On 21 January 2022, Bank Negara Malaysia, the Central Bank of Malaysia (‘
BNM’) introduced two new facilities under BNM’s Fund for Small Medium Enterprises (‘
SMEs’), namely the Business Recapitalisation Facility (‘
BRF’) and the Low Carbon Transition Facility (‘
LCTF’) with a facility amount of RM1.0 billion each.
This alert highlights the main features of the BRF.
Background
The BRF and the LCTF were first announced by the Minister of Finance during the
2022 Malaysian Budget Speech.
1
The BRF is made available through participating financial institutions (‘
PFIs’), the list of which is available
here.
Details of the BRF
The BRF is a financing facility established by BNM to support SMEs to recover and grow, while managing their level of their indebtedness (i.e. to make improvements in their capital structure, particularly those that wish to undertake capital expenditure, facilitating a more manageable debt-to-equity structure after tapping the BRF) through innovative financing solutions.
Under BRF, SMEs may obtain:
The BRF financing may be used for working capital and/or capital expenditure, but cannot be used to refinance existing credit/financing facilities.
BNM has advised that applications for equity financing and/or blended financing are to be submitted to the PFIs. Approval will be subjected to credit assessment of the respective PFIs and/or relevant third party equity financiers.
Eligibility
The BRF is available to viable
Malaysian-owned SMEs3 (including microenterprises) in all sectors.
Financing amount, tenure and financing rate
Eligible SMEs will be able to obtain financing up to RM5 million each. The maximum tenure for financing is 10 years.
The maximum effective rate of financing is up to 5.0% per annum, inclusive of guarantee fee or 3.5% per annum without guarantee.
For equity financing, there will be no cap on return of investment for equity investment.
According to BNM, it is possible under the blended financing option for an SME to raise a combined financing that exceeds RM5.0 million from the PFI and the third party equity financier.
Security
Collateral is not required under the BRF.
Availability
The BRF will be available from 3 February 2022 until full utilisation.
Further information
Further information on the BRF is available
here and
here.
Alert by Lee Ai Hsian (Partner) and Tai Kean Lynn (Associate) of the Banking and Finance Practice of Skrine.
1 See paragraph 156 of the 2022 Malaysian Budget Speech.
2 The term ‘common shares’ is not defined in the Companies Act 2016. It is possible that the term is intended to refer to ‘ordinary shares’.
3 Refer to the ‘
Guideline for SME Definition’ issued by SME Corporation Malaysia (‘
SME Guideline’) for definition of ‘small medium enterprise’. A description of ‘microenterprise’ can be found in the SME Guideline. To satisfy the criterion of Malaysian ownership, at least 51% shares in the SME must be owned by Malaysians in the manner described in the SME Guideline.