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Alternative Funding Sources for Businesses

SME Loan and Government Incentive for Alloy Wheels Manufacturer to Setup Its New Plant

SME Loan and Government Incentive for Alloy Wheels Manufacturer to Setup Its New Plant

Situation:

The company is one of the leading alloy wheel manufacturers in Malaysia. Over the years the company had distinguished itself through its niche casting capabilities, quality record and long-standing customer relationships.

The company was awarded a large number of contracts with an automotive OEM and was in need of additional manufacturing capacity to support the launch of new products. In addition, the company was looking for end-market diversification in an effort to grow outside of its core segment.

Challenge:

The Company needed to raise additional capital to move to a new location to increase its manufacturing capacity, purchase new machinery and equipments and to fund the incremental working capital necessitated by the forecasted increase in revenue.

They had relationships with two local commercial banks; one relationship was 5 years old and the other 6 years old. Both banks turned down the company’s request for an increase in their working capital line and for a term loan of 5 years. The banks stated that the company’s business was stagnant for the past few years. In fact the bank the company had been with for 5 years stated that the company was fortunate to get a renewal of its present facility despite the fact that the company had been a very good customer, paying its obligations on time and always in compliance of its loan agreements

Solution:

Management agreed that we would approach other FIs for the working capital and seek term loan for renovation of the new factory according to its specification. With the strategy agreed upon, we put together a loan proposal on the company which discussed its history, products, management, historical performance and the new opportunity.

Result:

CAPITAL’s significant experience and relationships in the industry allowed us to quickly identify and approach a few Malaysia development banks to provide the necessary credit facilities and governmnet incentives to grow the company as planned:

  • SME Bank: RM 5.0 million term loan with 5% interest p.a. for the new factory and working capital.
  • MIDF: RM1.3 million to purchase machinery and equipments including furnace and robotic arms at 90% financing with 5% interest rate.
    AmBank: RM1.1 million to purchase a fully automatic paint line.
  • MIDA: Approval of Pioneer Status which enjoying 5 + 5 years of 100% tax exemption under SME category.