Loans Application Processes for Small and Medium Enterprises

Small and Medium Enterprises often hard-pressed for working capital.

One of the options often undertaken is to seek some sort of financing from authorised money lending companies such as retail banks or commerce banks. Others seek Venture Capitalist companies.

Here is an information released by the Consumer Education Programme by Bank Negara Malaysia and The Association of Banks in Malaysia (Persatuan Bank Dalam Malaysia).

Irrespective of where the money comes from, normally there are 3 stages that one may encounter:

Stage 1: Preparation of Business Plan
Stage 2: Application Process itself
Stage 3: Assessment of the Loan

We shall focus on

Stage 1: Preparation of Business Plan.

What is a Business Plan?

It is a written plan outlining your vision and how the business is to be managed to achieve its objectives.

A well-written and structured business plan should cover and provide information on the business that the financial institution wants to know.

The business plan should be clear, simple and concise.

What are the Key Areas of the Business Plan?

The key areas of a business plan are:

• Business model, product/services, vision and goals

• Current position of company, in relation to financial, market and competitor (if available)

• Critical success factors for the business

• Financing requirements

• Specific purpose(s) of the loan and in what way the loan can help the business

A good business plan should incorporate the following basic information:

• Introduction to the business

• Organization chart and structure of the organization

• Business objectives and vision

• Description of product and services

• Industry and competitor analysis

• Business strategies

• Operational requirements

• Sales and marketing strategies

• Financial forecast

A Sample Business Plan may include but not limited to:

Introduction

Business Description

A brief description of your business; product type, industry and target market and competitive position as compared to your rivals

Current Position of Company

Date of incorporation and at what stage the company is at now

• For new businesses:

– How advanced is the business; has key staff been hired, production commenced, sales made etc.?

• For existing business:

– State the sales and profits of the company for the last three years


Financing Request

• State the type, amount, purpose, expected loan release date and expected loan repayment period
  
• New businesses should identify the sources of start-up capital of the company i.e. from shares/paid-up capital, advances from directors, family, third parties, external
  borrowings etc.

Working Capital Financing

Types and limits
Overdraft, trade facilities (trust receipt, banker’s acceptance)

Purpose
To finance shortfall/gap in working capital (WC) requirement

Computation of RM Value of WC Requirement

Example:
Days
Debtors credit terms 90

Stock turnover 60
150

Less
Creditors credit terms (60)
Asset Conversion Cycle 90

Example:

If the forecasted sales turnover is RM5 million, then the Working Capital Requirement will be 90/365 x RM5.0 million

= RM1.23 million

Capital Expenditure Financing

Types and limits
Term loan, leasing, hire purchase, margin of financing required, source
of borrower's own contribution

Purpose

• To finance fixed assets acquisitions e.g. purchase of properties, machinery
• To finance cost of construction for factory/shophouse

Details

Type, brand/make and cost of fixed assets to be acquired and its economic life span

Construction cost supported by relevant supporting documents

Repayment terms

• Method
• Amount (based on cashflow projections/income)
• Period/tenure
• Expected date for the first repayment to commence

Business Objectives and Vision

You should highlight your vision of what you would like the business to evolve into and achieve in the future

Description of Product and Services

• Provide a description on the type of product(s) manufactured/service(s) provided
• State which part of the supply chain i.e. as a service provider, manufacturer (Original Equipment Manufacturer (OEM) or a supporting industry), marketing/sales agent, wholesaler, supply contractor, construction etc
• Volume of sales or production per annum
• Nature of business cycle; regular or cyclical
• Nature of products

Industry and Competitor Analysis

• Provide a brief overview of the industry's structure and characteristics; the degree of competition and entry barriers
• List out the company's key competitors, their market share, strengths/weaknesses compared to the company's own position
• Identify the threats, risks and opportunities present

Business Strategy

• The development of a right strategy is crucial for the eventual success of the business
• The strategy should be based on your company's strengths and critical success factors in respect of competition and industry
• Effective strategies should focus on the uniqueness or distinctiveness of your product or service
• Your company's strategy should be dynamic
  (i.e. adapted to address a changing operating environment in the long run)

Generic Strategies

• Low cost producer
• Differentiation; product offering is unique
• Focus; serving a niche market, product line segment or geographic market

Operational Requirements

Personnel

• List down type and number of staff required for key management posts, production, marketing and sales
• Source and availability of labour; skilled, unskilled, technical
• Training and incentives to retain these personnel

Production/Manufacturing Processes

• Extent of automation of production processes; technology required and technical agreements/support secured
• Types/make of key machinery used
• Production capacity/shift
• Main raw materials/components

Customer Service and After Sales Support

Provide a brief outline on the company's programme for after sales service and support to build customer loyalty, increase repeat buys and the promotion of other products/services

Business Cycle, Buyers, Suppliers & Terms of Trade

• Key buyers, sales volume, frequency and collection term
• Key suppliers, purchase volume, frequency and payment terms
• Details of concessions/contracts with suppliers and buyers
• Business cycle (e.g. list of the key milestones, period taken and terms)

Sales and Marketing Strategies
Provide a brief outline of the company's marketing strategies for getting customers to buy your products and services in respect of its marketing mix i.e. product, pricing, channels
(sales) and promotions

Financial Forecast

• 3 forecasts are required:
  – Profit and Loss
  – Cash Flow
  – Balance Sheet
• These are to be projected on a monthly basis for the next 12 months and on an annual basis for the next 2 years
• Assumptions Used
  Provide the key assumptions used as follows:
  – % costs of key expenses, raw materials, labour, commissions
  – % of credit and cash sales
  – Credit period given and received
  – Inventory period
  – % growth per annum

The format of profit and loss, cash flow and balance sheet projections are not included herein.

Expanding Businesses Part I

Taking pages off the plans from a bakery, a beauty company, a shoe retailer and a restaurant.

On Franchising / Licensing

To franchise or licensing chains of shops requires lots of attention.

The following areas are of major concerns:

• documentation. There has to be submission of training manuals and operation manuals.



• track records. People who have seen your visible success or known for its core businesses that are replicable.



• reliable people. One has to prepare for the road-shows, marketing materials, and managers to convince the parties to take up the options to support the growing number of outlets.



• 2nd/3rd party experts. Be prepared for legal advisors, planners and forecasters, market researchers, and public relations consultants.
  

One of the greatest weaknesses will be the ableness to guarantee a certain amount of Return of Investments (ROI) in which most investors, franchisees and license are wary of. The other aspect of worrying state would be the maintenance and also the support services provided to the area management.

Contemplating franchising or licensing, one should put in the mind that not all franchise can be successsful. Whilst it is indeed wonderful to see companies such as Old Town Cafe doing so well with its 80 outlets, one has to know its historical background and wealth derivation from which drives its expansion plans as well as being in the niche market. http://www.oldtown.com.my/index.php?option=com_content&task=view&id=35&Itemid=55

Likewise, one should not put all eggs in one basket. It is better for a business owner to retain at least 20% number of outlets as his own whereas remaining 80% are franchise off. By having the 20% helping to provide margin of profits, those monies can be well-used to cover up certain eventful expenses that affects certain areas of businesses.

In the case where one pursue 1 to 1 (or 50%) or more, it is certainly less risky albeit slower growth option.

On Public Listing Exercise

Many companies afforded experts to provide public listing exercise to float their companies in the local and foreign stock exchanges.

Over the years, such exercises had proven to have taken a toll on the management group where they are ill-prepared for such as hiring of experts, stock brokerage houses, market to launch at and general economic weather.

Currently the economic nature is such that Initial Public Offerings of newly listed companies are getting soft and this shall impact the pricing to go down instead of the opposite way.

In this instance, were overall economic nature is foreboding, one should postponed the IPO until such a time where one is to get good pricing for its stocks.

Promoting Your Blog

(From www.blogger.com)

This is in no way a science or guarantee; it’s simply a few suggestions with which many bloggers have found success.

Set your blog to Send Pings. When this setting is activated, your blog will be included in various "recently updated" lists on the web as well as other blog-related services.

Activate Your Navbar. Do this and you might start to see the effects right away! One of the features on the Blogger Navbar is a button called NextBlog — click it to visit the next Navbar-enabled blog.

Install Email This Post. If you use Email This Post on your blog, people will be able to forward your posts to friends. This may not have an immediate impact on your site stats but it enables others to publicize your blog for you.

Turn on Post Pages. By publishing every post as its very own web page with Post Pages, you ensure that your entries are way more link-able and more attractive to search engines.
Turn on your site feed. When people subscribe to your site feed in their newsreaders, they’re very likely going to read your post.

Add your blog to Blogger's listings. When you add your blog to our listings it shows up in Nextblog, Recently Updated, and other places. It's like opting-in to traffic.

Write quality content and do it well. If your "style" is bad writing, worse grammar, no punctuation, and an ugly design, that might be okay for a niche crowd. But the idea here is to achieve mass appeal, so fix yourself up a bit.

Publish regular updates. Simple: the more you blog, the more traffic you’ll get.

Think of your audience. A good way to build an audience is to speak to one in particular. When you keep your audience in mind, your writing gains focus. Focus goes a long way toward repeat visitors.

Keep search engines in mind. There are a few things you can do to make your blog more search engine friendly. Use post titles and post page archiving. This will automatically give each of your post pages an intelligent name based on the title of your post. Also, try to be descriptive when you blog. A well crafted post about something very specific can end up very near the top results of a search.

Keep your posts and paragraphs short. Strive for succinct posts that pump pertinent new information into the blogosphere and move on. Keep it short and sweet so visitors can pop in, read up, and click on.

Put your blog URL in your email signature. Think of how many forwarded emails you’ve seen in your day, and just imagine the possibilities.

Submit your address to blog search sites and directories. People look for blog content at Technorati every day, are you on their list? You should be. Submit your blog's url to Technorati, Daypop, Blogdex, Popdex, and any other site of that ilk you come across.

Link to other blogs. Links are the currency of the blogosphere and it takes money to make
money so start linking.

Install a blogroll. It's a very simple yet effective social networking scheme and it has the same result as a simple link if not stronger: traffic! So if you don't have one yet, sign up for a blogroll and get that link-list going.

Be an active commenter. This is in the same vein as linking. Most comment systems also provide a way for you to leave a link back to your blog which begs a visit at the very least. So if you feel inspired, leave a comment or two in your blog travels. It behooves you.

US Top 50 Performing Companies 2008 by BusinessWeek

Gilead Chief Executive John Martin, a PhD chemist by training, challenged his researchers to simplify those cumbersome treatments. And they did. "The first four times we tried to manufacture the drug, we failed," says Martin. "It was a matter of perseverance."

The payoff: Gilead's profits have tripled since 2004, to $1.6billion—a performance that vaulted the drugmaker to the No. 2 position in this year's BusinessWeek 50.

And with the economy sitting on the precipice of what could potentially be a deep recession, it's this kind of management vision and moxie that could spell the difference between the companies that not only survive, but thrive and those that are carried away in the economic undertow. These are companies that, for all of their past successes, are not afraid to alter their business models at the first signs of weakness.

Companies like this year's No. 1 performer, Coach. The handbag maker moved quickly when it understood that its aspirational customers might suddenly hesitate at spending $900 for one of its Legacy handbags. Coach quickly rolled out more affordable lines of bags for as little as $160.

Or companies like Starbucks (SBUX) (No. 16), which, in the face of a renewed push by McDonald's (MCD) to boost coffee sales, announced a sweeping remake of its stores that includes free refills and Internet access for regular customers, and more handcrafted coffee drinks.


While analysts fret those moves could cut profits in the near term, Starbucks CEO Howard Schultz is willing to absorb that hit to "reignite the emotional connection we have with our customers." Will it work? Starbucks isn't going to wait until things get worse before it tries to find a solution.

The companies that make up the BusinessWeek 50 represent our picks as the top performers in each of the 10 sectors that make up the S&P 500.

To select this year's overachievers, we ran the S&P 500 through a proprietary screen that ranks those companies within sectors by two key metrics: return on investment and sales growth over the past three years, and for financial-service firms, their returns on equity and growth in assets.

"There's a market for suppliers that can take over a company's supply chain and run it better, cheaper, and faster, and these companies have shown how to do it," says Chris Zook, head of the global strategy practice at Bain & Co.

"Warren Buffett himself said that it's harder for companies to sustain their growth," says Adrian Slywotzky, a management consultant for Oliver Wyman Group and co-author of the book The Upside: The 7 Strategies for Turning Big Threats into Growth Breakthroughs. "But managing risk well is one way to do it."

For the full article, kindly go to http://www.businessweek.com/magazine/content/08_14/b4078051184585.htm?chan=top+news_top+news+index_dialogue+with+readers

Not Alone In Thoughts - World Class Companies

For the past weeks before the General Election, we have made cold-calls to businesses in virtually every part of Penang and made visitations to all forms of businesses and meeting entrepreneurs. From bakery to hair salons, from restaurants to optical shops. From start-ups to companies in the process of listing.

One of the things that we noted and we are in agreement with an article recently published in BizWeek, The Star dated 22 March 2008 under Companies & Strategies, that there is an absence of world-class companies within Malaysia. (Refer http://malaysiafinance.blogspot.com/2008/03/absence-of-world-class-companies.html)

Definitely the article raised relevant issues that are prevailing within an organisation or an institution. However, we write to provide certain widely-acceptable answers to the questions in the checklist of the article, based on our personal experiences, expectations and not supporting anyone including us, being advisors and consultants.

For the questions, kindly refer to the said article provided in the website.

a) All businesses whether in making, strictly new or still active, do have some form of product strategy. Nevertheless, the key word, "strong product strategy" needs to be considered.Most entrepreneurs deliberately learn about the 4Ps; product, price, place and promotions before setting up businesses.

In fact, in our recent meeting with an arm of Boon Siew Group, we were "tried" by the managers on our knowledge of retail mix.Our deliberation on the strong product strategy would be, how does one measure the success of the product strategy and its strength. To a newcomer in business, just breaking-even within 6 months would have the same satisfying effect as to the making $120 million revenue of a company with strong financial support.

b) To do business, is to profit. If its non-profiting, it is either charity-based or public service. Definitely top management wants to seek improve margins and ways to manage finance better.

c) In most cases, business owners are consumed to know who, what and how are the competitors performing. In relation to this, business owners take efforts to find innovative ways to increase their market shares.

d) Whilst business owners are often innovative and creative in finding new solutions, often the solutions bring about newer problems to be addressed such as resources and time factors to implement the ideas. In the world of retailing especially, quality and quantity in human resources and raising fresh capital often delays even the best plans in mind. Over time, the innovation or inqenuity had been superseded by better ideas or plans which may come from competitors.

e) Companies that are established over years often adopts certain workable strategies that are often repeated. Where business growth is concerned, the same management may utilise the same key performance indicators that had largely made them successful.

In our mind, whether the strategy on growth is organic or via acquisitioning (buying advance products, services or franchised systems), a learning organisation should not put thoughts in one basket but to create newer business units and divisions to handle different product or services business growth rate. Hence companies such as Procter & Gamble or L'Oreal often have several brand managers taking care of many different types of product ranges.

As for other questions in the checklist itemised f to k, it is of note that is the basic model for a world-class companies albeit at a start-up level.

For a company to be world-class, in our opinion, they would have to go beyond the checklist.

Current active businesses hoping to turn world-class would have often amalgamate the checklist with their management responsibility and by participation, through their business experiences gained, through years of dealing with different types of staff and staff turnover, and through business associations or getting advisors and consultants in for the businesses; they have gained the understanding of what is required for the business to be world class.

In this aspect of understanding the needs and wishes of our business owners, we will depart from the article in which it firstly hypothesised,

"We also have far too many family-run enterprises. They have to learn to let go and let professionals to take over. Nepotism is rife in Aisa and only a very small percentage of family run companies do very well".

From our perspective, even if professionals were to take over the businesses but doing it for the sake of pay and trying to get results by virtue of business orientation - meaning to say, sending a memo to all the staff, please smile when attending to customers as part of the Customer Relationship Program, that memo will be largely ignored and business will surely fail.

Sam Walton of Wal-Mart made Wal-Mart today because he practiced what he preached. And how he practices it, is to do it himself. He then rub his life philosophy onto his children, their children, his staff and their children, creating a wholesome culture appreciated by the common people who buys from Wal-Mart.

The only time family run companies will perform badly; will be when there are internal conflicts amongst the family members and the people in the companies taking sides.

On the second hypothesis,

"Their mentality also restricts how a good company can grow further. Professional managers know better. Do we have the political will to employ them? Or are the entrenched interests too strong to dismantle?"

Their mentality is also our mentality. Their children and our children study in the same science/art stream, same college and in some cases, same universities. They are exposed to the same environment as we all are.

Critically we wish to point out, in most cases, a professional manager will push for his/her ideas to be generally accepted because its the role that he/she has to play. Whether a professional manager knows better or not, it is depending on skill level to explain, sell the idea, negotiate even and gaining momentum for the ideas to be fully accepted. Ideas that are pounded into acceptance or used to dismantle another idea, would often be subjected to future criticism and put on microscope at a later stage of management study when cracks start to appear.

We do strongly agree with the writer, Salvatore Dali, for the companies to be going somewhere, creating value and knowing what the critical success factors are - only then the companies will be world class. We believe that to achieve world-class is something that all of us should strive together to perform and support one another.

To be the next New York Fifth Avenue, all the businesses whether inter-business or intra-business should co-operate to launch their sector actively to a target market nation such as US, Australia or EU to ensure heads are turned this way.

To end this remarkable article published in BizWeek, we wish to summarise our contribution, We are Not Alone in Thoughts. Every business owner, every Malaysian, has the wants to be world-class, the good questions to ask, is how and when.

Automobile Industry 22 Mar 2008 (The Star)

Tan Chong Aims For Bigger Market Share

The company aims for 1% increase every year, says exec director Datuk Dr Ang Bon Beng.

Nissan Motor Co Ltd President and CEO Carlos Ghosn reaffirmed that strong products would be necessary for Nissan to achieve sustainable and profitable growth in Malaysia.

He outlined that clear business goals, a well-timed and concrete product introduction strategy, and well-established service operations network would be key drivers behind the dynamic partnership between Nissan and Tan Chong Motor.


Proton Can Survive if Managed Well

Nissan Motor Co. Ltd. and Renault SA President and CEO Carlos Ghosn believes that car manufacturers can survive if they know their markets well and their business well.

It is not true that only large car manufacturers can service because even
they can collapse,

he said.

"Working in a company with a different culture is not easy. However, when people who come from different cultures and speak different languages come together with one purpose and one vision, they can be very powerful and eliminate the competition."


Ferrari Names Naza Italia Sole Distributor for M'sia

CEO S.M. Faisal S.M. Nasimuddin said,

We see Ferrari as an iconic brand with good growth potential in the niche market
of high-end automobiles and we see te need to maximise the ownership experience
of Ferrari users.

The group will invest substantial amount in customer relationship management, sales and after sales services, training, branding and marketing activities.

Ferrari Asia-Pacific regional business manager Simon Inglefield said,

Ferrari is selling dreams, not cars.

The group would study the Malaysian market demand first and supply according to that.

Penang Retail Outlook 2010

By 2010, we will see some 25.0 million square foot of retail space in Penang.

This figure is just a rough estimate given project sizes of Paragon Hunza, Gurney Plaza New Wing, Penang Time Square, The Light, PGCC, Juru Autocity and malls that are planned and developed on continuous growing year by year basis.

Given that the population growth of more or less the same every year, some 1.5 million people on the Island and additional 0.5 million people on the Seberang Prai area, the economics for retail may be in present, downward spiral. There is also an national inflation of 2%-20% to be added to current pricing.

Contributory to the effect, worldwide recession has started with United States due to prime home loans affair and also inflation in China, that create future problems even though there may be an increase of tourists to the Island but the spendings may be limited by the same tourists.

Every year as the new generations of youths aging 20-40 years old becoming more entrepreneurial, we shall see some 15,000 new brand or businesses emerging (assuming each business is to take up 1,000 sq.ft for retail).

At present,

Penang Retail Outlook 2008

There are an estimated figure of over 10 million square foot of lettable retail space in Penang.
(8.0 million sq. ft. based on NST report in 2004 excluding Queensbay Mall)

1. Queensbay Mall (1.5 million sq. ft) 500 shops
2. Sunshine Square (452,000 sq.ft)
3. Bukit Jambul Shopping Complex (999,604 sq.ft) 414 shops
4. Gama (no details offered by Evelyn, Business Dev. Mgr 06 March)
5. Bayan Central Complex (440,640sq.ft?)
6. Gurney Plaza (754,000 sq.ft)
7. Island Plaza (320,000 sq.ft)
8. Komtar Complex (148,534 sq.ft)
9. One-Stop Midlands Park Centre
10. Prangin Mall (900,000 sq.ft) 593 shops
11. Suiwah (combined space) Sunshine Farlim, Sunshine Jelutong
12. Sunshine Square
13. Sunway Carnival (500,000 sq.ft)
14. Pan Palaca Plaza (110,000 sq.ft)
15. Penang Plaza
16. New World Park
17. Pacific Megamall
18. Bukit Mertajam Plaza
19. Kompleks Pekan Rabu Datuk Kailan
20. retail squares at Sungai Dua, Penang.
21. Prima Tanjung, Medan Fettes.
22. Ivory Properties behind USM.

Unaccounted for: 3.9 million

Sources:

http://www.nst.com.my/Weekly/PropertyTimes/News/Focus/20040724125056/Article/
http://www.hbp.usm.my/RetailPG/bayan%20baru.htm
http://www.penangresort.com/rhi/news2.php?subaction=showfull&id=1123133533&archive=&start_from=&ucat=1&
http://biz.thestar.com.my/news/story.asp?file=/2007/6/23/business/18100855&sec=business
http://www.seri.com.my/oldsite/EconBrief/EconBrief2002-11.PDF
http://announcements.bursamalaysia.com/EDMS/subweb.nsf/7f04516f8098680348256c6f0017a6bf/a5165d375a53769d48256f3c00309cd1/$FILE/Suiwah-AnnualReport2004.pdf
http://www.tourismpenang.gov.my/page.cfm?name=se02c