THE outbreak of the Covid-19 pandemic, and the subsequent movement control order (MCO), is forcing the business community to embrace a new norm and to rapidly adapt to new ways of doing business.
Small and medium enterprises (SMEs) are among the hardest hit following the implementation of the MCO from March 18.
According to an online survey by the SME Association of Malaysia, only 37.8% have sufficient cash flow to sustain themselves through April 2020. The survey also indicated that SMEs have taken several measures in March to cope with the downturn in business including cutting down manpower-related costs, seeking cheaper raw material supply, as well as putting expansion plans on hold.
The outlook is not good, but SMEs can persevere against the financial adversities by leveraging on all available resources to tide them through these difficult times. This includes tapping into the series of support measures announced by the government and financial institutions.
SMEs may benefit from three government facilities under the first economic stimulus package announced on Feb 27 – the Automation and Digitalisation Facility, Agrofood Facility and Micro Enterprises Facility – aside from the automatic six-month moratorium on financing announced by Bank Negara Malaysia (BNM).
This means that as at April 1, customers with financing facilities denominated in Malaysian Ringgit and that are not in arrears for more than 90 days will receive an automatic deferment for the repayment of their facilities. Most notably, there will be no impact to their CCRIS records, with no changes to installment amount, but a tenure adjustment will reflect the six months that have been deferred.
Although interest will accrue, the moratorium removes an immediate concern for SMEs in servicing their financing facilities.
Most banks, like CIMB Bank Bhd and CIMB Islamic Bank Bhd (CIMB), have announced that they will not compound the interest charged for the facilities during the period.
The move is part of the CIMB Financial Relief Assistance Programme for SMEs introduced in line with BNM’s RM13.1bil Special Relief Facility (SRF), which is intended to alleviate SMEs’ short-term cash flow problems arising from the Covid-19 outbreak and to assist them in sustaining their business operations.
With CIMB’s BNM SRF/-i, eligible SMEs can obtain working capital financing of up to RM1mil at a financing rate of 3.5% per annum (inclusive guarantee fees) with a maximum tenure of up to 5.5 years, including the six-month moratorium period. The facility is available under term financing and has up to 80% guarantee coverage by the Credit Guarantee Corporation Malaysia Bhd (CGC).
CIMB is also supporting SMEs in other ways, including restructuring or rescheduling (R&R) financing installment payments – also eligible for the deferment package – for SMEs to better manage their cash flow.
Smaller businesses and micro enterprises, which make up the bulk of the nation’s business establishments, can benefit from CIMB’s microfinancing programme through the CGC imSME portal, which provides access to working capital of up to RM50,000 at a financing rate of 10% per annum.
For insurance or takaful policyholders through CIMB’s Bancassurance partner, Sun Life Malaysia Assurance Berhad has also provided a 3-month premium/contribution payment deferment for those who have been impacted.
On top of the financing moratorium, SMEs should make full use of the additional wage subsidies and other benefits launched under the government’s stimulus package of measures for SMEs.
For each employee with a salary below RM4,000 a month, SMEs with up to 75 employees will receive a subsidy of RM1,200 per employee, while those with 76 to 200 employees will receive a subsidy of RM800 per employee.
The three-month wage subsidy programme is tied to the condition that employers must retain their staff for at least six months.
While the measures will make it easier for SMEs to deal with employee salaries, businesses can also be proactive in negotiating employment terms with their employees, by consulting and reaching a consensus with employees before implementing pay cuts or unpaid leave during the MCO period. Should any issues arise, either party can refer to the Labour Department for advice.
In 2019, CIMB had committed to a RM15bil allocation for SMEs from 2019 to 2020 where over RM10.4bil loans have been disbursed to the businesses. CIMB had engaged with over 15,000 SMEs and will continue to provide relief to them during this challenging time.
This is the first part of a two-part article focusing on helping SMEs sustain their business during the Covid-19 pandemic, courtesy of CIMB Bank.
Source : https://www.thestar.com.my/business/business-news/2020/04/18/helping-hand-to-cope-with-covid-19