Get your SME loan approved with the help of the SJPP Loan Scheme and these insider tips

For SME owners, seeking financial assistance such as applying for a loan can propel the business forward. Loans unlock more capital quickly, allowing SMEs to move faster on new opportunities and gain a lead in terms of the competition.

SME owners often face challenges in securing financing from banks; this may be due to insufficient collateral or the lack of a business track record. UOB’s collaboration with Syarikat Jaminan Pembiayaan Perniagaan (SJPP)¹ is designed to help remove this roadblock. Under this scheme, the Malaysian government will guarantee up to 80 per cent of the loan amount for eligible SMEs for a nominal guarantee fee.

While the government will provide the guarantee for the financing, SMEs must still apply for the loans through the scheme’s partner financial institutions. As such, it is important that business owners understand the loan application process so they are well-prepared when they seek out financial support.

Here are four things SMEs can do to increase their chances of successfully getting their loan approved.

#1: Outline the purpose of your business loan

A first and vital step to this process is to be clear on the specific purpose of the loan. Whether the funds will be used for fixed asset acquisitions, expansion plans or simply to bridge the gap between the time of procuring inventory and collecting proceeds from sales, the purpose needs to be clear from the outset.

It also helps to have your purpose backed by a documented business plan that demonstrates you've thought very carefully about your growth strategy and have outlined very clear tactics for expansion. Online tools like Enloop and Lean Canvas are useful for laying out and presenting business plans clearly.

#2: Keep a good credit report

One of the first things banks look at is the borrower's and guarantor's reputations or track records for repaying debt. In Malaysia, banks extract credit reports from a credit bureau to find out this information. Only credit bureaus gazetted by Bank Negara Malaysia (BNM) are allowed to collect credit information on individuals. Such bureaus include BNM’s Credit Bureau which manages the Central Credit Reference System (CCRIS) and CTOS Data Systems Sdn Bhd, which issues the MyCTOS Score Report. A credit report reveals important details such as:

• Records of all credit checks
• Credit repayment trend for the past 12 months
• Default records, if any, will be displayed from the date they were uploaded at the credit bureau

#3: Demonstrate your capability to repay the loan

Banks also look at your business’ existing resources to determine if you are adequately equipped to repay the loan that is being applied for. They also take into consideration the required cash flow to support your debt commitments and expenses.

The more robust the cash inflow, the more certain it is for the company to service its regular commitments and manage any contingent expenses. In return, this increases the company’s reliability in the eyes of the loan approver.

Banks also need to determine a company’s financial health. A good rule-of-thumb is to keep timely financial reports ready so that you avoid scrambling at the last minute when you need to compile the documents for your loan application. SMEs that want to streamline the financial reporting process can utilise digital accounting tools that are readily available. To get started, SMEs can consider UOB SmartBusiness, a solution which incorporates digital accounting functionalities in its platform.

#4: Leverage collateral if required

The availability of collateral helps reassure banks that applicants have assets that can compensate for any failure to repay a loan. Typical sources of collateral for loans include real estate and equipment. Other types consist of business inventory and outstanding business invoices. Equipment and commercial vehicle financing loans or business property loans are some forms of secured loans against the assets financed by the bank.

It’s worth noting that this isn’t always required, depending on what type of loan you’re applying for. There are unsecured loans, such as UOB Business Loan, that do not require collateral. This reduces risk and barriers to entry for SMEs, giving them more flexibility and speed when it comes to additional cash to take on business opportunities.

Taking out a loan is an effective option for SMEs to accelerate business growth instead of being bogged down by limited capacity to expand. It pays for SME owners to be well-prepared for the application process. By fully understanding the criteria that banks evaluate, they can ensure that they’re doing everything they can to secure a business loan successfully.

Find out more

If you’re an SME looking for financing, UOB’s BizMoney Business Loan is a sound option. With fast approval times, no loan processing fees, flexible repayment tenures, and loan amounts of up to RM1 million, we are your reliable financing partner. Apply now or contact us to learn more.