Learn more about how to start a business / company in Malaysia and how to operate it properly under the laws of Malaysia. If you're starting up new, the articles are very useful for new business owners too.
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It might cost hundreds of ringgits to millions of ringgits to launch a business. What if you require money to support bigger company endeavours or get through challenging times during regular operations? You might need to consider the cost of marketing, hiring staff, purchasing equipment, or registering your business.
The best part is that you have a variety of options for raising capital for your business plans. In this article, the six alternatives in Malaysia are listed, together with their pros and cons.
1. Personal loan
2. Business loan
3. Grants and schemes
5. P2P lending
6. Venture capital and angel investors
|Ways to fund business
|get rapid cash for modest sums
|have a lower financing limit
|simpler to obtain than business loans
|difficult to get approved if you own a business or work for yourself
|assist you in obtaining significant money
|harder to qualify for than personal loans
|interest rates lower than personal loan
|limitations on how you may utilise the money
|Grants and schemes
|provide large grants
|there are qualifying standards for each funding programme
|low-interest financing (or interest-free financing)
|certain grands are competitive
|simpler to raise money than through grants and bank loans
|funds won’t be release if you don’t meet the target fundraising
|qualifying standards may not be as strict
|less stringent financial and operational standards
|higher interest rates
|provide speedy financing
|Venture capital and angel investors
|offer substantial financing as well as mentoring or networking possibilities
|could not ask for any money back
|you might give up some power
Even while a personal loan might not be the first thing that springs to mind when you think of “business finance,” it can be a useful tool for getting rapid cash for modest sums. This makes it appropriate for microbusinesses that don’t require a lot of funding, like a home-based bakery or a food truck operation.
You’ll need a respectable credit score and a track record of steady income in order to get approved for a personal loan. These loans are typically simpler to obtain than business loans, which could necessitate that your company has been in existence for several years. Additionally, some loans distribute money in a working day or less, which is helpful for addressing emergencies.
Although your limit may be based on your income, personal loans have a lower financing limit of RM50,000 to RM200,000. Additionally, they often have higher interest rates than commercial loans. Additionally, it could be more difficult to get approved for a personal loan if you own a business or work for yourself.
Business loans are harder to qualify for than personal loans. You might need to have operated for a certain amount of time. If you want to be eligible for larger sums of money, you could also have to put up collateral. Additionally, there may be limitations on how you may utilise the money you get, such as the fact that you can’t necessarily use it to invest in stocks or real estate.
On the bright side, business loans may assist you in obtaining significant money, ranging from RM10,000 to millions of ringgits, however this will depend on your company’s performance and if you have any pledge able assets. They also have interest rates that range from 5% to 7% annually, which are often lower than personal loans, which can have interest rates of up to 18% annually.
Government or business programmes may provide large grants, low-interest financing (or interest-free financing), mentorship opportunities, or interest-free financing.
However, there are a number of qualifying standards for each funding programme. Some programmes are exclusively accessible to certain populations or enterprises (such those wishing to improve their digital capabilities) (e.g. if you are a female entrepreneur or a Bumiputera applicant). A grant application may also need to pass through numerous rounds of examination since certain grants are competitive.
Crowdfunding may make it simpler to raise money than through grants and bank loans since the qualifying standards may not be as strict. Platforms based on rewards or donations could not even require a history of commercial operations.
But even if you invested time, money, and effort into creating your campaign, certain platforms won’t release any cash if you don’t meet the target fundraising.
As they have less stringent financial and operational standards, P2P loans might be an alternative financing option if you don’t qualify for a bank loan. Additionally, they can provide speedy financing. If you’re borrowing less money (less than RM100,000), your application can be finalised in a matter of days.
However, expect increasing interest rates. Since investors demand bigger returns in exchange for taking on more risk, P2P platforms frequently charge higher interest rates than banks (up to about 18% p.a.). This is in addition to the P2P platforms’ own costs, which might be a percentage of your loan.
Entrepreneurial businesses can benefit greatly from venture capital and angel investors. They may offer substantial financing as well as mentoring or networking possibilities. Furthermore, if your company fails, they could not ask for any money back.
However, these chances are frequently competitive. You’ll need to demonstrate the long-term development potential of your company or business concept. Venture capitalists or angel investors will want equity or convertible debt (debt that may be converted into equity later) in exchange for their investment if you are successful in obtaining finance. They could also want to be part in the management of your firm, so you might give up some power.
Already deciding between taking up a grant or loan but still feeling unsure? Check out our article breaking down the difference between the two here: https://bossboleh.com/articles/differences-between-grant-and-loan
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