Q & A 1 : What advice does Dato have for the loan applicants?
Every decision in business should be done rationally. Eventually, you will have to deal with whatever consequences that comes with the decision. When it comes to business financing, strategize before making any decision. Do not jump into any loan application without taking due consideration in all aspects, or you may risk going into bankruptcy.
Q & A 2 : As the Chinese saying goes "Supply goes before troops", in military, it means the military supplies should be transported to the camp base before the troops arrive. In business, does that mean that money is the solution to all kinds of business challenges?
After having resolved over 10,000 companies financing problem, we realised that financing issue is not the sole factor leading to the success of a business entity. In order to maximise the growth and success of a SME, business management needs to first establish the Standard Operating Procedures (SOP), which can be effectively replicated, create value, enhance value and subsequently come with an exit plan. Today, having a great product or service alone is not enough to succeed.
Q & A 3 : The Bank Negara's statistic claims that 83% of SME loan applications were approved. Why do we still hear so many complaints from SMEs about unsuccessful loan applications?
Data can be manipulated to show misleading statistics. For example, 100 businesses submitted loan applications, 70 cases were disregarded, only 30 cases were processed. Out of the 30 cases, 25 cases were approved. These 25 cases made up the 83% of successful loan applications, while the 70 disregarded cases were not captured in the data.
Q & A 4A : What are the reasons why SME loan applications were rejected?
This is a very common topic brought up for discussion. I have shared my thoughts in detail in the book I published and the columns I contributed in the newspaper. When a loan application is rejected, it could signal potential shortcomings from either the SME itself or the lending institutions.
In short, businesses should not be solely held responsible for unsuccessful loan applications.
Q & A 4B : What are the common shortcomings with the lending institutions?
One of the common shortcomings is that the criteria of credit evaluation is not transparent. Most of the time, they just reveal to the applicants that the rejections were due to so called “the system”. Everyone supposedly knows that “the system” is monitored by human being. You could also be dealing with credit officers who are bureaucratic, under qualified or lack of business management experience.
Q & A 5 : Is it crucial to build "guanxi" (relationship) with bank officers (e.g. business meals, drinking and other entertainment sessions) to guarantee smooth loan approval?
Based on my 20 years of experience, trend have changed from “guanxi based” to “document based” today. Do not make the mistake thinking that your “guanxi” with bank officers can guarantee your success in business financing. If you fail the credit evaluation, the officers cannot approve your financing request. In this era, credit scoring and risk rating are more important.
In short, you cannot rely solely on “guanxi”.
Q & A 6A : We heard that Dato encourages business operators to appeal if they think they have been treated unfairly. Would such appeal put SMEs in the risk of offending the bank?
Definitely not. Do not worry about offending the bank. At most, only the relevant employee may feel offended. Be understood that a single employee does not represent the bank, not to mention that the employee turnover rate in banks is very high too. If you have such concern, you could probably have seen yourself as a receiver and the bank as a giver. This is an outdated and incorrect mindset. To me, if Bank A does not accept your loan application, you can always go to Bank B. If you are not willing to switch your bank, you can go to different business centre of the same bank. If you are not willing to change to another business centre, you can still request for a different loan officer to handle your application.
In short, banks do not get offended by loan appeals.
Q & A 6B : Rumour has it that some high level bank officers make use of their approving authority to solicit personal interests from loan applicants. Is that true?
Officers with such authority will not do such thing, people who seek personal gain are mostly the ones without approving authority.
Q & A 7A : Dato, is it very difficult to get business financing from Financial Institutions or Development Financial Institutions?
Financing is easy, the difficulty lies in getting a “right and beneficial financing package”. The business could be worse off if the approved financing package is not right or not beneficial for the business’ needs. In fact, if the company and the directors do not have any adverse remarks or bad track records, and the business is doing well with a feasible business plan, there will be plenty of financing channels available.
Q & A 7B : Are commercial banks the only option available for business financing?
There are many financing channels available, such as commercial banks (Maybank, Public Bank, Hong Leong Bank, etc.) and Development Financial Institutions (Credit Guarantee Corporation Malaysia Berhad (CGC), Malaysian Industrial Development Finance Berhad (MIDF), SME Bank, Exim Bank, etc.).
Government agencies such as Ministry of Domestic Trade, Cooperative and Consumerism (MDTCC), Ministry of Finance (MOF), Ministry of Science, Technology and Innovation (MOSTI) and etc., offer targeted financing packages too.
Today, there are also other innovative financing alternatives such as crowd funding, venture capital, peer-to-peer lending (P2P) and LEAP.
Q & A 8 : May I ask Dato, is it easier for Sdn Bhd / private limited company to get financing facilities as long as they engage a professional accountant to prepare their financial report?
Sdn Bhd / Private limited company usually will appoint professional accountants, company secretary, auditors and tax consultants separately. Usually, these professionals would follow their professional manual to “do the things right”, but not to “do the right things”. These could potentially be an obstacle when it comes to business financing.
Q & A 9 : What is Dato's viewpoint on the loan consultants that promise guaranteed loan approval? What is the value of loan consultants in business financing?
Loan consultants are providing solutions from a third party position. Ultimately, the lending institutions are the ones that make the final decision. Hence, it is not appropriate to promise guaranteed loan approval. As a professional loan consultant, what we can do is to greatly improve chances of getting loan approved, reduce the chances of getting loan rejected and speed up the loan approval process. This could save up a lot of time and trouble the business owners have to go through for loan application. They could have make better use of their time on more productive or income generating purpose.
Q & A 10 : What causes the banks to recall banking facilities?
First, large amount of banking facilities may be approved, but was not optimally utilized. Second, the financing facilities may be abused for improper purpose. For example, Banker Acceptance (BA) was approved for goods purchase, but was abused for forging fake purchase order. These could be why banks recall the banking facilities.
Q & A 11 : From Dato's viewpoint, what are the things that we need to take note during the loan application?
Some of the key points to remember:
1. Insist on acknowledgement copy upon submission of loan application. Every correspondence or discussion during loan application process should be recorded in black and white.
2. The timeline to be expected for loan approval range from a maximum of 70 days under the first phase of PARTNER, to 52 days under PARTNER 2, and can be shortened to 42 days without CGC guarantee.
3. If the application is unfortunately rejected, ask for the reason(s) of rejection.
4. Do not produce false document when you are unable to provide the required documents. Sincere communication is still the best approach. If the bank discovers any fraudulent document, your credibility will be greatly affected and you may even be blacklisted.
Q & A 12 : We know that Dato published the first guidebook on Business Financing in Malaysia. What is the rationale behind this cover design?
It is just to simplify my personal experience of the whole financing scenario in Malaysia through the cover of this book. No doubt the government has been sincere in helping SMEs to grow and the commercial banks are very friendly. From the cover, you can see 6 employees standing in front with grey, black and white faces. Most of the time, SMEs are very “lucky” to find themselves dealing with the black faces. The good guys are scarce to come by.
Q & A 13 : On the government side, what advice does Dato have?
Our government has always been overly emphasized on publicity that makes people feel good, but falls short in terms of delivering system and result. Very often, we see government officials making announcements on press conference without actually resolving the crux of the issues. Eventually, these issues get brushed under the carpet. Also, our government places excessive trusts on the related government officials. Whenever complaint arises, they stand up and defend for these officials. Hence, I would suggest refraining from appointing CEO out of cronyism. The CEO should be someone with a great deal of experience and knowledge in the related fields.
Q & A 14 : How to choose the right loan consultant?
Ask the following questions:
1. Does he/she possess recognized university qualification? Such area of expertise is very difficult for people without higher level of academic qualification to manage.
2. Does he/she possess comprehensive relevant working experience? Seek to understand his/her past working experience (in what position? which institution? under which department? for how long?). If he/she worked in BSN as a teller, his/her experience may not be relevant for you.
3. Whether the consulting firm is reliable or trustworthy? This depends on whether the firm received any recognitions/awards from government or other community groups, and whether the received recognition is reliable or authoritative?
Q & A 15 : Is it necessary to pledge collateral when we apply for business financing?
Not necessary. If you do not have any collateral or you have insufficient collateral, you may opt for CGC or SJPP guaranteed scheme. Collateral is only one of the seven evaluation criteria to qualify for the financing.
Q & A 16 : I understand that most all the cases referred by SAHABAT SMI® are approved, does it mean that SAHABAT SMI® is excellent in highlight the strength of an applicant？
Thank you, I will take it as compliment. However we should understand that in order to get a loan application to be approved, we may provide 100 reasons but in order to reject a loan application, they just need 1 reason. Thus, we are good in detecting the reason of rejection and manage to tackle it.