Did Your SME Loan Got Rejected By M’sian Bank? Here’s Why

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Financial institutions and banks are getting stricter with their protocol especially with anything that involves a monetary form especially if its a loan. Many business owners struggle to obtain an SME loan and sometimes, you won’t get the reason too. Hence, it makes things even more complicated and businesses are forced to close down due to this.

Don’t be discourage by this situation and try approaching a financial advisory firm like us to get things analysed and sorted. With that being said, here are 10 reasons why the bank rejected your SME loan application.

1. Repayment Ability

With all these financial documents, the banks will assess the company’s income to understand their ability to cover the new and current loans. With this, it is crucial for SME business owners to always repay on time. This will build trust with the financial institutions and it will show up on your credit score if any of your SME loans have not been paid.

2. Funding Purpose

The bank needs to know the purpose of this funding as it has to be aligned with the company’s nature of business. This helps to justify working capital requirements and the bank will able to approve your SME loan without scepticism.

3. Financial Positioning

The meaning of financial positioning would be the company’s track record in their repayment ability and audited report. If there’s any failure in repayment or financial document that doesn’t look appealing, the company’s financial position will be affected heavily. Hence, the company must always maintain its standard. 

4. Commitment Ratio

SME owner commitment towards that particular company should be higher which also includes their shareholder of the company too (51%). Anything below, the banks would reject it instantly as it does not fulfil the SME loan requirement.

5. Low Credit Score

Credit scores from CTOS and CCRIS are the company’s credit health overall since the beginning of the operation. Your credit score plays a major role in determining your chances to obtain an SME loan in the future. Not only that, the company’s financial stand and their repayment habit are reflected on these two platforms too.

6. Single Customer Risk

The single customer risk relates to the niche targetted audience. For example, the company depend on one type of buyer or one type of supplier for its business operation. It will heavily affect the company if the only targeted customer or supplier is facing difficulties.

7. Lack of Collateral

In many financial institutions, they require collateral as a form of default payment such as your vehicle, property and so much more. If they still need more collateral, you can offer your personal assets too.

8. Incomplete Documents & Applications

Incomplete applications or lack of certain documents would be an automatic rejection. This issue has been quite common as many SME owners would miss out a document or two due to a long list of needed documents for submission. Regardless, double-checking or ask the bank officer if there’s anymore needed for the submission to prevent any issues.

9. High Gearing Ratio

High gearing ratio means the company has a larger debt than its equity capital. Hence, the higher the debt, the risk would also be higher too. If it’s lower, the bank officer won’t hesitate in providing you with the funds as they believe in your repayment capability.

10. Working Capital Amount

The working capital amount (SME loan) should be larger in volume as financial institutions cost of services should be worth it. With this, larger financing is more profitable to them.


Sam Wong - SME loan Consultant

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