to borrow from loan sharks and credit companies at high interest rates.
“We suggest that the government control the amount of financing through a specific government agency so that companies that can repay, but lack financial reports, can apply without being limited,” he said.
Early this year, Prime Minister Datuk Seri Anwar Ibrahim had tabled the revised Budget 2023 that included several measures for SMEs, including providing various financing facilities to SMEs with a total value of up to RM40bil and SME tax rate on taxable income for the first RM150,000 reduced to 15% from 17% for the assessment year 2023, among others.
The Prime Minister had also announced that Syarikat Jaminan Pembiayaan Perniagaan would guarantee up to RM20bil in SME loans, where key sectors such as high technology, agriculture, and manufacturing are provided with a government guarantee of up to 90%.
He said guarantees would also be expanded to financing by non-banking financial institutions such as credit leasing companies and cooperatives.
Kuala Lumpur & Selangor Indian Chamber of Commerce & Industry (KLSICCI) treasurer Datin Maheswary Ramasamy said many commercial banks had rejected loan applications by SMEs due to their poor credit score or lack of credit history with the Credit Reporting Agency — CTOS, leaving them with no recourse.
“Due to the pandemic, SMEs are in debt from 2020 to 2021 and are repaying in 2022 and this year.
“It is sometimes justified for businesses to pay their suppliers first and postpone loan repayments, and financial institutions should go above and beyond to process loan applications.
“Also, CTOS and CCRIS (central reference information system) credit records are not removed promptly, which prevents businesses from applying for financing.”
Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) SMEs committee chairman Koong Lin Loong said many SMEs were turned down for loans because their financial reports were incomplete.
“They could, however, apply for bank financing again if they could demonstrate their repayment ability and good business performance,” he said, adding that companies need to automate to survive.
“Many financial institutions and agencies in the sector have automated financing applications.
“We also found that it is not cash flow that is currently bothering SMEs, but the rise in raw materials, the ringgit exchange rate, and a lack of staffers,” he said.
SME Association president Ding Hong Sing said the regulations surrounding the financing facilities announced early this year had yet to be made clear.
“We have pursued this, but the authorities have said they will announce it shortly,” he added.
— thestar.com