Funding Your Vision: How to Secure a Startup Business Loan with Limited Business History
Financing remains the greatest challenge for startups in Malaysia. Most of the traditional lenders are looking for two years of financial history, clean revenue models, tangible assets, all which are requirements that young ventures just do not have.
Without a credit history or solid track record, business founders often hit a wall when trying to secure financing for their startups.
The good news is that Malaysia’s impressive startup ecosystem has given rise to other types of loans and grants that are tailored for new businesses.
The Loan Difficulty for Startups
The obstacles that startups typically face when applying for start up business loans include:
Narrow Operating History: Banks generally prefer businesses that have demonstrated that they can keep their heads above water. And many startups have not made it to a second year, so it can be difficult to establish reliability.
No Collateral or Assets: New business may not have property, equipment, a large enough inventory or any other significant assets to offer as collateral or security.
Banks That Think Startups Are Riskier: Banks believe startups are riskier, leading to higher interest rates, tougher qualification requirements, or not funding at all.
Hence, existing government schemes and alternative lenders attempt to fill this gap by providing less stringent terms to early stage companies.
Financing Options for Startups in Malaysia
Government-Backed Loans and Grants
The Malaysian government has specific programs for startups, especially for those without any substantial history:
SME Bank Start-Up Financing Program: This sme business loan program supports businesses that are 1 year to 2 years old, financing up to RM500,000. Government guarantee (SJPP/CGC) up to 80%. You can apply for it if your business is in the F&B, logistics, services and manufacturing sectors.
TEKUN Financing Scheme: For micro and small entrepreneurs, provides for RM10,000 to RM100,000 in financing for startups requiring startup capital for operation and expansion.
Cradle Fund: Grants worth RM150,000 up to RM600,000 are offered to technology-oriented startups aiming for product development and commercialization. Agencies like SME Corp, MDEC have grants for early-stage startups and digital ventures.
SME Corporation’s SMERF and Business Accelerator Programme: Low collateral and less track record based financing, support of up to 90% project cost with attractive interest rates (as low as 3% per annum).
Budget 2025 Loan Guarantees: SJPP offers government-supported guarantees on as much as 80% of qualifying loans, a helping hand for startups with little collateral on offer.
Microloans & Alternative Financing
If government grants are not a fit, startups can look to microloans or digital financing platforms:
Microloans: Loans ranging between RM20,000 and RM200,000, with flexible tenures, are usually aimed at micro-enterprises. MicroLEAP, Fundaztic, and Funding Societies concentrate on small or microloans for startups with minimum paperwork and business history with funds being released in a matter of days.
Peer-to-Peer (P2P) Lending Platforms: Licensed platforms (Alixco, Capbay, Funding Societies, microLEAP) offer the option to borrow directly from investors, typically with lesser requirements in comparison to traditional banks. Malaysian P2P campaigns facilitated RM2.09 billion in financing in 2023, making them one of the greatest lifelines for startups and micro-enterprises.
Crowdfunding: Equity crowdfunding is only offered by platforms approved by the Securities Commission Malaysia for startups with high growth rates.
Business Credit Cards & Lines of Credit
Business Credit Cards: These offer access to cash-on-hand for operational needs, which helps startups to handle daily expenditures and establish a preliminary credit history.
Lines of Credit: A few banks and fintech platforms provide lines of credit to early-stage businesses or sole proprietors. Interest is only charged on amounts drawn, allowing founders to plug short-term financing gaps without pledging much collateral or history.
Tips to Secure Approval with Limited History
The success to securing start up loan in Malaysia often requires a strategic approach:
Beef Up Your Business Plan: Lenders and investors are looking for solid market research, cash flow projections and a strong vision. Even if you lack years of financials, a strong plan can instill confidence.
Demonstrate Personal Financial Responsibility: Banks may analyze your personal credit. Keep a clean personal credit history, show a record of saving, and be transparent with your finances.
Recourse to Co-Signers or Guarantors: Turn to partners with good credit or assets, or use a government guarantee (SJPP). This might ease lenders’ fears and bolster your chances of approval.
Small Beginnings are Good: The tiny microloan (for example, through P2P/micro finance) might just give your business a history of repaying (on time or early), which may make it easier to secure larger credit.
Embrace technology: Take advantage of digital banking, online lending platforms and financial tools to tidy up your finances and get your application documentation in order.
With access to the variety of choices within Malaysia’s start-up ecosystem, founders who plan ahead can go beyond their financing challenges and into a growth-driven phase by turning vision into reality.
