Fintech Association of Malaysia(FAOM)
Fintech Association of Malaysia(FAOM)
Growing Steady > Funding
Angel investors, also known as private investors, are a popular form of financing option for businesses and startups. These high-net-worth individuals provide financial backing in exchange for company equity.
Business accelerators are fixed-term, cohort-based programmes that assist startups through finance, mentoring and education. Aside from that, logistical and technical resources are also provided as well as shared office spaces.
There are two types of business accelerators: seed programs; lasting two to four months and focus on less mature startups, and second-stage programs; lasting up to six months and focus on more mature startups.
A rising financing method, Equity Crowdfunding (ECF), is a method of raising funds from several individual investors through an online platform.
ECF also allows businesses set up a more flexible investing plan, which offers greater control towards the business owners.
The Malaysian Government offer a range of grants to support impactful startups and young businesses. Grants are typically awarded to businesses that aim to benefit the community and it is not required to be paid back. However, this does not include technical or financial assistance, such as loan guarantees, interest rate subsidies or revenue sharing.
Peer-to-peer (P2P) lending is an online loan platform. Generally, young businesses and startups are unable to obtain loans from banks to grow their business, due to the requirements.
Similar to a conventional loan, P2P provides funding where interest payments are to be made without the need of collateral.
P2P gains its funds from individual investors that are registered on the online platform. Additional benefits are as follows: easy application, fast loan approval and better interest rates than conventional loans.
Venture Capital (VC) and Private Equity (PE) is a form of financing that is provided to non-publicly listed companies and businesses that show high prospects for long-term growth. In exchange for funding, large chunks of the company’s shares will be transferred to the VC and PE.
VC tend to focus on startups and new businesses whereas PE focus on mature companies.
Venture Debt (VD) is a form of non-dilutive funding for early stage companies. VD is different from conventional loans as it does not require collateral and repayment schedules are relatively short (3-4years).
The principal amount to be loaned is typically 30% of the last round of VC fundraising. In exchange for VD, interest payments are needed on the loans and warrants of the company’s common equity are to be issued to the lender.