On 21 January 2022, Bank Negara Malaysia, the Central Bank of Malaysia (‘BNM’) introduced two new facilities under BNM’s Fund for Small Medium Enterprises (‘SMEs’), namely the Business Recapitalisation Facility (‘BRF’) and the Low Carbon Transition Facility (‘LCTF’) with a facility amount of RM1.0 billion each.

This alert highlights the main features of the BRF.

Background

The BRF and the LCTF were first announced by the Minister of Finance during the 2022 Malaysian Budget Speech.1

The BRF is made available through participating financial institutions (‘PFIs’), the list of which is available here.

Details of the BRF

The BRF is a financing facility established by BNM to support SMEs to recover and grow, while managing their level of their indebtedness (i.e. to make improvements in their capital structure, particularly those that wish to undertake capital expenditure, facilitating a more manageable debt-to-equity structure after tapping the BRF) through innovative financing solutions.

Under BRF, SMEs may obtain:

The BRF financing may be used for working capital and/or capital expenditure, but cannot be used to refinance existing credit/financing facilities.

BNM has advised that applications for equity financing and/or blended financing are to be submitted to the PFIs. Approval will be subjected to credit assessment of the respective PFIs and/or relevant third party equity financiers.

Eligibility

The BRF is available to viable Malaysian-owned SMEs3 (including microenterprises) in all sectors.

Financing amount, tenure and financing rate

Eligible SMEs will be able to obtain financing up to RM5 million each. The maximum tenure for financing is 10 years.

The maximum effective rate of financing is up to 5.0% per annum, inclusive of guarantee fee or 3.5% per annum without guarantee.

For equity financing, there will be no cap on return of investment for equity investment.

According to BNM, it is possible under the blended financing option for an SME to raise a combined financing that exceeds RM5.0 million from the PFI and the third party equity financier.

Security

Collateral is not required under the BRF.

Availability

The BRF will be available from 3 February 2022 until full utilisation.

Further information

Further information on the BRF is available here and here.