General Information about FRGLS
1. What is the new Flood Relief Loan Guarantee Scheme ('FRLGS') for?The Scheme is established by the Malaysian Government to help restore Small and Medium Enterprises ("SMEs") who are affected in the flood disaster areas identified by the National Security Council, Prime Minister's Department.
2. What is FRLGS?FRLGS is a scheme that provides operating expenditure (OPEX), working capital and capital expenditure (CAPEX) for the replacement of machinery / equipment for viable SME companies from all sectors with shareholders equity less than RM20.0 million wherein the FI will provide the financing facilities and the Malaysian Government will guarantee a portion of the said financing facilities. It is strictly for local operations only.
3. How does it work?
Under the Scheme, the Malaysian Government will share the credit risk with FIs that provide financing to eligible SME companies, through a guarantee cover provided to the FI.
This will encourage FIs to continue providing financial assistance to SMEs which are affected by the flood disaster to ensure continued economic growth of the country.
4. When will FRLGS be made available?The application for FRLGS is made available 6 months from 1 April 2015.
5. What is the meaning of Small and Medium Enterprise (SME) Companies in the services sector?The meaning refers to the new guidelines on the meaning of SME Companies issued by SME Corp Malaysia and endorsed by the National SME Development Council.
6. What is the meaning of Bumiputera Status Company?To comply for the Bumiputera Status Company under FRLGS, a company must have 51% Bumiputeras' shareholdings as at 31 December 2014.
7. Who can apply for this Scheme?All SME companies with shareholders' fund not exceeding RM20.0 million.
8. Can those companies who have enjoyed the previous WCGS and 10MP WCGS Scheme apply again for the FRLGS Scheme?Yes.
9. Who are the participating Financial Institutions for this FRLGS Scheme?All commercial banks, Islamic banks and development financial institutions that have participated in the previous WCGS Scheme are participating in the FRLGS Scheme.
10. What is the meaning of viable business?The definition of a viable business is a business with the ability to generate cash flow from its operations to pay off its financial obligations. Participating FIs have full discretion to evaluate and determine whether an applicant meets the eligibility criteria.
11. What is the meaning of Shareholder Equity?It means the Shareholders Fund as per the latest audited accounts, which is not more than 18 months from the date of application.
12. Can companies which are part of a Group or Conglomerate apply for facilities under the Scheme?This financing facility is offered to deserving companies, and as such companies within a group which are able to provide funding or can financially support its subsidiaries, are advised to obtain funding from within the group or conglomerate.
13. What is the meaning of Group or Conglomerate?It means companies having the same holding company or ultimate holding company.
14. Are the participating FIs allowed to grant Stand By Letter of Credit (SBLC) facility to customers who intend to expand their business operations overseas?FRLGS is for local operation use only.
15. Is the Malaysian Government bind by the guarantee?Yes. Under Section 14 of the Financial Procedure Act 1957 (Act 61), a guarantee involving a financial liability on the Government shall bind the Government provided it is entered into with the written authority of the Treasury or in accordance with federal law.
16. What if the Malaysian Government fails to pay?
It is an unlikely situation because funds for the Guarantee Scheme have been allocated as announced by the Prime Minister in the revised Budget 2015 on 20 January 2015.
In fact, under the current WCGS and 10MP WCGS Scheme, the Malaysian Government had honoured claims by FIs amounting to RM216.29 million.
17. What is the procedure to apply for financing facilities under the Scheme?
If a customer is interested with this Scheme, please proceed with the following steps:
1. Ensure that their business qualifies for the financing facility by consulting their bankers or any participating FIs in this FRLGS Scheme.
2. Apply for the financing facility at the participating FIs.
3. Provide the necessary documents required by the participating FIs.
4. After the financing facility is approved by participating FIs, copy of full financing paper will be submitted to SJPP for the guarantee cover.
About the Financing
1. What is the financing limit for the FRLGS Scheme?The maximum financing limit is RM2.0 million whereas the minimum financing limit is RM50,000.
2. What is the guarantee cover for the FRLGS Scheme?The guarantee cover is 70% by the Malaysian Government on the total financing given by participating FIs.
3. What is the purpose of the financing?
The purpose of the financing is to be used only for operating expense (OPEX) and working capital as well as for capital expense (CAPEX) to purchase equipment damaged. The facility cannot be used to refinance existing facility granted by the same or other participating Financial Institutions ("FIs")
The participating FIs and/or SJPP will be responsible for determining the genuineness of the Borrower based on their respective credit evaluation procedures.
4. What is the financing tenure?The financing tenure is five (5) years or until 31 December 2020, whichever is earlier.
5. How much is the guarantee fee?The guarantee fee is payable at 0.5% per annum which is payable in advance upon approval of the financing by FIs participating in the Scheme.
6. How much is the interest rate?The interest rate will be determined by the FIs that provide the financing.
7. How long does it take for SJPP to issue the guarantee cover?SJPP will issue the guarantee cover within 10 business days from receipt of the guarantee application from the participating FIs.
8. Will SJPP re-evaluate the financing paper approved by the participating FIs before issuing the guarantee?SJPP will only do a comprehensive evaluation and scrutinise the approved financing papers submitted by the participating FIs and check on the global guarantee scheme limit prior to issue guarantee approval.
9. Can an existing customer of the participating FI request for their financing to be under the scheme?Yes, the customer may request for it, but it shall be the participating FI's decision and approval.
10. When can the participating FI submit a claim on the guarantee? (Claim validity period).A Notice of Termination has to be issued first on the financing facility to the customer followed by the Claim Notice. Both Notices must be made within the validity period of the Guarantee.
11. Where will the claim be submitted to?The FI will submit the claim to the SJPP, who will assess it and thereafter recommend the claim to the Malaysian Government for payment.
12. What if SJPP fails or refuses to pay the claim?SJPP with the consent of the Malaysian Government will pay the claim because its specific purpose is purely to implement the Malaysian Government's decision for the guarantee scheme.
13. Who will pay the claim?The Malaysian Government via SJPP.
14. When will the claim be paid?The claim will be paid within 30 days from the date of receipt of such Claim Notice by SJPP subject to all of the required documents are received in full and the stage of legal action against the customer is within the level set by SJPP.
15. Must the participating FI proceed with legal proceedings and/or foreclosure proceedings before submitting Claims Notice to SJPP?Yes. After the Notice of Termination has been issued on the financing facility to the customer, the participating FI must proceed with legal proceedings and/or foreclosure proceedings. At the same time the participating FI may submit Claim Notice to SJPP. The FIs must continue with recovery action to recover from customers after the Claims have been made. Any proceeds received after Claims have been made are to be shared with SJPP in accordance with the percentage of guarantee cover.
16. Can the participating FIs restructure the financing?Yes, the FI is encouraged to restructure the financing in accordance with their internal policies. If restructuring is made after post claim period, all proceeds received must be shared with SJPP in accordance with the percentage of guarantee cover.
17. What happens to the participating FIs when the financing is subrogated to SJPP?Upon subrogation, SJPP will continue recovery actions against the customer. Proceeds received by SJPP will be shared with FIs based on the guarantee coverage percentage.
18. What happens to the participating FIs' rights on the customer if other recovery manager is appointed?In the event another party is appointed as the recovery manager, any proceeds from recovery will still be distributed to the FIs in accordance with the percentage of guarantee cover.
19. What happens when the customer makes payment after claims has been paid?In the event the participating FIs received any payments from the customer, the FIs are to distribute the amount received in accordance with the percentage of guarantee cover.
20. What is a 'Delinquency Report'?This is a report to be sent to SJPP by the participating FIs on a monthly basis for financing that are delinquent for more than 1 month.
21. Why is SJPP imposing RM100.00 for applications that have been cancelled to participating FIs and who is to bear the cost?SJPP noted that based on the previous WCGS and 10MP WCGS Schemes, some customers tend to shop around for better banking facilities and cancel earlier approval to enable them to obtain financing from another FI. The RM100.00 cancellation fee is to discourage such act.
22. SJPP also cancel guarantee approvals on financing that have not been disbursed for more than 6 months and subsequently charge RM100.00. Why?Most financing approvals are partially secured by cash deposits and directors guarantee while only a few involved property charge documentation. We do not envisage that the financing be disbursed more than 6 months after approval. The charges imposed are to defray administration cost as well as loss of guarantee fee income.
23. SJPP also impose a service charge of RM100.00 for replacement of Guarantee Certificate. Why?Yes, it is to defray SJPP administration expenses.