PETALING JAYA: Just as the small and medium enterprises (SMEs) look forward to seeing their businesses picking up following positive developments over the past two months, the recent spike in the number of coronavirus disease (Covid-19) cases is back to haunt them again.
Their cash flow is now the sole lifeline to determine whether they would be able to pull through as they brace the multiple headwinds following the end of the six-month moratorium two weeks ago.
Another round of conditional movement control order (MCO) will be implemented in the Klang Valley for a two-week period starting tomorrow and while all economic sectors are allowed to operate as usual, this is expected to take a toll on most businesses, including the SMEs.
The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) SMEs committee chairman Koong Lin Loong (pic) said it all boils down to their cash flows, in respect of their sales.
“The so-called third wave is here and businesses are greatly affected because they have to start repaying their loans.
“The retailers, for example, were back to about 60% to 70% before we started seeing positive Covid-19 cases at several shopping malls, ” he told StarBiz, adding that this would eventually see a reduction in patrons, resulting in lower sales that would greatly affect their cash flow.
There are around one million SMEs in Malaysia, out of which some 35% are based in the Klang Valley.
SME Association of Malaysia president Datuk Michael Kang (pic below) said they have always proposed to the government that whatever happened, the economy should not be locked down.
“Allow the economy to move, we should not limit it only to essential services. If there is really an economic lockdown this round, easily 20% to 30% of the SMEs will go bust.
“I think the government should also step in in terms of moratorium extension, as we have received complaints from members because they felt they have been taken advantage of, ” he said.
Kang related an incident where an SME approached a bank for an extension and when the business started paying its installment starting October, the bank deducted the amount for a six-month lump sum interest payment for the months of April to September.
When queried, the bank involved said the system “auto deducted” and it did not allow the transaction to be reversed.
“So the company has to pay again for their October installment. Banks should not take advantage of SMEs.
“We are already facing many problems. If we continue facing issues with our cash flow, a lot of us will have to fold, ” Kang said.
The Malaysian Employers Federation (MEF) also called on the Finance Ministry to urgently support SMEs that are extremely challenged due to the pandemic.
Its president Datuk Dr Syed Hussain Syed Husman said while they appreciated the banks’ efforts to support those in need of extended moratorium, there were still many companies, especially SMEs, that have had their requests being rejected or delayed.
“Though we try to regain our momentum, the ‘new normal’ and new global direction continue to pose very tough challenges.
“It is critical that the employers be given the much-needed support at the bank execution level by easing the requirements and injecting more liquidity into the system, ” he said in a statement.
Syed Hussain added that employers are doing their best to retain staff through various means, such as salary and other cost reductions, but those efforts would be futile in the long run if businesses do not survive.
He stressed that without the necessary support, employers would have no other choice but to resort to retrenchment, which would cause the entire economy to suffer.
According to a recent ACCCIM survey, about 50% of its members have benefited from the blanket moratorium.
While 69.2% of SMEs require repayment assistance now that the moratorium has ended, only 55.6% have reached out to their banks to explore options.
Koong said it is important to note that accepting targeted repayment assistance would not be reflected in the Central Credit Reference Information System (CCRIS) record or affect eligibility for future applications for financing.
Source: https://www.thestar.com.my/business/business-news/2020/10/13/round-two-of-survival-mode