So you have an awesome business idea. It could be for a full-blown business, or a flexible side income after work/school hours.
But you quickly hit a problem: you need money. So here are all the possible ways to fund your business.
First up: Do you even need money to fund your business?
Well, yes you certainly need some money, but some people get really caught up with their business plan and start listing 1001 things they think they absolutely need to buy before they even start. But there are businesses you can start with no or little up-front costs.
Ways to raise under RM10,000
In the bigger scheme of things, RM10,000 really isn’t that much. With personal discipline and some side hustling you can probably save up that amount in less than a year. Here’s how to fund your business if you only need up to RM10,000.
1. Own savings
After you’ve saved up your emergency funds (three to six months’ worth of living expenses), consider using this money to fund your business. Other options can work, but you’ll immediately save on the respective loans’ interest rates and/or time to apply for those financing options.
2. Advance cash option from banks
Consider Maybank’s EzyCash option because the 3.88% fee is reasonable (well, effectively 7.76% per annum). It is easy, too – apply via Maybank2u and the money appears in your bank account straightaway – you just have to pay it back within six months.
Credit cards and personal loans are possible advance cash options too. Whichever you choose, make sure you’re able to make the repayments. The consequences for missing payments are HUGE. It’ll affect your credit score and ability to buy a car/house.
Mentally, you’ll get stressed and depressed. You may have to spend years to pay back the loan, and be forced to take any job that comes your way, even those you hate.
Ways to raise over RM10,000
Ah, now it gets trickier. The prerequisites are:
(i) A business that you want to grow, rather than start. This means you have a company already.
(ii) Or if you have not started the business yet, then you need a proper business plan + pitch deck + whatever that can convince the other party to give that money to you.
There are very limited options for businesses in this stage, also called the Ideation stage. Investors like to see at least a Minimum Viable Product (MVP) aka what you’re actually offering.
(iii) Helps that you are a tech startup or rural business.
1. MaGIC Central’s Resource page
Go to their website for a listing of funding available specifically for aspiring entrepreneurs. Select preferred funding options too if you want i.e. Angel Fund, Crowd Funding, Loan, Grant, Venture Capital & Equity and Guarantee Service options.
2. SME Bank
There are many good financing programmes implemented, with very reasonable loan rates. There are specific funds for:
• young people (Young Entrepreneur Fund)
• women (Financing Program for Women Entrepreneur)
• online business (Online Business Financing Program)
• racial groups (My Seed SME Scheme – Indians; for Malays/Bumiputera)
3. SME Corp-listed SME Financing
These come with specific terms and conditions that you need to fulfil in order to qualify. Available under various ministries, agencies and private entities, there are four types of help available:
• Loan schemes
• Grant schemes
• Venture capital
• Guarantee schemes
4. Small business loans from banks
Quite straightforward. Earlier, you had to ask each bank individually for their rates, but now it’s easier – iMoney has a comparison tool which lists banks and their interest rates.
5. P2P (peer-to-peer) lending platforms
A relatively new offering, P2P lending platforms connect businesses to individuals who are willing to lend their money in return for an agreed interest rate. Here are all the available P2P lending platforms in Malaysia:
• B2B FinPal
• Ethis Kapital / Kapital Boost – the only one focussed on Shariah-compliance
• FundedByMe Malaysia – good if your business wants to attract international investors, not just Malaysians
• ManagePay Services
• Modalku Ventures / Funding Societies
• Peoplender / Fundaztic
P2P platforms are an attractive option for lenders because it gives quite high rates (over 8% is common).
For the business side, even though rates are higher it’s worth considering P2P lending platforms for the added marketing/advertising element, especially if you don’t want to let go of any equity in your business.
6. Equity crowdfunding (ECF) platforms
Also a fairly new offering, equity crowdfunding platforms allows individual investors to hold some ownership in your startup/business in exchange for funding.
Here are all the available equity crowdfunding platforms available in Malaysia:
• PitchIN – Focuses on tech startups, links with incubator WatchTower & Friends. Open for startups in ideation stage.
• FundedByMe Malaysia – Good if your business wants to attract international investors, not just Malaysians.
• Ata Plus – Blockchain-enhanced ECF platform.
• Eureeca – Good if your business wants to attract international investors, not just Malaysians.
• CrowdPlus.Asia – Accepts established businesses across different sectors looking for growth.
• Crowdo – Says that it connects Asia’s startups to global market.
ECF platforms are also great for the added marketing/advertising benefit, as well as the business mentorship.
7. Angel investors
Did you know we have our very own Malaysian Business Angel Network (MBAN)?
They are comprised of High Net Worth Individuals (over RM3 million) or High Income Earners (RM180k per annum, or RM250k with spouse) who can enjoy tax benefits up to RM500k under the Tax Angel Incentive Programme if they invest in your business.
Here’s what you need to be eligible:
• Minimum 51% Malaysian-owned.
• Core business must be tech-related.
• Cumulative revenue less than RM5 million.
• Been operating for three years or less.
• And registered as a Registered Investee Company.
This method of getting financing relies a lot on networking and your personal ability to convince individuals (all of whom are businesspeople) into believing your business idea. They have to love it enough to fund it.
8. VC firms (venture capital firms)
Nexea Angels has a very good list of available venture capital firms providing financing to Very Early Stage and Later Stage startups.
VCs look for high-potential startups to invest in, and many reduce risk by investing in more mature businesses with an already-established userbase/clients with projected profit revenue and whatnot.
The above are ways to raise money for your business and many come with added benefits like mentorship and advertising.
Try to avoid funding your business with credit cards, personal bank loans and loan sharks – the risks are too big in case the business fails (and statistically, nine out of 10 businesses close shop within five years).
You’re not limited to one funding option; you can choose a few depending on what you want at different stages of your business.
This article first appeared in ringgitohringgit.com
Suraya is a corporate writer-for-hire and the blogger behind personal finance website Ringgit Oh Ringgit. She is more of a minimalist, less of a consumerist, a konon DIY enthusiast, a let’s-support-small-businesses-over-big-corporations kinda girl. Prior to her current role, she worked in various capacities within the non-profit industry.