SME financing for equipment and machinery

New equipment can raise your output or cut your costs, but it's a big upfront spend. An SME business loan lets you buy what you need now and spread the cost over 6 to 108 months, without pledging the equipment. It's for businesses registered with SSM for at least 1 year. This guide covers the full cost to plan for, how to check the equipment pays for itself, and when hire purchase or leasing is the better deal.

ExampleRM 80,000 over 36 months

About RM 2,394.08 a month at 4.90% p.a.

A food manufacturer replacing an ageing packaging machine to keep up with orders, paying RM 15,000 of the RM 95,000 cost from the business's own funds.

Apply nowWorked out at 4.9% p.a., the same rate for every period. Every approved customer pays 4.9% p.a., and your adviser confirms your amount and instalment before you sign.

What it can cover

  • Production machinery and workshop tools
  • Commercial kitchen equipment for restaurants, cafés and central kitchens
  • POS systems, computers, software licences and networking
  • Refrigeration, shelving and display units
  • Delivery, installation, electrical upgrades and staff training
  • Used or reconditioned equipment, after a proper inspection

How much to borrow

  1. Price the full installed cost

    Ask suppliers for a complete quotation: the equipment, delivery, installation, any electrical or plumbing works needed to run it, training, and SST where it applies. Ask what the warranty covers and what servicing costs after it ends. Base the loan on the total, not the list price.

  2. Check the equipment pays for itself

    Estimate what the equipment brings in each month: extra output you can sell, labour saved, less wastage or lower repair bills. Compare it with the monthly instalment in the example on this page. If the gain only just covers the instalment, any delay in installation or orders will squeeze your cash flow.

  3. Keep the term shorter than the equipment's useful life

    At our rate of 4.9% p.a., RM 80,000 costs about RM 2,139.21 in interest over 12 months, RM 4,147.12 over 24 months and RM 6,186.99 over 36 months. A longer term eases monthly cash flow but costs more, so make sure you won't still be paying when the machine needs replacing.

  4. Put in some of your own funds

    Paying part of the cost yourself, like the RM 15,000 in this example, lowers the loan and the interest. But don't empty the business account: keep enough for stock, payroll, rent and a few instalments, because new equipment often takes weeks to run at full speed.

What you'll usually need

  • The owner's or director's MyKad, verified at signing
  • SSM registration: the business information for a sole proprietorship or partnership, or the company profile for a Sdn Bhd
  • Last 6 months' business bank statements
  • Optional: your latest Borang B (sole proprietors) or financial statements (Sdn Bhd)
  • Optional: the tenancy agreement for your premises
  • For your own planning: the supplier's quotation with specifications, warranty and delivery date

Before you borrow

Compare with hire purchase and leasing

For vehicles and many machines, hire purchase or leasing through the supplier or a bank may be cheaper, because the equipment itself secures the financing. Under hire purchase you own the item only after the final payment; under a lease you may never own it. Compare the total amount payable, the deposit, and what happens if you want to end early.

Check warranty and after-sales service

Make sure spare parts and technicians are available locally, and ask how quickly they respond. A key machine standing idle for two weeks can hurt your cash flow more than the instalment.

Inspect used equipment properly

For second-hand equipment, see it running, check its age, service history and any outstanding finance on it, and ask for a short warranty. A cheaper machine that breaks down often isn't a saving.

Insure the equipment

Check that your business insurance covers the new equipment against fire, theft and breakdown. You'll still owe the loan if the machine is damaged.

Keep working capital in reserve

Don't combine all your cash and a loan on equipment. Keep enough in reserve to cover stock, payroll and the monthly instalment while the new equipment beds in.

Questions

Do I have to pledge the equipment as security?

No. The SME Business Loan is unsecured, so you don't pledge the equipment and you own it from the day you buy it. Unsecured moneylending loans are capped at 18% p.a. by law.

Is hire purchase cheaper?

Often, for vehicles and standard machinery, because the asset secures the financing. But hire purchase usually needs a deposit and you don't own the item until the end. Our loan suits items that are hard to finance through hire purchase, such as installation works, software or mixed purchases from several suppliers. Compare total cost before deciding.

Can I buy second-hand equipment?

Yes, the loan can be used for new or used equipment. With used equipment, check its condition, remaining life, service history and that nobody else still has finance on it.

Will the money be paid to the supplier?

No. The loan is paid into the bank account named in your agreement, and you pay the supplier yourself. Pay against an invoice and keep the receipts and delivery order.

How long a term should I choose for equipment?

Terms from 6 to 108 months are available: 6, 12, 24, 36, 48, 60, 72, 84, 96 or 108 months. Choose a term well within the equipment's useful life and as short as your cash flow allows. Longer terms lower the instalment but add to the total interest. The rate is 4.9% p.a. for every term, and your application is assessed on your business profile.

Related guides

Other purposes

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Work out your monthly repayment first with our calculator. Your adviser confirms your rate before you sign, and applying doesn't commit you to borrow.

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