Detailed framework for eligibility of loan to start-ups has been released
The Malaysia Debt Ventures Berhad (MDV) has published a detailed framework on the eligibility requirements and application processes for the RM100.00 million Technology Start-Ups Funding Relief Facility (TSFRF).
MDV is a wholly-owned subsidiary of the Minister of Finance Incorporated. It was established in 2002 with the objective of providing flexible and innovative financing to develop high-impact and technology-driven sectors of the economy.
The facility is targeted to benefit between 40 to 60 technology start-ups and will be available for applications for the first start-ups cohort beginning 18 May 2020 until 31 May 2020.
Subsequent application windows will be opened until the entire fund of RM100.00 million is fully committed. The TSFRF will be funded via a soft loan from the Malaysian Government to MDV.
The publication of the framework follows the recent announcement by the Minister of Science, Technology and Innovation, Yang Berhormat Khairy Jamaluddin, on a new funding relief facility for technology start-ups.
The TSFRF is open to all Malaysian technology start-ups that are either backed by VC companies or any Government agencies.
The start-ups companies must fulfil one of the following criteria:
- Majority of the company’s equity is owned by Malaysian(s)
- Majority of its staff are Malaysians
- Majority of revenues are generated in Malaysia.
The TSFRF was developed following a series of engagement sessions with technology startups.
Key enablers include:
- Venture Capital (VC) firms
- MDV’s stakeholders — the Ministry of Science, Technology and Innovation (MOSTI), and the Ministry of Finance (MOF)
- Cradle Fund Sdn Bhd (Cradle)
- Malaysia Venture Capital Management Berhad (MAVCAP)
- Malaysian Global Innovation and Creativity Centre (MaGIC)
- Malaysia Digital Economy Corporation (MDEC).
Each agency will also provide access to the tech start-ups within its purview for application of the program.
Cradle, MAVCAP, MaGIC and MDEC have also provided requirements of their constituent companies and facilitated the development of the TSFRF.
The TSFRF is offered in the form of working capital and business expansion requirements, aims to provide immediate, affordable and targeted cashflow support for VC or government agency- backed technology start-ups companies that are impacted by the current adverse economic conditions and funding disruptions.
Nizam Mohamed Nadzri CEO of MDV said this is to ensure that they can sustain their business operations during this difficult time. The TSFRF facility will be offered at an interest rate of 3.5 per cent/per annum on the amount outstanding.
“The TSFRF is meant to address liquidity challenges faced by tech start-ups in this current period by having on-hand working capital facilities to mitigate cashflow issues going forward,” he said.
“It is also meant to shorten time-to-money with lesser application requirements; shorter due diligence and credit assessment processes; minimal legal documentation requirements; and quick disbursement processes. Tech start-ups will also not have to bear any additional fees and charges for the facility.”
Importantly “no hard collateral is needed under the TSFRF” and as part of its risk mitigation measure, applicants are only required to provide personal guarantee and debenture, said
He further elaborated that the TSFRF is similar to a revolving credit facility, which means that disbursement can be requested on demand or based on a 6 month rolling cash flow requirements per applicant. Outstanding balances of the principal can be rolled-over semi-annually, providing flexibility in managing repayment.
“What this means is that applicants would have the option to service the financing interest while principal repayment can be brought forward to the next 6 months and so on until the expiry of the facility tenure,” explained Nadzri.
Since the outbreak of the COVID-19 pandemic, which has had a significant impact on a global scale, including to the Malaysian economy, MDV has rolled out a series of measures to alleviate the burdens faced by tech companies — particularly SMEs and start-ups.
These include expediting evaluation process on existing products to ensure timely availability of funds and accelerating disbursements for customers to enable capacity building, as well as offering a moratorium on loan repayments to support the companies through tough times and to help bridge their cash flow gap.
MDV has also provided options to existing customers (on case-bycase basis) to reschedule or restructure their financing facilities to help them manage their cashflows.
“It’s our hope that eligible technology companies will seize this opportunity and submit their applications for the TSFRF to MDV, to ensure their continued resilience, recovery and growth,” Nadzri said.