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Guide to Best Small Business / SME Loans in Malaysia (2023)

BySamantha Lim

Jul 2, 2023
BizTech Community | Personal Finance | Guide to Best Small Business / SME Loans in Malaysia (2023)

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BizTech Community | Personal Finance | SME in Malaysia, what is SME

SME in Malaysia, what is SME?

SMEs, also referred to as small and medium-sized businesses, are essential to Malaysia’s economy. These companies are identified by their ongoing revenues, assets, or personnel count that is below a predetermined threshold. They provide a variety of employment opportunities and frequently serve as the engine for innovation because they are at the forefront of Malaysia’s expanding and developing economy.

SME loan are one of the most frequently required resources for SME loan in Malaysia for a variety of purposes, including business expansion, the purchase of new equipment, or working capital. Understanding what constitutes a SME is essential when searching for the finest SME loan Malaysia.

In Malaysia, a business must achieve certain requirements regarding its yearly sales turnover and the number of full-time employees in order to be classified as a SME. Notably, these requirements differ based on the industry the business operates in. The criteria for the manufacturing sector, the services sector, and other sectors are each summarised in the tables below:

Manufacturing Sector

Business Size Sales Turnover Full-Time Employees
Micro Less than RM300,000 Less than 5
Small RM300,000 to < RM15 million 5 to <75
Medium RM15 million to <= RM50 million 75 to <= 200

Services & Other Sectors

Business Size Sales Turnover Full-Time Employees
Micro Less than RM300,000 Less than 5
Small RM300,000 to < RM3 million 5 to <30
Medium RM3 million to <= RM20 million 30 to <= 75

To qualify as an SME, a company must be registered with the Companies Commission of Malaysia (SSM) or other equivalent bodies. However, public-listed companies on the main board, subsidiaries of publicly-listed companies, multinational corporations, government-linked companies, and state-owned enterprises are excluded from the SME definition.

Understanding the criteria to qualify as an SME is crucial, especially for companies interested in applying for an SME loan Malaysia. With the right financing solution, these enterprises can continue to contribute significantly to Malaysia’s economic growth.

BizTech Community | Personal Finance | Is SME important in Malaysia

Is SME important in Malaysia?

Small and medium-sized businesses (SMEs) are the backbone of the Malaysian economy and are essential to the growth and development of the nation. They made up an amazing 97.4% of all establishments in the nation as of 2021, underscoring their absolute domination and significance in the commercial scene.

SMEs make a variety of important economic contributions to Malaysia. More than 80% of all SMEs operate in the services sector, which is a crucial industry where SMEs make their impact. SMEs play a significant role in a number of other industries, including manufacturing, agriculture, mining, and quarrying.

Notably, 78.6% of all SME establishments are microenterprises, making up the majority of these businesses. 19.8% of businesses are small, with medium-sized businesses accounting for the remaining 1.6%. This emphasises how important SMEs are for the socioeconomic development of the nation since they generate innovation, create employment opportunities, and stimulate market competition.

Many SMEs struggle to ensure their sustainability and maintain their competitiveness in a changing environment, despite their enormous potential and significant contributions. One of the major barriers in this regard has been highlighted as access to money.

The usefulness of SME loan Malaysia becomes apparent in this situation. SME loan are provided by a number of financial organisations in Malaysia, including banks and non-banking financial firms, to assist small enterprises in developing and growing. SME loan Malaysia from financial institutions are a significant part of the nation’s financial system, according to data from the Central Bank of Malaysia. Therefore, SME loan Malaysia play a critical role in helping SMEs overcome financial obstacles and ensuring their development.

SME’s play a crucial role in the stability and expansion of Malaysia’s economy. These businesses may continue to prosper, develop, and greatly advance the country through systems like SME loan Malaysia. Remember that SME loan Malaysia options are available to give you the financial support you require, whether you are a new entrepreneur trying to launch a small firm or an established SME seeking expansion.

The challenges faced by SMEs

Small and medium-sized businesses (SMEs) are the backbone of Malaysia’s economy, which is continually changing and makes major contributions to the GDP. These SMEs have tremendous potential, but they also face a variety of difficulties that frequently impede their development.

Navigating through Financial Challenges: SME Loan Malaysia

Securing financial support is one of the biggest difficulties SMEs confront. Given the numerous rules and requirements established by banking institutions, applying for a SME loan Malaysia is frequently a difficult and time-consuming process. Despite the fact that there are many SME credit programmes available, many business owners are either not aware of these possibilities or think it would be too difficult to obtain these loans. The resurgence of SMEs in the post-pandemic recovery phase is being hampered by a lack of understanding and the complexity of SME loan Malaysia applications.

Additionally, some SMEs, especially Micro SMEs (MSMEs), find it difficult to budget for operational expenditures and significantly rely on their meagre profits to cover expenses. This problem is made worse when expenses such as power bills rise because the new expenses must be paid for out of the already meagre revenues.

Technological Challenges: Adapting to the Era of Big Data

Malaysian SMEs must adapt as the global business environment goes through fast technological development. Big data use is becoming necessary for firms to stay competitive. Due to their limited resources and lack of IT infrastructure, SMEs may face considerable difficulties when converting to a more digital, data-driven strategy.

Big data analysis can offer insightful information and improved processing, which will ultimately result in better decision-making. It does, however, call for an integrated and export-focused IT infrastructure that can deal with challenges relating to information privacy and intellectual property rights as well as data quality, retention, integration, and security. Despite their potential advantages, these cutting-edge technologies can be difficult and expensive for SMEs to use.

Operational Costs and Rising Prices

The increasing cost of operations is a perennial problem for SMEs. Rising prices for goods and raw materials have recently put additional strain on the industry, making it more difficult for SMEs to operate their businesses. The cost of fuel and electricity accounts for a sizable amount of operating expenses for SMEs.

Keeping the low voltage price for non-domestic users is an example of a government policy to manage rising costs that provides some relief for SMEs. These steps, meanwhile, are not always enough to counteract the growing prices of commodities and raw materials.

SMEs can take into account a number of techniques to address these issues head-on. Simplifying the loan application process and raising awareness of SME loan availability in Malaysia could bring about much-needed financial relief. Concurrently, increasing technology capabilities through training and resource investment can increase operational effectiveness and competitiveness. The burden of operational costs and growing prices can also be lessened by advocating for favourable governmental policies and initiatives.

BizTech Community | Personal Finance | Eligibility Criteria for SME Business Loans in Malaysia

Eligibility Criteria for SME Business Loans in Malaysia

Securing a Small and Medium Enterprise (SME) loan is frequently a key stage in business growth, whether you’re just starting your venture or trying to expand an established one. It is crucial to comprehend the requirements for these loans. With an emphasis on business registration and legal requirements, financial standing and credit score consequences, as well as other special eligibility requirements, this page seeks to give a general overview of these needs.

Business registration and legal requirements

Having a duly registered firm is one of the first eligibility requirements for obtaining a SME loan Malaysia. Your company must be registered in Malaysia, controlled and owned by Malaysians, with a minimum 51% shareholding, according to AmBank Malaysia. A sole proprietorship, partnership, or private limited corporation are all examples of this. Additionally, the company should have been in operation for at least three years.

Financial standing and credit score implications

The eligibility requirements for a SME loan Malaysia include important factors including financial situation and credit score consequences. Over 90% of all financing for SMEs in Malaysia comes from banks and other financial institutions. This indicates that the lenders thoroughly assess your creditworthiness, payback capabilities, and financial history. Your likelihood of obtaining a SME loan increases with a high credit score, which may also have an impact on the loan’s interest rate.

Other specific eligibility criteria

There are certain qualifying requirements to be eligible for a SME loan in Malaysia, in addition to the fundamental business registration and financial requirements. For instance, AmBank Malaysia states that the principal employee of the company must be between the ages of 25 and 65.

Additionally, SMEs have the option of delaying their income tax installment payments from January to June 2022 and can take use of specific concessions for minor assets valued at no more than RM2,000. Additionally, there is a stamp duty exemption for loan agreements on credit facilities authorised by Tabung Bank Negara Malaysia.

Review the terms and conditions of your lender carefully before applying for a SME loan Malaysia. Each bank and financial institution may have a separate set of specific requirements. By fulfilling these eligibility standards, you may have a better chance of obtaining the funding needed to sustain and expand your firm.

Understanding these qualifying requirements can help Malaysian SME owners who are looking for financial support for their company’s expansion to make an informed choice regarding SME loan Malaysia.

BizTech Community | Personal Finance | Top SME Business Loan Providers in Malaysia 2023

Top SME Business Loan Providers in Malaysia 2023

If you’re an SME owner in Malaysia looking for financial aid to boost your business, this article will provide a comparison of the top SME loan providers in the country. The following criteria – loan amount and tenure, interest rates and fees, and unique selling points and benefits – are discussed for each provider to help you make an informed decision.

1. Alliance Bank Digital SME Loan

Interest Rates You Borrow Loan Period Annual Sales Turnover Interest Rate
RM20,000 – RM500,000 12 to 84 months RM50,000 to RM30 Million 5.9% p.a. – 13.78% p.a.
RM201,000 – RM1 Million 36 to 84 months Min. RM500,000 9.67% p.a. – 10.17% p.a.


Fees & Charges Interest Rate / APR Stamp Duty Early Termination Fee Late Penaly Fee
from 5.9% p.a. to 13.78% p.a. depending on loan amount and period 0.5%  of the whole amount 2%  of remaining amount, chargeable for loan above RM200,000 1%  from current outstanding amount, as addition, and per annum

Unique selling points and benefits

  • Assist you in acquiring new customers
  • Improving the efficiency of your business
  • Assist in developing, and upskilling your employees, and much more
  • Get to enjoy with your approved loan is the Support Lokal initiative which can help local SME owners reach a broader audience.

2. Avex Credit SME Loan

Interest Rates You Borrow Loan Period Annual Sales Turnover Interest Rate
RM50,000 – RM3 Million 3 to 60 months Min. RM 100,000 12% p.a.


Fees & Charges Interest Rate / APR Stamp Duty Early Termination Fee Late Penaly Fee
As low as 12% p.a. depending on loan amount and period 0.5%  of the whole amount 6 months’ interest will be charged 8%  from current outstanding amount, and per annum

Unique selling points and benefits

  • A customisable SME loan package in accordance with your business performance and objectives
  • Get more flexibility over the loan amount, choice of loan tenures of either short-term or long-term and competitive interest rates
  • Hassle-free online application
  • Loan approval as fast as seven working days
  • Get guided throughout your loan application process

3. RHB SME Online Financing Loan

Interest Rates You Borrow Loan Period Annual Sales Turnover Interest Rate
RM50,000 – RM1 Million 6 to 84 months RM500,000 to RM25 Million 8.45% p.a.


Fees & Charges Interest Rate / APR Stamp Duty Early Termination Fee Late Penaly Fee
As low as 8.45% p.a. depending on loan amount and period 0.5%  of the whole amount None 1%  from current outstanding amount

Unique selling points and benefits

  • Faster approved your loan. You may receive your fund within 5 working days.
  • Needed shorter business operating period, which minimum of 1 year.

4. Capital by Boost Credit SME Loan

Interest Rates You Borrow Loan Period Annual Sales Turnover Interest Rate
RM1,000 – RM100,000 Up to 12 months None 18% p.a.


Fees & Charges Interest Rate / APR Wakalah Fee Early Termination Fee Late Penaly Fee
18% p.a. RM 50 Zero termination Fee with 1 month termination notice 1%  from current outstanding amount, maximum and as per Shariah

Unique selling points and benefits

  • Faster approved your loan. You may get the approved money within 2 working days (48 hours) directly credited.
  • No guarantor required.

5. HSBC Working Capital Term Loan for SME

Interest Rates You Borrow Loan Period Annual Sales Turnover Interest Rate
RM100,000 – RM500,000 12 to 60 months Min. RM500,000 9.89% p.a.


Fees & Charges Interest Rate / APR Early Termination Fee Late Penaly Fee
As low as 9.89% p.a. depending on loan amount and period None 1%  from current outstanding amount

Unique selling points and benefits

HSBC business loan for working capital has no lock-in period, meaning you can pay off your outstanding loan balance anytime you want at zero fees.

See the table below for what you are about to get from this HSBC SME loan:

Loan Amount Up to RM500,000
Loan Tenure Up to 5 years
Margin of Financing 100%
Interest Rate BR + 6.75%
Effective Rate 10.39% p.a.

Where can I apply for financial assistance?

If you’re a business owner in Malaysia, you might be asking how to get funding to expand your operations. This article attempts to offer insightful information on the choices available, with an emphasis on government funding or grants and Development Financial Institutions (DFI), an important step in your search for a SME loan in Malaysia.

Development Financial Institutions (DFI)

Development The government created financial institutions, which are specialised financial institutions, to provide loans for the development of specific economic sectors. They provide a range of financial goods and services, including equity, loans, and advisory services. DFIs aiding SMEs, microbusinesses, and low-income people play a key part in Malaysia’s economic growth.

Understanding the terms and conditions of the loan, including the interest rates, loan tenure, repayment alternatives, and any other fees or charges involved, is essential when applying for a SME loan through a DFI.

Government Funding/Grants

In addition to DFIs, the Malaysian government offers a number of incentives and financial opportunities to assist SMEs in expanding their operations. These include the financial assistance programmes unveiled at the annual budget, which offer urgently need aid to businesses impacted by unforeseen economic disruptions like the COVID-19 epidemic.

For instance, the “Enhanced Enterprise Financing Scheme – SME Working Capital Loan” makes it possible for SMEs to get more financial assistance to close their working capital shortages. The maximum supported loan under this programme is $500,000, which helps SMEs manage their cash flow during challenging times. Another choice is the “Enhanced Enterprise Financing Scheme – Trade Loan,” which supports a $10 million maximum loan with a 90% government risk-share and improves access to trade financing during slower economic operations and longer payment cycles.

It’s important to note that some of these programmes are sector-specific, which means they are designed to satisfy the particular requirements of businesses that operate in certain industries. As a result, when looking for financial aid, be sure to submit an application for a loan or grant that fits your particular sector and business needs.

BizTech Community | Personal Finance | Why should I apply for an SME loan

Why should I apply for an SME loan Malaysia? (Case Studies/scenarios)

Applications for SME loan Malaysia are made for a variety of reasons by aspiring business owners.

Aside from the obvious ones, like to launch a firm, other applications are made as a focused financial assistance strategy to finance their subsequent business endeavour.

Let’s look at the following examples:
Scenario 1
Lina is very good at baking. One of her best is chocolate brownies and moist chocolate cake. While studying at a public university, she uses her free time to bake for her friends. Later on, her cakes were in high demand.

She began to take up orders twice from what she had before but she cannot cope with it due to lack of utilities. She applied for Capital by Boost Credit and managed to open up a small bakery shop in Klang Valley.

Scenario 2
David just graduated from a public university in Malaysia. While waiting for a permanent job in his field, he decided to start up a vape shop business with his friend.

He decided to apply for the SME Bank Business Accelerator Program to kick-start his business. David can borrow for up to RM1 million at a flat profit rate for a maximum of 7 years of repayment tenure.

Scenario 3
Visber owns a small farm in rural parts of Selangor. He plants a few types of vegetables and sells them at the local market. Luckily, he got an offer from a huge supermarket to supply vegetables.

However, due to his capacity, he did not manage to fulfil the order in time. He then applied for HSBC Working Capital Term Loan for SME and managed to expand his farm and grow his business.


Frequently Asked Questions

What is the maximum loan tenure for SME business loans in Malaysia?

The maximum loan tenure for SME business loans in Malaysia typically extends up to 7 years.

Can a start-up business apply for an SME business loan?

Yes, start-up businesses can apply for an SME business loan. However, in some cases, the business may be required to have been in operation for a minimum number of years, for example, 3 years as specified by some banks.

What are the consequences of defaulting on an SME business loan?

Defaulting on an SME business loan can lead to several consequences. The loan is classified as impaired if the principal or interest or both of the loans is past due for more than 90 days or 3 months. If the loan is classified as impaired, it could affect the business’s credit rating and its ability to secure financing in the future.

Are there specific loans for women or minority-owned SMEs in Malaysia?

As of my last training data in September 2021, there are no specific details on loans exclusive to women or minority-owned SMEs in Malaysia. However, all SMEs, regardless of ownership, can apply for business loans as long as they meet the eligibility criteria set by the lenders. It’s advisable to consult with the specific banks or financial institutions for the latest and most accurate information.


Samantha Lim

Samantha Lim is a knowledgeable finance writer based in Malaysia. With expertise in personal finance, investments, and economic trends, Samantha...

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