Starting a startup company can be a super challenging journey, but it will surely be worth it. Operating a business will be easier when you have a strong financial foundation. Hence, having a solid financial base will help you expand your business. The major aspect of this is to secure funding.
To secure funding and approach investors, you need to understand the funding options that are available in Malaysia. This article will be a guide for you to recognise the right sources of funding for your company.
Government grants in Malaysia
The Malaysian government is not reluctant about giving out grants for SMEs (small and mid-size enterprises). The government launched these grants to help these businesses grow through business digitization, wage subsidies, job creation, increased local product consumption, and support for women entrepreneurs.
The Malaysian government offers a variety of grants and financial assistance to help these businesses expand. Here is the list to get you started.
1. SME Digitisation Grant
Digitise your business! The Malaysian government is handing out grants for SMEs to put their businesses on the digital market. Each business can apply for three different types of digitisation programmes. RM5,000 will be given to those who want to take their business online. The grant will be closed when 100,000 SMEs have claimed it, or in 5 years, starting in February 2020.
2. Boosting Online Businesses
The goal of this government grant is to encourage SMEs to adapt their businesses to e-commerce and e-payment. These businesses will be more expansive by incorporating online activity into their operations. The applicants will receive guidance for e-commerce and e-payment onboarding. Additionally, the grant provides seller subsidies, sales support, and training.
3. Incentivising Women Entrepreneurs
This grant is made available specifically to help women entrepreneurs grow their businesses. This initiative allows women entrepreneurs to apply for up to 70 percent financial support.
4. Indian Community Entrepreneur Development Scheme (SPUMI)
Indian entrepreneurs can apply for this grant to expand their businesses. The government started this initiative to support the Indian community in becoming successful entrepreneurs. Those who qualify can receive between RM10,000 and RM100,000.
5. Sustainable Development Goals (SDGs) Financing Scheme
If your business contributes to one of the 17 SDGs available, you should apply for this grant. The government aims to accomplish the 17 SDGs, and if you share the same goal, you are already qualified to apply.
6. Working Capital Guarantee Scheme (SJMK)
The government aims to assist SMEs in all industries through this grant. The SJMK grant is for businesses to use for CapEx or working capital only. It has a limit of RM10 million. Apply and get a chance to expand your business with big capital.
How to apply for government grants in Malaysia
Though there are specific criteria to be eligible for these grants, these are six simple steps to apply for a grant based on your needs:
- Get a general overview of grants at the Grants Learning Center.
- Be certain that you meet the requirements.
- Look for federal funds that are relevant to your work.
- Sign up with grants.gov.
- Fill out and send in your application.
- For submission status, enter your Grants.gov tracking number(s).
7. Equity CrowdFunding (ECF) platforms
In general, equity crowdfunding is a method of raising capital and funding from retail investors. It is a way for investors to support SMEs in improving their financial well-being as well as developing strategies based on their experiences. ECF is considered a high-risk investment, but it will have a high return for both investors and SMEs.
“Investors are there to help,” said Khairul Anwar, the CEO & Founder of Pandai. “Investors have the capital to fund businesses as well as the experience to help them thrive,” he elaborated.
Though businesses have multiple investments all over, Angel Low, the principal of the Hive, supported the statement, “Always ask for help from the investors, no matter what area it is.”
How to apply for Equity CrowdFunding (ECF)
1. Choose a platform
There are multiple platforms for ECF. Different platforms have different categories, as there are different types of investors. These investors will most likely have their “go-to” platforms. Different models are reward- or equity-based.
2. Get into the platform
The platform will verify your documents and the forms you submit. If the equity model is what you want to opt for, you have to provide an offer document since it will give the specifics of what the investors are investing in.
3. Pitch your idea
After being accepted, you are given the chance to express your project and how much you are expecting to raise. Before pitching your idea, Khairul advised, “Learn how the investors communicate or interact. Ask the portfolio company about their experience with the investor.” This will give businesses a general idea of how to persuade the investor.
4. Start a campaign
Different platforms have different methods. Some sites will raise your funds during the campaign, while others require you to decide on a goal and receive the funds after achieving it.
Finally, equity crowdfunding (ECF) can help SMEs build a stronger financial foundation by providing them with the resources they require. Before pursuing the investment, it is important to know the aspects that you need.
Angel Low explained that businesses need to interact with all the parties involved to know their needs. Adding to the statement, Sam Shafie, CEO & Co-Founder of pitchIN advised businesses to “update the investors on new things so they can decide to buy more shares or bring in other investors.”
A lot of investors go through the ECF platforms. Angel investors and venture capitalists are two of the many potential investors at your disposal. If you are looking for “seed funding” or funds to kick-start your business, equity crowdfunding should be the right platform for you.
8. Peer-to-Peer (P2P) platforms
If you want to avoid the complications of dealing with traditional lenders like banks or credit unions, P2P is the option for you. P2P is a platform where you can get a loan directly from investors at low-interest rates based on your credit score. Those with a higher credit score are still eligible to take out a loan.
Peer-to-peer lending allows you to obtain quicker funding as there are no middlemen or banks. Those who may not be able to take out a traditional loan can opt for P2P. This benefits investors and borrowers because rates are lower and returns may be higher depending on the agreement.
How to apply for peer-to-peer (P2P) lending
1. Get into the platform
Find the platform you prefer, such as CapBay or Funding Societies. Sign up by filling up the forms.
2. Find investors
These platforms are filled with investors. Find the investors that you are interested in and apply for the loan. However, some investors have a few criteria to meet.
3. Wait for approval
After you have applied for the loan, give it some time for investors to look into your company. They will decide whether or not to fund your business.
In short, P2P lending is a platform where almost anyone can apply for a loan. It has an easy and quick process for both lenders and borrowers. Mutual agreements are needed where both parties have risks to take. It also has low-interest rates based on your credit score.
Learn about funding and other business outlooks with WORQ
WORQ is a community-centric coworking space that cumulatively has 10,000 community members. It is open to anyone in need of a space to work, catering to start-ups and SMEs. WORQ has taken the initiative to support the business community by organising an event called the EQ Series, or Entrepreneurial Quriosity.
At the EQ Series, knowledge sharing occurs since WORQ invites knowledgeable and successful business owners to be the panelists. Last round, WORQ successfully held a talk on the 2023 funding outlook, inviting Sam Shafie, Angel Low, and Khairul Anwar as the speakers.
EQ Series is there with the latest business tips and tricks. Conducted in an Ask-Me-Anything format, these sessions help you clarify your curiosity on all things business. Be on the lookout for our next EQ Series on our events page!