Financial Guide for SMEs - SME Corporation Malaysia

Financial Guide for SMEsUnderstanding the Debt Financing Options :Long-term versus Short-termIf you select debt as a financing option, you haveto consider which debt product (as there are many)will meet the needs of your business.In making this assessment, you will need to:• Understand the nature of alternative debtproducts in the market to make an informeddecision;• Identify the alternative features available foreach product;HINTIt is important toreview alternativefi nance productsfrom different lendersand ensure thatyou are comparingapples with apples• Have a common basis for comparing debt products;• Match the right debt product / features with your business circumstancesand requirements; and• Understand the tax implications of alternative products.To cater for your business needs, fi nancial institutions offer a wide range offi nancing products for SMEs under both conventional and Islamic banking. Youcan choose from a wide variety of products offered in the market, dependingon your fi nancing needs and the suitability of such fi nancing to your business.A list of different types of products available, its usage, features and benefi tsfor SMEs is provided on page 95.Evaluating Your Own CircumstancesIn matching a debt product and selecting the appropriate features to suit yourbusiness requirements, you need to determine the following about yourbusiness:• Types and purpose of the loan / funds and how long you would require them;• Whether they are for short-term funding of working capital or long-term funding,to fund a building extension or export market entry costs;• How much finance you need (be realistic about the amount of funds yourequire – do not underestimate).93chapter 7-13 p79-181 Eng.indd 938/15/11 5:02:56 PM