Dato' Michael Tio

Insight – Helping hand for SMEs even after moratorium

Some business owners who foresee potential financial issues once repayments resume in October 2020 may want to explore repayment assistance options available to them, says PKT Logistics’ Michael Tio. (pic)

The Covid-19 pandemic has brought about one of the most challenging economic environments in recent memory, affecting all Malaysians.

Although the adverse impacts were immediate, our economy is gradually heading towards a recovery, thanks to some swift and effective action. As small and medium enterprises (SMEs) are the backbone of Malaysia’s economy, their recovery is crucial to maintain this positive momentum.

As a business owner, it is encouraging to see that the banking industry is taking extraordinary measures to ensure assistance is available for individuals and SMEs alike, as we all adapt to this new normal.

What next after the automatic moratorium period?

Looking back, it is clear that Bank Negara’s unprecedented six-month automatic loan moratorium was necessary to protect businesses as well as households. Since the recovery movement control order (RMCO), businesses have been gradually reopening and recovering while adapting to this new normal.

Some SMEs, however, may still face difficulties and require repayment assistance to lighten their commitments, so they may cope financially and retain their employees as they navigate this new reality.

To meet the needs of consumers and businesses in the next phase of economic recovery, banks are offering targeted repayment assistance to those who need it.

From what I have read recently, as of early September, a total of 5,017 SMEs have applied for repayment assistance, and 4,300 have been approved so far.

As a business owner myself, I understand that the hard reality remains for businesses and it’s important to conduct continuous assessment of the state of the business in order to keep cash flow healthy and viable.

Some business owners who foresee potential financial issues once repayments resume in October 2020 may want to explore repayment assistance options available to them.

Under the targeted repayment assistance programme, banks are offering various repayment options for affected customers. For example, you may be offered the option of payment of interest/profit only for a specified period, before resuming full installments when your business stabilises.

Alternatively, there may also be the option of a possible extension of the financing tenure to enable lower monthly installments over a longer period.

These repayment options can help you manage your cash flow efficiently while greatly reducing your monthly commitments. In order to improve your financial health, it is important to discuss the targeted repayment assistance options with your banks now.

Additionally, SMEs that receive targeted repayment assistance during this period will not have it reflected on their CCRIS report and it will not hinder their future applications for other forms of financial products and/or services.

Up to RM35bil in financing for SMEs under Penjana

In addition to the targeted repayment assistance, the Prihatin and Penjana economic stimulus packages by the central bank and the government provide further options for SMEs. According to Bank Negara, the original Special Relief Facility, which was announced as part of Prihatin, benefited over 21,000 SMEs and preserved more than 450,000 jobs.

Under the new Penjana SME Financing (PSF) Scheme, a further RM2bil is available for SMEs seeking short-term funds to assist their business operations.

Under the PSF, SMEs may apply for financing of up to RM500,000 at a subsidised interest/profit rate of 3.5%.

There are also other financing options that are available for SMEs and micro-SMEs across various industries in the RM35bil Penjana economic stimulus package. These include a RM1bil Penjana Tourism Financing for the tourism sector, a Penjana Microfinancing Fund for micro-SMEs, a Tekun Nasional fund which has a special allocation for women entrepreneurs, an Agrofood Facility for agricultural activities, and plenty others at fixed subsidised interest/profit rates.

There are multiple options available, and business owners can explore them by approaching their banks.

Jumpstart your businesses and sustain the economy

The impact of SMEs in Malaysia cannot be underestimated. In 2018, SMEs made up 38.3% of the country’s GDP, and the sector’s contribution to the nation’s GDP grows with every passing year.

More importantly, SMEs also provide job opportunities to millions of Malaysians, spurring the nation’s economy.

If you are an SME owner, it is important to act quickly to assess your financial status.

Remember, the end of the moratorium does not mean the end of targeted repayment assistance for your business. While numerous options are available, it takes time to explore the options and make these important decisions. Do not delay – it is wise work with your bank to explore the solutions and options available for you.

SMEs may also go to the Credit Counselling and Debt Management Agency (AKPK) for advice and to explore other alternatives.

Datuk Michael Tio is the group chief executive and managing director of PKT Logistics Group Sdn Bhd. Views expressed here are the writer’s own.