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Starting a business

5 Funding Options for Starting a New Business

As an entrepreneur, you want to set yourself up for the greatest possible chance of success. Many Malaysian entrepreneurs face concerns as they start their new businesses, and one of those is how to raise the money needed to get their enterprises off the ground. Fortunately, you have several viable options when it comes to funding your new business.

Finding Government Grants for Malaysian Small Businesses

The government offers several types of small business grants for Malaysian businesses to help new businesses launch. Funding sources include:

  • Matching grants from the Small and Medium Industries Development Corporation (SMIDEC) — This funding source provides matching grants of up to 50% to most types of small business startups in the manufacturing and services sectors. Some manufacturing startups may be eligible for grants of up to 80% of costs, with a cap of RM100,000.
  • Cradle Investment Programme (CIP) — If you run a tech startup, check out this Ministry of Finance funding source designed to move you from the “great idea” stage to a functional business. Innovative tech ideas that show strong commercial potential are eligible for up to RM50,000 per idea.
  • Multimedia Development Corporation (MDeC) Pre-Seed Fund — If you’re an entrepreneur in the tech field with a business plan but without an existing company, this fund stands ready to bring your plans to fruition. Up to RM150,000 is available, with additional support that includes use of shared lab facilities at MSC Malaysia Status Incubators as well as a mentoring programme.
  • Enterprise Innovation Fund (EIF) — This fund is designed to promote innovation in commercial ventures. The Ministry of Science, Technology and Innovation (MOSTI) runs this fund, which provides grants ranging from RM20,000 to RM250,000 over a period of up to 18 months.
  • Malaysian Biotechnology Corporation Seed Funds —These commercialisation grants are designed for businesses in the biotech field. Expect to receive a maximum of RM 2.5 million, which is disbursed over two years.

Applying For Small Business Bank Loans

While Malaysian banks have a solid history of lending money to businesses, they typically want to see your track record and profitability, which may make getting bank loans a little more difficult if you’re starting a business. In particular, they’re likely to want to see what kind of collateral you have — again, something that not all startups can offer.

As a startup, you may find borrowing opportunities at the SME Bank , a subsidiary of Bank Pembangunan Malaysia Berhard. The SME Bank makes loans to innovative small and medium-size enterprises in all phases of growth, with the SME Start-Up programme designed for new businesses that are ready to launch their products and services, including those with insufficient collateral or history to qualify for standard bank loans.

Some government loans are also available for startups. Check out the offerings from the Malaysian Industrial Development Finance Berhad (MIDF), the Green Technology Financing Scheme (GTFS), and the Intellectual Property Financing Fund.

Ask You Family and Friends for a Loan

Whether you use a crowdfunding platform like Kickstarter or ask friends or family members for a loan, acquiring funds from people you know is a tried and proven method of getting a business off the ground. While your family and friends may want to support your venture, try not to rely on a handshake and verbal agreement if you borrow money from them. Instead, consider drawing up a formal loan agreement that covers all the terms and conditions regarding your funding, including when the loan must be repaid, what the repayment schedule should look like, and any interest rate to be charged. A formal agreement might seem awkward at first, but it preserves relationships in the long run.

Find Investors For Your Business

Many entrepreneurs raise funds from investors who see potential in their business plan. When you take on investors, you give them a percentage ownership of your business in exchange for their funds, so you need to have a good idea what your company could be worth in the near future. Your prospective investors are likely to want to see a business plan that includes all the market research you’ve done on your product or service, your target audience and your competitors, a marketing plan that demonstrates how you intend to sell your products or services, and all your financial information, including cash flow forecasts and a profit and loss statement.

Bootstrap Your Own Business Startup

A creative way to fund your new business is simply to put your own money into it, if you’re fortunate enough to have those resources available. To raise the money you need to launch your business, you might sell valuable assets you own, like real estate or stocks, or tap into your savings. Some entrepreneurs take out personal loans to fund their business ventures, although high interest rates can cause these types of loans to be cost prohibitive.

As you get your business up and running, you can track your incoming funds — whether from grants, investors, loans, or sale of your products — and your spending using QuickBooks Online. Staying on top of the numbers makes it possible to repay any borrowed funds and show investors what you’ve done with their money, so you can keep your new enterprise in the black and thriving.