Forget about bank loan. These are the alternative Financing Options for Your Business (Malaysian Companies)

When it comes to funding their business, most entrepreneurs and business owners will usually look to the easiest option available – obtaining loans and other banking facilities provided by financial institutions. However, besides banks and financial institutions, there are other agencies and bodies out there which are able to provide grants and loans to locally based businesses. Even the Malaysian Government has participated and supported such alternative financing options. Through various bodies, the Government has put in effort to provide alternative financing solutions to businesses, especially for start-ups and SMEs which might not qualify for loans and banking facilities. In this article, we will explore alternative funding options available to start-ups and SMEs based in Malaysia.


1. Peer-to-peer (P2P) funding

This form of business financing allows investors to connect directly to your business with minimal intervention from third parties. This option is best for businesses who are looking for funds to support their short to medium term financing needs. In return for loans received, you can offer investors various perks, i.e. repayment of loan amount with an agreed interest rate or issuance of equity (shares or bonds) in your company. The average interest rates on these platforms are usually 6% to 12% per annum, depending on the P2P operator. Using P2P funding also provides a marketing and advertising benefit, whereby potential investors will know your brand and offerings as they go through the listings on the P2P platform (even if they do not end up investing). Another benefit of P2P funding is that you can list on multiple platforms, enabling you to reach a wider range of investors and also improving your market presence of your business as well.

We have categorised angel investors under this category as well. The Malaysian Business Angel Network consists of high net worth individuals who are looking for potential returns by investing in various businesses. To obtain funding from these angel investors, business owners and entrepreneurs will have to set an appointment to meet these angel investors with their proposals and pitch their business plans and ideas.

To facilitate peer-to-peer funding, there are various online platforms which allows you to list your products and services for a small fee. Here are some of the more notable P2P lending platforms in Malaysia:


- Fundaztic (https://www.fundaztic.com/)

- FundingSocieties (https://fundingsocieties.com.my/)

- FundedByMe (https://www.fundedbyme.com/en/)

- KapitalBoost (https://kapitalboost.com/)

- Malaysian Business Angel Network (http://mban.com.my/)



2. Crowdfunding

In the past, crowdfunding platforms like Kickstarter were usually used by start-ups or entrepreneurs who have a good business pitch, to seek for funds to set up and run their business. However, due to the power of crowdfunding, SMEs and established businesses have now started to turn to crowdfunding platforms to obtain funding, due to the lower investment amounts required from investors.

For example, if a start-up sets its contribution amount at RM500 per investor for a target sum of RM100,000, it opens up the funding opportunity to potential investors who do not have a lot of funds to participate in this crowdfunding. Compared to the minimum contribution amount of RM10,000 for a similar target sum on certain P2P platforms, the crowdfunding option is much easier to achieve and reaches a wider range of investors.

Unlike P2P and traditional bank financing, in return for the funds received from investors, crowdfunding usually requires the business to provide the business’ products (once it is market ready) or company equity to its investors. However, there are also crowdfunding platforms which allows you to take loans from investors and repay the loan amount over a certain period of time together with interest as discussed above.

Similar to P2P financing, the crowdfunding process is carried out through online platforms. Here are several established crowdfunding platforms in Malaysia:


- Crowdo (https://crowdo.com/)

- PitchIN (http://pitchin.my/)

- Alix Global (https://alixglobal.com/services/equitycrowdfunding/)

- Eureeca (https://eureeca.com/Default.aspx



3. Funding from Government-Linked Bodies

The Malaysian Government has also taken various steps to support and promote the development and growth of SMEs and startups in Malaysia. Compared to other alternative funding options, loans from Government-linked bodies usually have lower interest rates and longer repayment periods. Some of these bodies even allow conversion of loans to grants when your business meets certain criteria set by these bodies! Especially for tech start-ups and businesses which carry out inhouse research and development, there are many grants which are readily available. By successfully obtaining a grant or converting a loan to a grant, businesses no longer have to make repayments to the Government.

Here are some of the common portals which local businesses can connect with the Government to obtain funding and grants for their startups and businesses:


- MaGIC (https://central.mymagic.my/resource/)

- SME Bank (https://www.smebank.com.my/en/financing2)

- SME Corp (http://www.smecorp.gov.my/index.php/en/)

- Craddle (https://www.cradle.com.my/)


With the advancement of technology, alternative funding options have now become easier for small businesses and start-ups. We hope this article has helped you understand more about alternative funding. If these financing options interest you, please browse through the websites to see which platform and financing option is the best for your business. If you have any questions or need any further guidance to prepare your business for alternative financing discussions, feel free to give us a call or drop us an e-mail for further consultation. 


Published by : WX Kao - Finance and Accounting Consultant of Rockwell Global Solution


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