Can I Get A Loan To Buy A Franchise
Ever noticed those long queues at Mixue? Or maybe you’ve been tempted by the refreshing drinks at Aicha or the aromatic teas from Chagee? Obviously that franchises are booming in Malaysia!
You’re not alone if you’ve been thinking, ‘Wow, I’d love to own a franchise like that! Can I get a franchise loan?’ This article will explore how you can turn that dream of owning your own Mixue, Aicha, or Chagee outlet into a reality.
Types of Franchise Loan in Malaysia
We have different types of loans in Malaysia. These loans often consider the franchise’s proven track record and established brand, which can mitigate some of the risks associated with starting a new business.
Franchise Financing Scheme Malaysia
In Malaysia, the government and various financial institutions are actively supporting the growth of the franchise sector. One key avenue is the Franchise Financing Scheme (FFS), designed to empower Bumiputera entrepreneurs. This scheme provides crucial financial assistance to those looking to invest in established, Syariah-compliant franchises. Here’s a breakdown of the key criteria and financing structure:
Company Criteria:
- Age: The business owner must be between 21 and 60 years old.
- Operator: The business owner must also be the primary business operation.
- Education: Preference is given to applicants with a minimum diploma qualification.
- Company Registration: Financing applications must be submitted through a registered company (Sendirian Berhad).
- Ownership: The company must be 100% Bumiputera-owned.
- Franchisor Approval: A letter of offer from the registered franchisor or master franchisee is mandatory.
- Syariah Compliance: The business must adhere to Syariah principles.
- Sole Proprietorship/Partnership: Financing applications through sole proprietorships or partnerships are limited to a maximum of RM250,000.
- Cooperatives: Cooperative bodies must apply through a Sendirian Berhad entity.
- Creditworthiness: The company, business owner(s), director(s), and shareholder(s) must have a clean credit record and not be bankrupt.
- Financing Structure:
| Feature | Details |
| Financing Mode | Islamic Financing (Tawarruq Concept) |
| Financing Size | RM50,000 to RM2,000,000 |
| Financing Margin | Up to 70% of the total project cost |
| Profit Rate | Base Financing Rate (BFR) + up to 5% |
| Financing Tenure | Up to the maximum tenure of the franchise agreement |
CIMB Franchise Financing Scheme:
CIMB’s franchise loan programs are often structured to cater to the specific needs of franchisees, with competitive interest rates and flexible repayment terms.
| Total Credit Facilities | Unsecured Portion | Secured Portion |
| RM1.0 million and below | 0.75% | 0.50% |
| Above RM1.0 million | 1.00% | 0.50% |
Credit Guarantee Corporation (CGC) Franchise Financing Scheme:
| Feature | Details |
| 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. <br> • Must fall within the definition of SMEs as defined by the National SME Development Council. <br> • The existing total credit facilities of the borrower should not exceed RM7.5 million. <br> • 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: <br> • Loans up to RM1 million: <br> – Unsecured Portion: 0.75% <br> – Secured Portion: 0.50% <br> • Loans above RM1 million: <br> – Unsecured Portion: 1.00% <br> – Secured Portion: 0.50% <br> Guarantee fee and the applicable tax (if any) shall be borne by the customer. |
| Interest/Profit Rate | 4% to 6% per annum |
| Contact | Credit Guarantee Corporation (CGC) <br> Bangunan CGC, Kelana Business Centre <br> 97, Jalan SS7/2, 47301 Petaling Jaya <br> Selangor Darul Ehsan <br> Tel: +603 – 78062300 <br> Fax : +603 – 78063308 <br> Website: https://www.cgc.com.my |
| Sources | www.cgc.com.my |
Franchise Loan Requirements
Lenders typically require a comprehensive set of documents and information to assess your loan application. These may include:
- Business Plan: A detailed business plan outlining your franchise operations, financial projections, and marketing strategies.
- Financial Statements: Personal and business financial statements, including income statements, balance sheets, and cash flow projections.
- Franchise Agreement: A copy of the franchise agreement, which outlines the terms and conditions of the franchise relationship.
- Credit History: A review of your personal and business credit history.
- Collateral: In some cases, lenders may require collateral to secure the loan.
- Franchisor Approval: Some franchisors may need to approve the financing arrangement.
- Down Payment: Most loan programs require a down payment. The amount of the down payment varies depending on the lender and the franchise.
Check Your Credit Score (CTOS)
In Malaysia, CTOS (Credit Tip-Off Service) is a leading credit reporting agency. Lenders heavily rely on CTOS reports to assess your creditworthiness. Before applying for a franchise loan, it’s crucial to check your CTOS score and address any discrepancies or negative entries. A strong credit score significantly increases your chances of loan approval. It is very important to ensure your credit history is accurate and up to date.
FAQs
- Can you start a franchise with bad credit? Even with bad credit, some lenders might offer other financing options or ask for extra collateral. You could also find franchisors that offer their own financing, or partner with someone who has better credit. If you need more advice, feel free to ask our financial advisors.
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