Smaller companies are finding it increasingly tough to sustain their businesses as efforts to flatten the curve of the Covid-19 pandemic continue, but several industry players offer insights into considerations they need to keep in mind while implementing suitable measures to survive.
The advice and suggestions revolving around the crucial necessity of ensuring cash flow liquidity, stemmed from a discussion during an Apr 27 Facebook Live and Zoom video conference titled Relief for SMEs to Overcome the Challenging Business Landscape.
The fourth knowledge sharing session under the SOBA SMEBiz Webinar series, the forum saw the participation of Malaysia External Trade Development Corp chief executive officer Datuk Wan Latiff Wan Musa, RHB Bank Bhd group business and transaction banking head Jeffrey Ng, Credit Guarantee Corp Malaysia Bhd chief business officer Leong Weng Choong, as well as Branding Association of Malaysia president Datuk Eric Chong.
SOBA 2020 is organised by Star Media Group with Digi, PKT Logistics Group Sdn Bhd and RHB Bank Bhd as main sponsors, Credit Guarantee Corporation Malaysia Bhd as co-sponsor and the Malaysia External Trade Development Corporation as official trade promotion partner. It is supported by Bursa Malaysia and audited by BDO. For more information on SOBA, email firstname.lastname@example.org.
Branding Association of Malaysia president Datuk Eric Chong
> SME operators are doing their level best at this point to find ways to stay afloat, to get through this very tough time, so they may be able to see light at the end of a very dark tunnel. Even seasoned entrepreneurs and large companies are feeling overwhelmed by the Covid-19 crisis where there’s no liquidity in the market and no sight of the end of the movement control order (MCO).
> Liquidity is the biggest issue for all businesses, as while some companies may have good revenue, they have low profit margins and high overheads.
> The manpower aspect is basically what is killing a lot of SMEs, with employers talking about implementing pay cuts or retrenching their employees, which will create a huge multiplier effect in the market. On the flip side, if you do what is right for the business, it probably means doing something that could hurt the employees.
> Businesses are grappling to balance the possibility of leveraging on announced government subsidies versus implementing structural changes for cost reduction and better cash flow management.
> There will be a lot of companies defaulting on payments, creating a bad chain effect in terms of legal repercussions, so businesses must engage their stakeholders to find a solution.
> Business is easy to do when times are good. Anybody can be successful in business, so to speak. You don’t have to be too careful with how you spend, because there’s enough business to make up for your mistakes. But at a time like this, you have to really be in control of everything that’s happening because any little negligence will be good enough to kill you. A bad mistake is going to kill you.
> Business owners must not only look at the pessimistic side of things, but look at ways to improve, such as looking into digitalisation, which is definitely necessary and timely in the new normal. The good thing about the current situation is that people (including business owners) have become very tech savvy and have learnt how to become more independent and hands-on, which will help the country in the long run.
> SMEs are adopting new ways of doing business during the crisis. This digitisation of the economy will save a lot of costs and make things a lot more efficient.
Malaysia External Trade Development Corp chief executive officer Datuk Wan Latiff Wan Musa
> Matrade’s main objective is to help Malaysian companies to find markets overseas for their products and services through four key areas, including export promotion, exporter development, market intelligence and advisory services.
> This is the time for SMEs to revisit their businesses and business models. Keep the momentum going by engaging with your buyers since it’s very useful during this time, even if it is a simple message to keep in touch, especially in an export environment where you’re competing with competitors in other countries.
> Look at your needs now and make decisions to cut costs in preparation for the recovery phase later on. Look at the cost structure of your company or products.
> Analyse your supply chain. If you’re getting your supply of raw materials from some countries, look at alternatives since if they’re under lockdown as well, that means you cannot get your raw materials coming in.
> How can you develop or improve your cash flow when the money keeps running out, but not coming in? It may not be at the level it was before, but the government is looking at allowing more sectors to resume operations.
> Wage subsidies, moratoriums, one-time grants, 0% interest micro loans - all these will not be sustainable if companies cannot make some money. Funds or assistance are meant just to keep the company afloat.
> Expanding the scope of the Market Development Grant is one of the things we’re looking at, to perhaps extend the scope to cover participation in virtual trade exhibitions. We’re working on a platform to allow virtual exhibitions, virtual B2B meetings and virtual pitching, working together with our trade commissioners abroad.
> Digitisation or using digital platforms are the way forward. Matrade already has an e-trade programme, where we digitise Malaysian companies to be onboard to be listed on e-commerce platforms, which is meant for cross-border e-commerce.
> Look at the Asean market as the first priority, followed by East Asia, West Asia and Europe. Asean makes sense because of the similarities to Malaysia. In the context of Covid-19, companies should also look into opportunities in countries where we can leverage existing free trade agreements.
RHB Bank Bhd group business and transaction banking head Jeffrey Ng
> Banks play a very critical role throughout this crisis, but all stakeholders have to play their part if all of us are going to emerge with minimal impact. The government, agencies and regulators have to come up with the (right) policies, banks have to ensure there’s enough liquidity and credit in the market, big and small companies within the ecosystem have to also give concessions.
> One key trick for the business to emerge with minimal impact, or with better footing, is that strong leadership is needed in a time of uncertainty like this. All companies irrespective of size will benefit from strong leadership that’s on the ball, constantly updated on all aspects of the business, communicates with staff constantly and also with stakeholders.
> In a time of crisis, the focus has to be cash flow management and projection. Cash flow is king, so it is very important that companies focus on cash flow planning and management over the immediate three to six months, identify all the gaps and potentially the kind of cash reserve levels that you would want. Look into how you will fund the gap, whether to go for equity or capital, or the banks for financing.
> Business owners must be hands-on with their financials. If a business is going to survive over this period of time, the owners themselves have to be very on top of things during this crisis.
> The way of doing business will completely change, including running the business remotely. Now, SMEs are struggling to do so as they have got no access to a lot of their documents, or do not have this information stored online. Even big organisations do not have a robust framework to operate remotely.
> E-commerce is also coming in very strongly during this crisis, so I believe there will be a change in the way we look at our distribution. SMEs should also think about diversification through this channel.
> Keep the supply chain going, no matter how little you’re generating throughout this MCO. It’s best to quickly change some of the business models you’re doing to generate some income. Keep your clients and suppliers close to maintain that relationship.
> There’s a need to be very clear on the stimulus packages that are available for you, because if not you can’t build your cash flow planning over the next few months.
> Cost-cutting is inevitable. While no business or employer would ever want to let their people go, there needs to be a balance, so it’s up to the individual situation/circumstances of that particular business. Financial obligations are being taken care of by the six-month moratorium, but look into whether the current wage subsidy programme will be enough for you. You have to align your workforce to whatever the current situation or biz volumes are, and without a doubt, we cannot deny that that would be the case.
> Active engagement and negotiation with stakeholders is key.
Credit Guarantee Corporation Malaysia Bhd (CGC) chief business officer Leong Weng Choong
> CGC started in 1972 and has availed guarantee and financing of up to RM75bil and assisted 350,000 SMEs to date. The three key pillars are the guarantee business, direct financing and the beyond guarantee business, which provides related platforms.
> CGC guarantees up to 80% of Bank Negara Malaysia’s (BNM) Special Relief Facility (SRF) through BizJamin SRF and BizJamin-I SRF, which offers up to RM1mil financing for SMEs at a 3.5% profit rate per annum with no collateral required, at a max tenure of 5.5 years including the six-month moratorium period.
> There are four other financing facilities provided by BNM, besides the SRF, including the All Economic Sectors Facility, Agrofood Facility, Micro Enterprises Facility, as well as the Automation and Digitalisation Facility.
> CGC does not appoint any third-party representatives to act on our behalf.
> There are a lot of channels for getting financing in Malaysia, including commercial and Islamic banks, developmental financial institutions, equity crowdfunding and peer-to-peer lending. This is in addition to certain government agencies that provide grants, so there are a lot of channels for assisting SMEs in terms of getting financing. The key thing is for SMEs to understand whether they’re able to take on debt or equity financing.
> SMEs must remember the need to be constantly and apply that into changing business models to adapt to new situations as they arise.
> Every bank has its own different risk appetite. The most important thing is to be very transparent with the banks that you go to. There are a lot of SMEs that may not disclose all their cash flow, profit and loss and all that. In this relationship between a bank and an SME, you need to be very clear to disclose and be very transparent in how you’re doing your business. If one bank doesn’t lend to you, it doesn’t mean the rest will follow.