What is Franchise Financing Scheme(FFS)
Owning a franchise in Malaysia is within reach for many, thanks to the government’s proactive efforts to support entrepreneurs. One such initiative is the “Franchise Financing Scheme” (FFS), a valuable resource designed to ease the financial burden of starting or expanding a franchise business.
Government Malaysia Offers Financial Support for Franchisees, Including FFS
The Malaysian government recognizes the pivotal role of franchising in driving economic growth and creating employment opportunities. To foster entrepreneurship and support the expansion of franchise businesses, they have introduced various financial assistance programs. The Franchise Financing Scheme (FFS) stands out as a significant initiative, tailored to provide accessible funding for aspiring and existing franchisees.
What is FFS (Franchise Financing Scheme)?
The Franchise Financing Scheme (FFS) is a government-backed financing program designed to assist Malaysian entrepreneurs in establishing or expanding their franchise businesses. It aims to reduce the financial barriers associated with franchising, enabling individuals to pursue their entrepreneurial dreams. The FFS provides access to loans with favorable terms, making franchise investment more accessible.
FFS Application Criteria and Requirements
To qualify for the FFS, applicants must meet specific criteria and requirements, which typically include:
- Malaysian Citizenship: Applicants must be Malaysian citizens.
- Business Registration: The franchise business must be registered with the Companies Commission of Malaysia (SSM).
- Franchise Agreement: A valid franchise agreement with a reputable franchisor is required.
- Financial Viability: Applicants must demonstrate the financial viability of their proposed or existing franchise business.
- Creditworthiness: A good credit history is essential.
- Business Plan: A comprehensive business plan outlining the franchise operation is necessary.
- Collateral: Applicants may be required to provide collateral.
- Franchisor Approval: The franchisor must be approved by the Ministry of Domestic Trade and Consumer Affairs (KPDNHEP).
Investment Mode, Size, and Tenure
The FFS offers flexible financing options, with the investment mode, size, and tenure varying depending on the applicant’s needs and the financial institution’s policies. Typically:
- Investment Size: The loan amount can range from a few hundred thousand to several million Ringgit Malaysia (RM).
- Tenure: The loan tenure can extend up to several years, providing ample time for repayment.
- Investment Mode: Can be for new franchise set ups, or expansion of existing franchises.
How to Apply for FFS
The application process for FFS involves the following steps:
- Prepare Documentation: Gather all necessary documents, including business registration, franchise agreement, business plan, and financial statements.
- Contact Participating Banks: Approach banks that offer FFS and inquire about their specific application procedures.
- Submit Application: Submit the completed application form along with the required documents.
- Bank Evaluation: The bank will evaluate the application based on the applicant’s financial viability and creditworthiness.
- Approval and Disbursement: If approved, the loan will be disbursed according to the agreed terms.
FFS Application Fee and Cost
The application fee and cost associated with FFS may vary depending on the participating bank. Applicants should inquire about these fees during the application process. Costs may include:
- Application fees.
- Processing fees.
- Legal fees.
- Interest rates.
When Will You Get FFS Application Status Notification?
The processing time for FFS applications can vary depending on the bank and the complexity of the application. Typically, applicants can expect to receive a notification regarding their application status within a few weeks to a few months. It’s important to maintain regular communication with the bank to track the progress of the application.
Banks That Provide FFS
Several banks in Malaysia participate in the FFS program, including:
- Maybank:
- The Maybank Franchise Financing Scheme (FFS) is a jointly participated scheme with the Kementerian Perdagangan Dalam Negeri Koperasi Dan Kepenggunaan (KPDNKK), Credit Guarantee Corporation (CGC) and two participating banks, i.e. Maybank and CIMB.
| Financing Amount | 5 Million |
|---|---|
| Interest Rate | BLR + 1.5% (subject to CGC subsidised rate) |
| Types of Facility | Term Loan (TL) |
- Eligibility
- Malaysian controlled/Malaysian-owned businesses, with net assets or shareholder funds not exceeding RM1.5 million.
- Your existing total credit facilities should not exceed RM7.5 million.
- The franchisor must be registered with Kementerian Perdagangan Dalam Negeri, Koperasi dan Kepenggunaan (KPDNKK) before applying for FFS.
- CIMB Bank
CIMB offer Franchise Financing Scheme for franchisees, too.
| Guarantee Fee | ||
|---|---|---|
| Total Credit Facilities | Unsecured Portion | Secured Portion |
| RM1.0 million and below | 0.75% | 0.50% |
| Above RM1.0 million | 1.0% | 0.50% |
- SME Bank
SME Bank provide Franchise Financing Scheme to maximum RM7.5 million with interest 4% – 6% per annum.
| Programme | FRANCHISE FINANCING SCHEME |
| Fund Provider | Credit Guarantee Corporation (CGC) |
| Eligibility | • All Malaysian-owned and controlled companies with net assets or shareholders’ funds not exceeding RM1.5 million. • Must fall within the definition of SMEs as defined by the National SME Development Council. • The existing total credit facilities of the borrower should not exceed RM7.5 million. • The borrower should not have any adverse record in respect of borrowing from any other financial institution or other agencies. |
| Stage Of Business | Expansion |
| Quantum/Margin of Financing | Maximum: RM7.5 million |
| Tenure | Up to 5 years |
| Guarantee | Guarantee Fee • Loans up to RM1 million – Unsecured Portion: 0.75% – Secured Portion: 0.50% • Loans above RM1 million – Unsecured Portion: 1.00% – Secured Portion: 0.50% |
| Interest/Profit Rate | 4% to 6% per annum |
| Contact | Credit Guarantee Corporation (CGC) Bangunan CGC, Kelana Business Centre 97, Jalan SS7/2, 47301 Petaling Jaya Selangor Darul Ehsan Tel: +603 – 78062300 Fax : +603 – 78063308 |
| Website | https://www.cgc.com.my |
Above are the details for Franchise Financing Scheme. Applicants should contact these banks directly to obtain the most up-to-date information on their FFS offerings.
FAQs
- Is FFS available for all franchise businesses?
- No, the franchisor must be approved by KPDNHEP.
- Can I use FFS to purchase an existing franchise?
- Yes, in many cases, FFS can be used for purchasing existing franchises.
- What is the maximum loan amount available through FFS?
- The loan amount varies depending on the bank and the applicant’s financial situation.
- What documents are required for FFS application?
- Documents include business registration, franchise agreement, business plan, and financial statements.
- How long does it take to get FFS approval?
- A few weeks to a few months.
- Are there any government grants available for franchisees?
- Yes, there are other grants, but this article focuses on the FFS loan.
The Franchise Financing Scheme (FFS) is a valuable tool for Malaysian entrepreneurs looking to venture into the franchise industry. By understanding the application criteria, requirements, and process, you can increase your chances of securing funding and realizing your franchise ownership dreams.
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