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Securing a business loan in Malaysia can be challenging, especially if you are a new business owner. What is worse is finding out your application was denied!


Don’t be disheartened, because there are ways to make your business more favourable to lenders. But first, it’s important to understand the potential reasons why your business loan applications was rejected and how to improve future loan applications.


Here are some common reasons why business loan applications are rejected. 

Poor Documentation Of Business Documents

Failing to provide banks with the required documents delays the review of a business loan application.


Use a digital platform to manage your business's accounts digitally. This way, all your documents are stored in one place and can be accessed wherever you are.


Damaged Credit Score

All banks check your reliability when it comes to paying back, and having a low credit score implies that you are not trustworthy.


In such situations, businesses can opt for secured and unsecured lines of credit or alternative lending options such as peer-to-peer financing. 


Cash Flow Limitations


Many banks require business loan applicants to demonstrate a minimum amount of monthly or annual revenue. However, banks can deny your loan if you are not consistently making profits in business.


This is because it implies that you are not managing your business well. Therefore, adopting a business management software is advisable to manage daily operations better. By putting your business transactions on record through business software, online banking, or e-wallet, it will be a good choice as data can be extracted to demonstrate the viability of your business.


Meanwhile, if you are in a cash-based business, you should begin this effort immediately because the bank will typically assess the previous 6 months of business transactions at the point of evaluation.


New to Business

When your business lacks credibility, getting a loan becomes difficult.


By using business management software, business owners can show their profits and sales reports which creates credibility for their business.


No Strong Business Purpose

Banks need to know how you will invest the money in your business. It is best to prepare a business plan, a document that shows the lender your vision.


A well-written business plan includes your plans to grow your business, a projection of costs and revenue, strategies you plan to adopt and more.


Too Much Existing Debt

A business’ debt utilisation rate is the portion of the credit limits it is currently using. Lenders prefer an applicant’s debt utilisation rate to be under 30%.


If your company has a higher credit utilisation rate, it will be considered too risky to qualify for a loan.


Alternative Funding Sources You Can Consider

If a bank denies your business loan application, there are other options you can pursue to obtain the financing you need. 


Business Credit Card

For some entrepreneurs, a credit card is the only way to start a business. Clutch, a market research firm, found that 13% of their respondents in a survey relied on credit cards for start-up capital.


Credit cards secure extra funds for businesses, and also offer savings and rewards. Additionally, they help companies build credit to secure a bank loan in the future.


A credit card you can use is the CIMB SME BusinessCard, which offers cash rebates on your business-related expenses. For example, the bank gives a 0.5% rebate on local purchases and 1.25% on overseas spending.


CIMB's SME InstaBiz Financing


CIMB launched the SME InstaBiz Financing, offering up to RM150,000 for sole proprietorships and up to RM250,000 for partnerships or private limited companies.


Here are 8 reasons why SME Instabiz Financing is the financing option for your business:


  • Apply for an SME loan anytime and anywhere
  • A completely online application process without needing to visit a CIMB branch
  • No mandatory documents are required for loan application
  • No collateral required
  • Speedy approval within 30 minutes
  • Fast disbursement on the same day
  • No processing fees
  • No lock-in period and early settlement penalty


5 Steps To Take If Your Business Loan Was Rejected


If you apply for a business loan but get denied, here are 5 steps you can take to get the funding you need:


  • Find out why your application was rejected.
  • Correct minor errors in your application.
  • If your rejection was due to a poor credit report, take time to review your information.
  • Consult a bank representative on what you are eligible for.
  • Apply for a new loan.


When a business fails to repay its lender, it will go bankrupt and be forced to liquidate its assets. This is why many companies hesitate to apply for a business loan.


However, as long as you manage your business debt wisely, you can use it to build your business' credit rating. Always check your affordablity before commiting to a fixed-term financing.


Nevertheless, do not get discouraged if your business loan application is declined. Use your rejection as a learning experience to discover how you can improve your business to qualify for a loan.


Interested in learning more business management and financing tips? If your answer is yes, visit our Business Insights section to broaden your financial knowledge.


This article is brought to you by CIMB as part of our ongoing efforts to raise the level of financial literacy among Malaysians. Financial knowledge and understanding are key to making well-informed and meaningful financial decisions towards positively improving welfare and well-being of communities. This is one of our many efforts to achieve CIMB’s purpose of advancing customers and society.