BRIEFING ON SME FINANCING BY SME SPECIAL UNIT BANK NEGARA MALAYSIA

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BRIEFING ON SME
FINANCING BYSME SPECIAL UNITBANK NEGARA
MALAYSIA
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PRESENTATION AGENDAI - INITIATIVES TO
ENHANCE ACCESS TO FINANCING BY SMALL AND
MEDIUM ENTERPRISES (SMEs) II - SMALL
DEBT RESOLUTION SCHEME
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• I - INITIATIVES TO ENHANCE ACCESS TO
  FINANCING BY SMEs

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SME Special Funds

• BNM established various funds for SMEs. The
  lending rates under the funds are lower than
  market rates (3.75-5 p.a.).
• Currently, 5 Special Funds with total allocation
  of RM6.85 billion are operational.
• These funds are channeled through the following
  financial institutions (FIs)
• - Commercial banks, finance companies, Islamic
  banks, development financial institutions and ERF
  Sdn. Bhd.

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SME Special Funds

• Objectives
• To ensure that the specific economic sectors get
  access to financing at reasonable cost and
• To increase the productive capacity of the
  specific economic sectors

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SME Special Funds

• Loan Processing
• Financing is granted in the form of loan, not
  grant.
• FIs bear the credit risk.
• Normal credit assessment of the FIs is based on
  applicants risk profile.
• Main criterion is viability of business /
  project.
• Other factors. (not exhaustive)
• - Applicants character, repayment capability,
  capital commitment, business condition, etc.

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SME Special Funds
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SME Special Funds
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Status of SME Special Fundsas at 30 June 2004
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467
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Credit Enhancement

• Credit Guarantee Corporation (CGC) provides
  guarantee for SMEs with little or no collateral.
• Borrowers are subjected to loan agreement
• With the scheduled repayment by borrowers, it
  will enable the Government to assist other
  eligible borrowers

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Client Charter of FIs

• FIs are required to display their client charters
  on the SME loans. The client charters include
• Documents and information required from SMEs
• Eligibility criteria and
• Loan processing time. Generally, the processing
  time for loan application is 30 days from the
  date of complete submission.
• FIs are also required to inform the applicants on
  reasons for rejection of loan applications.

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Complaint Units at FIs

• All FIs have established complaint units as an
  avenue for customers to lodge complaints
• FIs have to settle the complaints within two
  weeks.
• Customers of FIs could also forward their
  complaints to
• SME Special Unit, BNM
• Bumiputera Development Unit, ERF Sdn. Bhd.

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SME Units at FIs

• All FIs have established dedicated SME
  Units.
• The roles and functions include
• Identifying SME financing needs
• Organizing training, courses and seminars
• Providing cash management services and
• Advisory services i.e. financial management.

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SME Special Unit at BNM

• Established on 20 May 2003, to assist viable SMEs
  by
• Providing information on the various sources of
  financing available to the SMEs
• Facilitating SMEs in their loan application
  process
• Addressing the difficulties faced by viable SMEs
  in securing financing and
• Providing advisory services on other SMEs
  financial requirements.

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• II - SMALL DEBT RESOLUTION SCHEME
  (SDRS)

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Scheme Objective

• To provide assistance to viable SMEs that are
  constrained by NPLs through
• Facilitation of loan restructuring and
• Provision of new financing (if
  necessary)

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Eligibility

• Viable SMEs in all economic sectors
• 51 Malaysian owned companies
• Full-time employees ? 150
• Sales turnover ? RM25 million
• Aggregate NPLs of ? RM3 million
• Only NPLs of business-related loans and
• On-going business.

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Scheme Mechanism

• SDRC to undertake an independent assessment
  on the viability of businesses of SMEs whose
  applications for
• debt restructuring or
• debt restructuring together with new financing
  have been declined by the FIs.

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Funding / Guarantee

• RM800 million has been allocated.
• Guarantee of up to 80 under the Flexi Guarantee
  Scheme by CGC.

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Financing Features under RFSB

• Amount actual working capital or
  RM1.5m, whichever is lower
• Interest rate 5 p.a.
• Tenure maximum of 5 years
• Purpose of loan for working capital and
  business expansion
• Disbursement Through a non-checking
  account.

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Financing Features under RFSB

• Control mechanism
• Disbursement closely monitored
• New loan shall rank in priority and
• A Standstill Agreement is to be observed.

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Application Procedures

• Applicant must use standard SDRS
  application form
• The SDRS application form can be obtained from
  participating FIs, ERF Sdn. Bhd., the Secretariat
  or BNM website at
• www.bnm.gov.my and
• Completed application form together with all
  required supporting documents should be submitted
  to the participating FI, ERF Sdn. Bhd. or the
  Secretariat.

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• Supporting Documents
• Company information
• Management information
• Financial information
• Security information
• Business operation information
• Other information

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Roles Responsibilities of the SDRC Secretariat

• SME Special Unit of BNM acts as the
  Secretariat to
• Accept applications
• Conduct lenders meetings
• Assess viability and recommend debt workout
  arrangements to SDRC and
• Track progress of all applications and
• debt workout.

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• Roles Responsibilities of SDRC
• Independent assessment on rejected applications
• Review decide on debt workout recommendations.

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Summary of Process Flow
NPL Borrowers (Application Form)
ERF / SME Special Unit
Scenario 1
FI(s) will process the application
Agree to restructure and/or new financing
Notification of approval or rejection
Implementation
Secretariat
Disagree to restructure
Re-evaluation by the Secretariat
SDRC
Scenario 2
Reject
Applicant and FI will be informed
Approve
Implementation
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Conclusion

• The Government has introduced various initiatives
  and promoted various financing schemes to assist
  the SMEs. However, to ensure success SMEs
  should also
• Enhance competitive edge, business viability and
  quality of product or services offered.
• Implement effective strategies to enhance
  accessibility to technologies, innovation,
  technical expertise including finance and skills
  in business management.

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THANK YOU
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SME Special Unit at BNM

• Contact Numbers
• Telephone
• 26932330 / 26914570 / 26916539 /
  26913764 / 26916971 / 26913486
• Facsimile
• 26916954 / 26986705

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Questions Answers
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Credit Process

• Main criterion is viability of business/
  project.
• Review 5 Cs of credit
• - Character
• - Cash Flow Collateral
• - Capital Commitment
• - Competitive Advantage
• - Condition

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Collateral Support

• CGC provides guarantee
• Borrowers are subjected to loan agreement

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Sample Restructuring
REPAYMENT CAPACITY
Bank AAA BBB
NPL 100K 200K 300K
MI 2,500 4,500 7,000
P 1,000 2,000 3,000
I 1,500 2,500 4,000
Year 1
Year 3
Year 2
6,000
7,000
8,000
Next One Year
Decision
Consequence

• Insist on 7,000 p.m
• Insist on 6,000 p.m
• Agree to 4,000 p.m

• SME becomes a statistic
• OK but no W. Capital for SME
• Win-Win with 2,000 W. Capital

Based on existing projected business
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• Supporting Documents
• Company information
• - Business registration / Form 24, 49 and MA
• - Company profile
• Management information
• - Photocopies of directors owners I/C
  profile
• - Managements profile / organisation chart
• Financial information
• - Audited accounts for the last 3 years
• - Management account for the current year
• - Latest NPL statements
• - A copy of the letter of offer for all loans
  with FIs
• - Cashflow projection for 3 years

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• Supporting Documents
• Security information
• - Valuation report for NPL secured by property
• - For new proposed security-
• Landed property
• - A copy of grant / title
• - Latest valuation report
• - Sale purchase agreement
• Fixed deposit receipt
• Business operation information
• - List of major suppliers and credit limits,
  major clients
• and sales terms
• - List of on-going projects, completed projects
  contracts
• - Letter of award/indent/invoice/payment voucher
• - List of machineries and equipments owned

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• Supporting Documents
• Other information
• Construction sector
• - Pusat Khidmat Kontraktors certificate / other
  registration
• - Letter of award for proposed project for
  financing
• - Projects cashflow statement
• - Statement of projects estimated profit / loss
  etc.
• Manufacturing sector
• - Production cycle flowchart
• - Factorys details own / rent / encumbered /
  etc.
• - Productions details type of products,
  production capacity per month, market etc.

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• Supporting Documents
• Supply sector
• - Details of products traded / distributed /
  supplied
• - Source of supplies, trading and financing
  method
• - Current order(s) requiring financing provide
  purchase order / invoice / delivery order etc.
• Service sector
• - Details of service(s) provided
• - Particulars of labour
• - For professional services
• List of professional staff and qualification
• License / approval to provide services
• Other necessary documents to support your
  application

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PANEL CONSULTANTS FOR SME LOAN APPLICATIONS

• 1. SBF Integrated Business Centre S.B.
• Contact Person Mr.Peter Fong
• 712, 7th Floor, Block A Kelana Square
• Jalan SS7/26, Kelana Jaya
• 47301 Petaling Jaya
• Tel 03 - 78033688
• H/P 013 - 3314345
• Fax 03 - 78030399
• e-mail peterfong_at_sbf.biz
• website www.sbf.biz
•  
• 2. The Royal Mint Exchange S.B.
• Contact Person En. Hanif
• 28th Floor, Putra Place
• 100, Jalan Putra
• 50350 Kuala Lumpur
• Tel 03 - 40458299
• Fax [phone]
• e-mail hanif_at_rmex.com.my

• 3. Mohd Noor Associates
• Contact Person Mohd Noor
• Lot 14-1A, 14th Floor
• Pertama Complex
• Jalan Tuanku Abdul Rahman
• 50100 Kuala Lumpur
• Tel [phone] or 03 26985619
• Fax [phone]
• e-mail mohdnoor_at_mohdnoor.com.my
•  
• 4. Razalee Co.
• Contact Person Razalee Amin
• Tingkat 15 Menara Safuan
• No. 80 Jalan Ampang
• 50450 Kuala Lumpur
• Tel [phone]
• H/P 012 - 2385071
• Fax [phone]
• e-mail racopa_at_po.jaring.my