What is Business Term Financing (CGC)?
Business Term Financing (CGC) (BTF-CGC) is a partially secured financing / investment product where Credit Guarantee Corporate Malaysia Berhad (CGC) will provide guarantee coverage for financing approved to eligible SMEs.
BTF-CGC feature is similar to Business Term Financing (BTF) with some key differences.
Comparison between BTF-CGC and BTF
Product | BTF-CGC | BTF |
Purpose | To finance MSMEs’ working capital needs | To finance MSMEs’ working capital needs |
Payment | Monthly payment of principal and return | Monthly payment of principal and return |
Security | CGC guarantee + Personal guarantee by directors / shareholders | Personal guarantee by directors / shareholders |
Early Payment Fee | Yes | Yes |
Late Compensation | Yes | Yes |
Service Fee | 2% on principal and return | 2% on principal and return |
Return Rate | Up to 10% p.a. (lower rates due to guarantee coverage by CGC) | 8% - 18% p.a. |
Credit Guarantee Corporation Malaysia Berhad (CGC) was established on 5 July 1972. It is 78.65% owned by Bank Negara Malaysia and 21.35% by the commercial banks in Malaysia. CGC aims to assist Micro, Small and Medium-Sized Enterprises (MSMEs) with inadequate or without collateral and track record to obtain credit facilities from financial institutions by providing guarantee cover on such facilities. CGC has availed 490,000 guarantees and financing to MSMEs valued over RM82 billion since its establishment.
Source: https://www.cgc.com.my/overview/
How does it work?
Funding Societies will provide financing to creditworthy SMEs that meet the eligibility criteria for CGC guarantee coverage, funded by investors.
SMEs (Issuers) will make payment as per agreed schedule. In the event of default, specifically for BTF-CGC notes, CGC will risk-share the outstanding principal balance of the investment note at a pre-agreed risk sharing ratio (kindly refer to factsheet).
What is the eligibility criteria for SMEs to be approved under this scheme?
Meet the definition of SME
In operation for at least 3 years
Business registered in Malaysia and majority controlled and owned (at least 51% shareholding) by Malaysian
Financial and non-financial criteria agreed with CGC under the programme
What happens in the event of delinquency/default?
The recovery effort for BTF-CGC investment notes is similar to the current process. Upon note turning default at DPD ≥ 90 days, Funding Societies will submit a claim to CGC. If the claim meets the criteria, CGC will approve the claim according to the agreed guarantee Risk Sharing Ratio and pay out the amount to Funding Societies trust account.
Payout amount will be distributed to Investors after the necessary recovery effort as per Funding Societies’ recovery procedures and CGC’s guidelines (which is similar to our current recovery process).
Claim amount: Guarantee coverage % x Defaulted outstanding principal amount
Payout amount: Claim amount less any recovered amount made
Is this product Shariah-compliant?
For BTF-CGC, only conventional investment options are available currently.
What is the minimum investment amount?
RM100
How do I invest in MBBTC?
Investment can be made via manual investment as well as auto investment by setting up auto-bot for Business Term Financing.
What are the risks involved?
There is a risk that a claim may be rejected by CGC if the SMEs do not meet the Eligibility Criteria under the programme. The risk is mitigated by our internal processes in place to ensure that the requirements by CGC are being adhered to.
The claims payout by CGC to Investors shall only be applicable upon completion and full exhaustion of all available means of recovery effort taken by Funding Societies (for and on behalf of the Investors) against all Obligors concerned. The timeline for the recovery effort which includes legal proceedings (up to winding up or bankruptcy, whichever applicable) might vary across Investment Notes and could potentially be protracted to complete and exhaust.
The maximum claim payout amount is up to the Principal coverage Percentage as indicated above on the outstanding Principal amount at the point of claim payout.
While Funding Societies will facilitate the claim process on best effort basis, the Investors may not receive full or any payout amount should the claim be rejected by CGC. Any decision made by CGC shall be final and binding.