Financial Guide for SMEs - SME Corporation Malaysia

Financial Guide for SMEsDetails of the Loan RequiredThe potential lender will need to review why you are applying for aloan. You would have identified the amount of the loan when preparingyour cash flow forecasts and now you need to provide a detaileddescription of the loan required. The application should contain all theinformation on the funding required and should include the following:• Purpose of the loan;• Amount of the loan required;• Duration of the loan;• The method that the loan will be serviced; and• The security that is available to support the loan.Each of these points will be discussed in detail in below.The Purpose of the LoanA detailed description of why the loan is required should be included in theapplication as it is very important to a potential lender. Most lenders will not bewilling to provide a loan to assist in funding operating losses or for purchaseof luxury assets for the business owner. The purpose should be set out simplyand clearly. This may include:• Funding capital expenditure such as plant, equipment, vehicles, property andrenovations;• Increased working capital resulting from growth or to support increasedinventory holding;• Replacement of existing equity with debt;• Succession planning to provide an exit strategy for family members;• Acquisition of another business or part of business;• Research and development or commercialisation stage; and• Expanding distribution or developing new markets.134chapter 7-13 p79-181 Eng.indd 1348/15/11 5:03:04 PM