Financing
Financing in Malaysia ranges from simple to highly sophisticated. Its all about borrowing money from a legitimate source which in most cases a bank or a financial institution.
Source of Business Funding
In every case, your business need to have some form of security provided to the institution that you are able to repay the amount you borrowed. Some would require you to provide a collateral while others will evaluate your current financial health.
Term loans
Such loans can be applied for various reasons. You will probably get this loan for your own reasons. In most cases, banks call this personal loans which means:
- It is the most basic form of loan financing
- Usually has a maximum tenure
- Has a fixed interest rate
- Requires pay slips and income statement
- Uses this loan to repay credit card or other personal debts
Bank Overdraft
This is a facility usually provided by banks. It is intended for use by those who need quick cash and when there are not enough funds in the accounts. This type of financing owners usually:
- Are current account users (which means they use cheques)
- Does not have a tenure to the repayment
- The longer they owe the bank, the more interest will be incurred
Flexible loans
This type of loan is sometimes called a Flexi loan. It is actually a combination between the overdraft and the term loan. In other words:
- There is a minimum monthly installment to pay
- If there are any extras paid, then it will help to reduce the principal amount owed.
- Flexi loans help to reduce the interest in the account as long as there are funds there
Fixed Rate Loans
This type of loans is quite common for borrowers who are worried about the changes in interest rate. Some Islamic loans are parked under this type of financing package. It works in such a way that:
- The interest rate is agreed upon beforehand and fixed for the whole tenure
- The interest rate could be higher than other types of loans
- More stable but with a penalty for early settlement
Islamic Loan
This type of package is designed under the Murabahah concept which is provided through the Syari’ah laws. It is very strict and usually does not allow any form of speculation. In Islamic Loans, the borrower goes through the same procedure and is actually open for anyone (not only Muslims).
- The bank will buy the property from the borrower before renting it back
- The profit rate is decided prior to deriving the tenure
- Usually, the interest rate is fixed at the start before using a floating rate later
Hire Purchase financing
A common package for purchase of vehicles, this is the only financing package available. A hire purchase financing service is one which:
- Can be either private or commercial
- Has a fixed interest rate for an agreed tenure (usually 5-9 years)
- Can be easily applied
- Required a downpayment (usually a minimum of 10%)
Property or housing loan
As the name suggests, this is a loan you will obtain to buy a property. It could be a commercial lot or a house you want to stay in. This type of loan is:
- Longer term as compared to hire purchase loan
- Uses a floating rate concept where the interest will change depending on the BLR (Base Lending Rate)
- Can be used for refinancing of your property
Business Loans
You will apply for a business loan when you are going to start or expand your business. This type of loan, which is offered by a bank or financial institution will usually be:
- Up for discussion as the amount could range from small to millions
- Banks usually have a pre-determined package although you can always discuss with them for higher or lower interest rate
- Used for emergency or last-minute needs of cash or funds
- Used to start a business
