CGC - Banking Info

Credit Guarantee CorporationGENERALINFORMATIONCredit GuaranteeCorporationA consumer education programme by:

contents1 Introduction2 Role of CGCTypes of guarantee schemes offered by CGC3 Where to apply for CGC guaranteesDirect Access Guarantee Scheme (DAGS)5 Documents required6 Schemes other than Direct AccessGuarantee Scheme (Non-DAGS Schemes)7 iGuarantee: Online loan application via CGCwebsiteDocuments required for loan application10 Costs and fees for using CGC guaranteeschemes11 Other services provided by CGC13 Useful tips for obtaining guarantee cover14 Frequently asked questions19 Enquiries20 AppendixDisclaimerThis document is intended for your general informationonly. It does not contain exhaustive advice orinformation relating to the subject matter nor shouldit be used as a substitute for legal advice.Date: 1 March 2004

IntroductionThis booklet providesinformation onthevariousschemes offeredby CGC to SMEsTo ensure that small and medium enterprises (SMEs) have access tofinancing, Bank Negara Malaysia together with the commercial banks andfinance companies have established the Credit Guarantee CorporationMalaysia Berhad (CGC) to provide guarantee cover for SMEs.This booklet provides information on the various guarantee schemesand services offered by CGC to SMEs and explains how SMEs can applyfor such schemes.

TYPES OF GUARANTEE SCHEMES OFFEREDBY CGCCGC offers six types of guarantee schemes:• Direct Access Guarantee Scheme (DAGS)• New Principal Guarantee Scheme (NPGS)• Islamic Banking Guarantee Scheme (IBGS)• Flexi Guarantee Scheme (FGS)• Small Entrepreneur Guarantee Scheme (SEGS)ROLE OF CGCCGC was established on 5 July 1972.The main objective of CGC is to assistSMEs that have no track record orcollateral, or inadequate collateral, toobtain credit facilities from financialinstitutions by providing guarantee coverfor such facilities.• Franchise Financing Scheme (FFS)The features and eligibility criteriaof the specific schemes offered by CGCcan be found in the CGC website atwww.iGuarantee.com.my. Alternatively,you may wish to contact any of the CGCbranches nationwide for the information.2

WHERE TO APPLY FOR CGC GUARANTEESThere are 2 ways to apply for CGC guarantees and thiswill depend on the types of schemes involved:TypesDAGSOther Schemes(Non-DAGS)Application via• CGC branches• The participating financial institutionsThe main objectiveof CGC is to assist SMEs thathave no track record or collateralto obtain credit facilitiesDIRECT ACCESS GUARANTEE SCHEME (DAGS)How To Apply for DAGSTo obtain a credit facility under DAGS, you can approachthe CGC branch nearest to you. When you apply forDAGS, CGC will assess your application and if you are ableto meet the criteria, CGC will assist you to obtain theloan from the participating financial institutions. The listof participating financial institutions for DAGS is given inthe Appendix. The processes involved are shown indiagram A on page 4.3

DIAGRAM A: Steps to apply for DAGSNOCGC informs applicantCGC requests PFIs toreconsiderYESApproach CGC for guarantee cover inorder to obtain credit facilities from PFIsNOApplication assessed by CGCEligible?YESApplication assessed by PFIs (1)(1) If you meet the requirements of CGC,CGC will forward a letter of undertakingand relevant documents to all participatingfinancial institutions for assessment.(2) The participating financial institutionsmay reject your application and forwardit back to CGC. If CGC feels that yourapplication merits reconsideration, CGCwill request the participating financialinstitutions to reassess your case.(3) Upon approval of the application, theparticipating financial institution willforward a letter of offer via its nearestbranch to you. The participating financialinstitution will also inform CGC about it.PFIs return applications toCGC and CGC reviews them (2)NOAccept?YESPFI contacts you and informs CGC (3)Note: PFI = Participating Financial Institution4

DOCUMENTS REQUIREDBelow is the list of documents that CGCwill require from you when you applyfor DAGS:Statutory Documents• Memorandum & articles of association• Certificate of incorporation(Form 9)• Return of allotment of shares (Form 24)• Return giving particulars in register ofdirectors, etc. (Form 49)• Photocopies of directors’/guarantors’ IC• Copy of latest income tax(Form J) of owner/partners/directorsFinancial & Management Documents• Audited financial statements for the last3 years• Latest management account• Cash flow projection for the next 3 years• Copy of bank statement for the last6 months• List of existing borrowing(s)• List of major customers and supplierstogether with repayment schedule• Copy of 6 months personal and businessloan bank statements/personal loan paymentreceipts for owner/partners/directors• Copy of letter of offer of existing loan,including hire purchase• Company profileOther Documents• Declaration form duly filled by all directors• Valuation reports on property to be charged(if any)• Copy of tenancy agreement/title deed• Profile of main contractor*• List of contract-in-hand*• Latest purchase order**if applicable5

SCHEMES OTHER THAN DIRECTACCESS GUARANTEE SCHEMES(NON-DAGS SCHEMES)How To Apply for Non-DAGS SchemesWhen you apply for a loan from aparticipating financial institution, theparticipating financial institution willevaluate your loan application andwill recommend that you obtain aguarantee cover from CGC, if necessary.List of participating financial institutionsfor non-DAGS is given in the Appendix.The processes involved are as follows:DIAGRAM B: Steps to apply for non-DAGS schemesPFI will inform youaccordinglyNOApproach any PFI for a loanApplication assessed by PFIGuaranteecoverrequired?YESPFI submits application forguarantee cover to CGCCGC conducts credit evaluationCGC notifies PFINOApproved?YESCGC issues Letter ofGuarantee to PFI. You willbe notified and given aletter of offer by the PFI.Note: PFI = Participating Financial Institution6

iGUARANTEE: ONLINE LOANAPPLICATION VIA CGC WEBSITEiGuarantee provides a convenient onestopcentre for loan applications fromSMEs. In iGuarantee, you submit your loanapplication through CGC’s portal bycompleting the application form providedin the portal. Your loan application willbe posted on CGC’s portal, which can beaccessed by all participating financialinstitutions. The participating financialinstitutions may contact you to seekfurther information before they decideto approve your application.iGuarantee can help you to save bothtime and money as you do not haveto travel to different financial institutionsand complete multiple loan applications.In addition, you will be able to obtaincompetitive offers on your loanapplication. The processes involved areshown on page 8.DOCUMENTS REQUIRED FOR LOANAPPLICATIONMost participating financial institutionsrequire certain documents to supportyour loan application. In addition to thedocuments required on page 5, theparticipating financial institutions mayrequire the following documents as well:Company Information• Business registration form (Form A)• Registration certificate (Form D)• Company profile– Background of company– Activities of company– Management background– Proprietor curriculum vitae– Modus operandi• DAGS application form duly signedby applicant7

(1) After you have agreed to theoffer by CGC, CGC will notifythe participating financialinstitution, who will thencontact you and ask you tosubmit an application fora loan. Upon receipt of the loanapplication, the participatingfinancial institution will issuea letter of offer to you.However, the issuance ofguarantee cover by CGC wouldstill depend on the participatingfinancial institution’s creditevaluation processes.(2) The processes involved inapplication for DAGS are givenin Diagram A.NOApproved?YESDIAGRAM C: Steps to apply for loan via iGuaranteeSubmit onlineapplication atwww.iGuarantee.com.myCGC will inform youaccordinglyCGC will review yourapplication under DAGSYour applicationwill be processed (2)NOApproved?YESNOInterested PFIs revertwith their offersCGC evaluatesyour applicationEligible?YESYour application isposted on iGuaranteefor PFIs to viewPFIs evaluate yourapplicationCGC assesses PFIs’offers and selectsthe best offer thatmatches your needsNote: PFI = Participating Financial InstitutionCGC contacts youto ensure that thesuccessful PFI isacceptable by you (1)8

Personal Information on Director• Copy of IC of all proprietors/guarantors• Form J/Form EA or at least, latest 3months pay slip• Declaration form by proprietors/guarantors– List of assets and its worth e.g. houses,cars, land– List of liabilities, e.g. housing/car loan,personal loan– Evidence of payment on loans, e.g.loan statement, letter from bank,receipt of repayment for the past6 months– Personal bank accounts, if availableFinancial Details• 3 years audited accounts• Latest management account• Cash flow projection for 3 years(monthly basis for the first year),if available• Bank statement for the past 6 months• Ageing list for debtors and creditors• Copy of letter of offer of existing loan,including hire purchase– For hire purchase/term loan: to provideevidence of payment, e.g. receipt ofrepayment for the past 6 months orloan statement– Copies of investment made, e.g. fixeddeposits, shares, properties, unit trusts9

Other Documents• Copy of tenancy agreement (ifoffice/business premise is rented)• A simple map to the businesspremise• Photos of:– Proprietors/guarantors– Signage– Scenario of office– Working environment– Products• Profile of main contractor*• List of contract-in-hand*• Latest purchase order*• Others*if applicableCOSTS AND FEES FOR USING CGCGUARANTEE SCHEMESProcessing FeeThe processing fee is paid only once,either to the participating financialinstitution (where you obtained yourbusiness loan) or to CGC. In the case ofDAGS, the fee charged is determinedby CGC and borrowers should makepayment directly to CGC branches. Fornon-DAGS, the individual participatingfinancial institution will determinethe fee to be charged.Interest RatesThe interest rates imposed on the loansapproved to borrowers are determinedby the participating financial institutionbased on the prescribed rates of thevarious types of CGC’s schemes.Guarantee FeeThe guarantee fee payable to CGCvaries depending on the guarantee10

facility granted to you. Payment of thefee is made in advance annually bythe participating financial institution.The participating financial institution willsubsequently debit your account for thefee paid on your behalf. CGC schemes’guarantee fee range from 0.5% to 2.0%of the guarantee cover amount. However,the guarantee fee imposed under theFlexi Guarantee Scheme will be borne bythe participating financial institutiongranting the loan. This is to ensure thatyou, as the borrower, continue to enjoythe loans under the various funds at therespective prescribed rate.The guarantee feepayable to CGC varies dependingon the guarantee facility granted to youOTHER SERVICES PROVIDED BY CGCBusiness Advisory Services Entity (BASE)To assist SMEs who are not familiar ordo not know how to prepare therequired documents for loan applications,CGC has appointed a panel of BASE. Theobjectives are as follows:11

• To improve the turnaround time inprocessing and avoid delays in processingdue to incomplete submission of documents• To assist the SMEs in taking appropriatemeasures to safeguard and further improvetheir businessesHow Do I Obtain This ServiceYou can either visit CGC or if you alreadyknow the panel of companies under BASE,you can go to any of the companies withinthe panel directly. The contact addresses ofBASE can be found in CGC’s website.You may subscribe to the services of BASEfor a small fee and the payments aremade directly to BASE. The engagementof the services of BASE by the applicantis not an assurance that CGC will approvethe loan application. The fees chargedby BASE will vary depending on theservices required, which may include thepreparation of working papers for theloan application, site visits to the businesspremises, site visits to inspect the collateraloffered, preparation of financialprojections, market analysis and quarterlymonitoring and reporting (for the first yearonly). The fees for these services generallydo not exceed RM3,000.12

USEFUL TIPS FOR OBTAININGGUARANTEE COVER• Prepare and make available thenecessary documents (such as profileof business, business plan, financialstatements, cash flow projections, etc.)• If you do not know how to prepare abusiness plan/other documents for theloan application, you may eitherapproach any advisors of your choiceOR contact CGC’s panel of BASE• Plan the financing requirements ofyour business in advance so that you areable to submit your loan applicationearly to avoid any mismatch betweenyour requirements and the loandisbursement• Approach your financial institution andCGC to discuss any constraints that youmay have in servicing your loan on timeso that an amicable solution may bereached13

FREQUENTLY ASKED QUESTIONSDo we need to submitseparate applications to theparticipating financialinstitution and CGC?No. For DAGS, you can approach the CGC branch nearest to you and CGC will assistyou to obtain the loan from the participating financial institution. For non-DAGS,when you apply for a loan or any other credit facility to be covered by CGC, theparticipating financial institution will process and evaluate your application and assistyou to obtain the required CGC guarantee loan or credit facility.How do I qualify for a CGCguaranteedloan?Depending on the specific scheme selected, you must be a Malaysian citizen orresident-controlled company, operating a registered or licensed business in Malaysia,and your net assets or shareholders’ funds or total existing business borrowings meetthe requirements of the respective guarantee schemes.How many guarantee schemesare available through CGC?Currently, CGC offers six guarantee schemes. To determine which one best suits yourneeds, you can contact CGC or visit its website at www.iGuarantee.com.my.Q&A14

Can I approach CGC directly fora guarantee cover?You can only approach CGC directly for applications relating to Direct AccessGuarantee Scheme (DAGS).How can I benefit from using theiGuarantee?iGuarantee provides a convenient one-stop centre for loan applications from SMEs.Your loan application will be posted on CGC’s portal, which can be accessed by allparticipating financial institutions. Thus it saves you both time and money as you do nothave to travel to different financial institutions and complete multiple loan applications.In addition, you will be able to obtain competitive offers on your loan application.Are there any costs/fees involvedin posting loan applications iniGuarantee?There are no fees levied on the applicant.15

Is it safe to submit my financialinformation online?CGC has taken all necessary precautions to ensure safety and security of the datacollected and transferred through iGuarantee.Which financial institutionsparticipate in CGC schemes?The list of participating financial institutions are as per the Appendix.What types of credit facilitiesdo CGC guarantee under itsschemes?Among the credit facilities guaranteed are term loans, overdrafts, letter of credit,export credit refinancing, bills purchased, tradelines, trust receipts, hire purchase,leasing, bankers acceptances and other facilities determined by CGC from time to time.16

Is there a limit to the numberof guarantees I can obtain fromCGC, at any point in time?Borrowers may be allowed to enjoy multiple guarantees subject to the eligibilitycriteria being met and within their repayment capacity. Multiple guarantees can befor different schemes, under the same financial institution, subject to the limit onaggregate borrowing. For borrowers with existing CGC guarantee cover, they mustnot have bad record with CGC.How is the guarantee feecharged?The guarantee fee is imposed on the total guarantee cover amount and will be paidto CGC by the participating financial institution at the beginning of the guaranteeperiod and its anniversary dates. Your account will be debited for the fee paid on yourbehalf. However in the case of Flexi Guarantee Scheme, the fee is absorbed by theparticipating financial institution.17

Can I get a rebate on theguarantee fee paid if I repaymy loan?You can get a rebate under the following circumstances:(i) For all guarantee schemes, except for the revised New Principal GuaranteeScheme and Islamic Banking Guarantee Scheme (effective 1/11/2002),you can get a 100% refund of the guarantee fee if you have fully repaid yourloan and the participating financial institution has informed the cancellationof guarantee cover to CGC within the three months period from the dateof the approval as stated on the Letter of Guarantee (or its anniversary datesthereafter). No guarantee fee is refunded if the participating financialinstitution notifies CGC on the cancellation of the guarantee after the thirdmonth from the Letter of Guarantee approval date (or its anniversary datesthereafter)(ii) For the revised New Principal Guarantee Scheme and Islamic BankingGuarantee Scheme, you can get a refund as per (i). However, you will onlyreceive 50% refund if the participating financial institution submits thenotification of cancellation of your guarantee cover between 91-180 daysfrom the date of the Letter of Guarantee (or its anniversary dates thereafter)in circumstances whereby:– CGC guarantee coverage is no longer required due to the cancellationof the unutilised credit facility; or– A new Letter of Guarantee supersedes the existing Letter of Guaranteewhen the participating financial institution grants an additional loanto you; or– The existing guarantee coverage agreement is renewed prior to its expiry18

ENQUIRIESIf you require any further information,please submit your enquiries to CGC by telephone,fax, letter, or e-mail:Credit Guarantee Corporation Malaysia BerhadHead OfficeLevel 13-16, Bangunan CGCKelana Business Centre97, Jalan SS7/2, 47301 Petaling JayaSelangor Darul EhsanTel: 03-7806 2300Fax: 03-7806 3308E-mail: mailbox@cgc.gov.myor contact any of their branches nearest to you.Please refer to CGC’s website to obtain the updatedlist of branches.19

APPENDIXPARTICIPATING FINANCIAL INSTITUTIONS FOR DIRECT ACCESS GUARANTEE SCHEME (DAGS)• Malayan Banking Berhad• RHB Bank BerhadPARTICIPATING FINANCIAL INSTITUTIONS FOR NON-DAGS SCHEMESNo Schemes Participating Financial Institutions*1. New Principal Guarantee Scheme • Commercial banks• Finance companies2. Islamic Banking Guarantee Scheme All commercial banks & finance companies offeringinterest free financing under Islamic banking concept3. Flexi Guarantee Scheme • Commercial banks• Finance companies• Development financial institutions4. Small Entrepreneur Guarantee • Commercial banksScheme• Finance companies5. Franchise Financing Scheme • Bumiputra-Commerce Bank Berhad• Malayan Banking Berhad*Please contact CGC for the updated list of participating financial institutions20

Design Copyright © 2004 by Freeform Design Sdn Bhd. All rights reserved.

FOR MORE INFORMATIONLOG ON TOwww.bankinginfo.com.myOR VISIT OUR KIOSK AT MOST BANKSFirst Edition