BNM SME financing schemes: who qualifies and how to apply

Bank Negara Malaysia does not lend to SMEs and does not accept loan applications. Its SME funds are pools of money that licensed banks and development financial institutions draw on and then lend out under conditions BNM sets. You apply at a bank. The bank decides. That single fact accounts for most of the confusion around these schemes, and for a good number of wasted afternoons.

What BNM’s fund for SMEs actually is

BNM allocates money to a set of named facilities, each with a stated purpose. For each one it fixes the boundaries: what the money may be used for, the maximum financing per business, the maximum tenure, and a ceiling on the rate a bank may charge. Everything else belongs to the bank. The bank assesses the risk, decides the amount, sets the security it wants and either approves or declines.

The institutions allowed to offer these facilities are called participating financial institutions. They are commercial banks, Islamic banks and the development financial institutions regulated by BNM. Not every institution participates in every facility, which is why one bank will say a scheme does not exist and another will process it the same week.

The facilities themselves change. BNM opens new ones in response to specific pressures, closes others when the allocation is fully utilised, and revises the terms of the ones that remain. As at the date on this article the open facilities include the current list of BNM SME facilities, to be confirmed against BNM’s own published list. Any list published anywhere else, including on a bank’s own website, may be out of date.

How the channel works, in order

1. You approach a participating institution, normally through a business banking branch or a relationship manager.
2. The bank assesses your business the way it assesses any credit application: financial statements, bank account conduct, CCRIS record, directors’ records, and what the money is for.
3. If the bank is willing to lend and your case fits a facility’s parameters, it prepares the application against that facility.
4. If you are short of security, the bank may route the file to a guarantor, usually Credit Guarantee Corporation or Syarikat Jaminan Pembiayaan Perniagaan, for partial cover.
5. On approval, the bank draws on the fund and disburses to you under the facility’s terms.

At no point in that sequence do you deal with BNM. BNM does not review individual applications, cannot instruct a bank to approve one, and runs no appeal process for a declined SME. If a bank declines, the realistic options are to fix what caused the decline or to put a better prepared case to a different bank. Our guide on why banks decline SME applications covers the usual causes.

Who counts as an SME

Nearly every BNM facility requires you to meet the SME definition endorsed by the National Entrepreneur and SME Development Council and published by SME Corp. It works on two measures, annual sales turnover and full-time employees, and it splits by sector.

Below those bands you are a microenterprise, defined as turnover under RM300,000 or fewer than 5 full-time employees, and some facilities are written specifically for microenterprises rather than for SMEs generally.

Two details in this definition catch people out. The first is that where the two measures put you in different categories, the lower category applies. A services company turning over RM4 million with 20 staff is treated by headcount, not by turnover. The second is the definition of a full-time employee, which is at least 6 hours a day and 20 days a month, or at least 120 hours a month, counts foreign and contract workers, and excludes the proprietor, the partners and unpaid family members. Owners who count themselves into the headcount often arrive at the wrong band.

A business that exceeds the thresholds for two consecutive years loses SME status, and a business that falls back below them can regain it on the same basis.

The ownership and structure conditions

Meeting the size definition is not enough. The standard conditions across BNM facilities also require the following, and these are where applications fail quietly.

• At least 51% of the shareholding held by Malaysians resident in Malaysia. A Malaysian-incorporated company with majority foreign ownership does not qualify, however long it has traded here.
• Registration with the Companies Commission of Malaysia, or with the relevant authority in Sabah or Sarawak, or with the statutory body governing your profession.
• Combined shareholding by public listed companies and government-linked companies in your business not exceeding 20%. An investor on the cap table can disqualify an otherwise eligible company.
• Not a company listed on the main board, not a subsidiary of one, and not a subsidiary of a large firm, a multinational, a government-linked company or a state-owned enterprise.

Why a scheme application is still a credit application

A fund lowers the cost of money to the bank and caps what the bank may charge you. It does not lower the bank’s credit standard, because the bank still carries part of the loss if the facility goes bad. Where a guarantee is involved it covers a portion of that loss, not all of it, which is explained in our note on how a CGC guarantee changes your application.

So the bank will look at the same things it always looks at. Whether your account conduct shows returned cheques or persistent excesses. Whether your CCRIS record shows arrears on existing facilities. What CTOS says about the company and the directors. Whether the financial statements support the instalment you are asking for. Whether the purpose is one it can actually monitor. The documents a bank asks for are the same under a scheme as without one.

It is worth conceding the obvious. Sometimes a bank is right to decline. If the accounts show the business cannot service the repayment, a cheaper rate does not fix that, and a scheme will not be approved on sympathy.

The rules that most commonly trip people up

• Refinancing. Most BNM facilities exclude refinancing of existing credit facilities. If your plan is to move an expensive facility onto a cheaper scheme rate, that plan usually does not work.
• Wrong facility. Several facilities are tied to a defined activity, past examples being tourism, agrofood, flood relief and automation. A business that does not clearly sit inside the definition will not be squeezed in by the bank.
• The aggregate cap. The maximum is generally applied per SME across all BNM funds combined, not per facility. A business that has already drawn under one fund has less headroom than it thinks.
• Use of funds. These facilities are for working capital and capital expenditure. Paying down director advances, settling tax arrears or funding a shareholder buyout are not eligible purposes.
• Tenure. Facility tenures are capped, commonly at 5 years, which sets the instalment. A term that short can make an otherwise sensible amount unaffordable on paper.
• The allocation running out. Funds close when fully utilised. A bank telling you a scheme is finished is usually telling the truth, not brushing you off.

What is set by whom

Scheme parameters, eligibility and availability change, sometimes at short notice, so anything you read about a specific facility should be checked against what is current before you rely on it. For the wider regulatory backdrop, see our explainer on what BNM’s guidelines mean for your application, or work through the eligibility self-check first.

Common questions

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