WITH the current lockdown extended to June 28, things are about to get tougher for businesses. Amid the restrictions and rising inflation, the need for cash flow support has become even more apparent and urgent for businesses, particularly SMEs.
While business associations have accepted the need for a lockdown to curb the spread of Covid-19, many are also appealing to the government for more assistance given the ongoing restrictions on operations.
Associations have estimated that 30%-40% of small businesses would shut down in a protracted lockdown and a survey by the Entrepreneur Development and Cooperative Ministry had found that more than 90% of micro enterprises, SMEs and informal enterprises would risk closure.
The Federation of Malaysian Business Associations (FMBA), which represents more than one million companies and four million micro-businesses and self-employed workers, has urged the government to implement a blanket loan moratorium till the end of the year or until herd immunity is achieved to help smaller companies cope with declining or zero sales.
FMBA has also asked for the moratorium to cover every facility including overdrafts, housing loans, hire purchases and credit cards. Under the Pemerkasa Plus package, those in the B40 lower-income group and affected by a loss of income as well as small- and medium-sized enterprises not operating during the lockdown are eligible for a three-month loan moratorium or the option to pay back only half of the monthly installments for their loans for six months.
However, FMBA notes that it was a challenge for businesses to meet the documentation needs or guidelines set to qualify for this assistance and says an automatic moratorium, with the option to opt-out, would be more helpful.Notably, SMEs with bank loans for machinery and vehicles will need the assistance to safeguard their cash flow for survival.
The group also said there should be zero additional charges or interests accrued on the affected loans to avoid saddling consumers and businesses with additional hidden costs.
The ability to conserve their cash flow will help SMEs survive the lockdown and would also work as a buffer for them to rebuild their business when the restrictions are eased.