Equipment Financing Basics: What Every Malaysian Business Owner Needs to Know

Equipment financing is how successful businesses acquire the machinery, vehicles, and tools they need without draining their bank accounts. Yet many Malaysian business owners don’t fully understand their options—leading to rejected applications, overpaying, or missing opportunities entirely.

This guide covers the fundamentals of equipment financing in Malaysia. Whether you’re financing your first forklift or your tenth excavator, these basics will help you make smarter decisions.

What is Equipment Financing?

Equipment financing is any method of acquiring business equipment where you pay over time instead of upfront. The equipment itself typically serves as collateral, reducing lender risk and often improving your terms.

How It Differs from General Business Loans

General Business Loan:

• Money for any business purpose
• May require property or personal guarantee as collateral
• Higher scrutiny on how funds are used
• Often requires stronger credit profile

Equipment Financing:

• Specifically for purchasing equipment
• Equipment itself is the collateral
• Clear purpose simplifies approval
• Equipment value matters as much as credit

Types of Equipment You Can Finance

Heavy Equipment:

• Excavators, bulldozers, cranes
• Loaders, backhoes, rollers

Transport:

• Lorries, trucks, prime movers
• Refrigerated vehicles, tankers

Manufacturing:

• CNC machines, lathes, mills
• Injection molding, press machines
• Production lines

Material Handling:

• Forklifts, reach trucks
• Pallet jacks, conveyors

General Business:

• Restaurant equipment
• Medical equipment
• Agricultural machinery
• Printing and packaging

The Three Main Types of Equipment Financing

1. Hire Purchase

The most common form of equipment financing in Malaysia.

How it works:

• You make a down payment (can be 0% with some lenders)
• Monthly payments over fixed period (typically 1-7 years)
• Equipment registered in financier’s name during financing
• You gain ownership after final payment

Best for:

• Equipment you’ll keep long-term
• When ownership matters (for resale, modifications)
• Standard equipment with established values

2. Equipment Leasing

Renting equipment with potential purchase option.

How it works:

• Monthly payments for equipment use
• May include maintenance and services
• At end of lease: return, renew, or purchase
• Ownership stays with leasing company unless purchased

Best for:

• Technology that changes quickly
• Equipment needed for specific projects
• When you want flexibility to upgrade
• Off-balance-sheet financing needs

3. Equipment Loan

A straightforward loan to purchase equipment.

How it works:

• Lump sum disbursed for equipment purchase
• Equipment serves as primary collateral
• Fixed monthly repayments
• Ownership in your name from the start

Best for:

• Large equipment packages
• When you need equipment ownership immediately
• Negotiating cash discounts with sellers

Key Terms You Should Know

Down Payment: Amount you pay upfront before financing begins. Can range from 0% to 30% depending on lender.

Tenure: Length of financing period. Typically 1-7 years for equipment. Longer tenure = lower monthly payments but more total interest.

Interest Rate: Cost of borrowing expressed as annual percentage. Fixed rate stays the same; variable rate can change.

Flat Rate vs Effective Rate: Flat rate applies to original amount throughout tenure. Effective (reducing) rate applies to remaining balance. Same flat rate equals roughly double in effective rate.

Processing Fee: One-time charge for application processing. Usually 1-3% of loan amount.

Early Settlement: Paying off the loan before tenure ends. May incur penalties.

Collateral: Asset pledged as security. In equipment financing, the equipment itself is usually the collateral.

What Lenders Look For

Business Factors

Operating History:

• How long have you been in business?
• Banks typically want 2+ years
• Alternative lenders more flexible

Revenue and Cash Flow:

• Monthly business income
• Ability to handle payments
• Bank statement review

Industry:

• Some industries considered higher risk
• Construction, transport common for equipment
• Manufacturing, logistics also frequent

Existing Debt:

• Current loans and obligations
• Debt servicing ratio

Equipment Factors

Type:

• Common equipment types easier to finance
• Specialized equipment may require more assessment

Age:

• Banks typically cap at 5 years
• Alternative lenders more flexible
• Ing Heng has no age limit

Condition:

• Maintenance history
• Current operating status
• Remaining productive life

Value:

• Fair market price
• Resale potential
• Brand and model reputation

Credit Factors

CTOS Score:

• Banks typically want 650+
• Alternative lenders more flexible
• Score isn’t the only factor

Payment History:

• Existing loan performance
• Utility and trade payments
• Previous financing record

The Equipment Financing Process

Step 1: Identify Your Need

Before contacting lenders:

• What equipment specifically?
• New or used?
• Approximate price range?
• How will it generate revenue?

Step 2: Find Equipment

Sources:

• Authorized dealers
• Used equipment dealers
• Private sellers
• Auctions

Get at least 2 quotations for comparison.

Step 3: Gather Documents

Typical requirements:

• SSM registration (Form 9, 24, 49)
• 6 months bank statements
• Equipment quotation
• Business profile (optional but helpful)
• Customer contracts (strengthens application)

Step 4: Submit Application

Apply to multiple lenders:

• 1-2 banks (for comparison)
• Alternative lenders (Ing Heng Credit)

Never assume one rejection means no financing possible.

Step 5: Review Offers

Compare:

• Total cost over tenure
• Monthly payment amount
• Down payment required
• Approval conditions
• Flexibility and terms

Step 6: Complete Financing

After accepting offer:

• Sign documentation
• Pay any upfront costs
• Coordinate equipment purchase
• Begin repayment schedule

Common Beginner Mistakes

Mistake 1: Not Shopping Around

First offer isn’t always best. Different lenders have different:

• Approval criteria
• Rate structures
• Flexibility
• Processing speed

Solution: Apply to multiple lenders and compare.

Mistake 2: Focusing Only on Monthly Payment

Low monthly payment might mean:

• Longer tenure (more total interest)
• Balloon payment at end
• Hidden fees

Solution: Calculate total cost over full tenure.

Mistake 3: Overcommitting

Monthly payments shouldn’t exceed 15-20% of monthly revenue.

Solution: Be realistic about what you can afford.

Mistake 4: Incomplete Applications

Missing documents delay or kill applications.

Solution: Gather all documents before applying.

Mistake 5: Waiting for “Perfect” Conditions

“I’ll apply when my credit improves” or “I’ll save for a bigger down payment”

Meanwhile, competitors acquire equipment and win contracts.

Solution: Explore options now. 0% down payment available. Credit flexibility exists.

Bank Financing vs Alternative Financing

When Banks Work Best

• Equipment under 3-5 years old
• Strong credit score (650+)
• Established business (3+ years)
• Can afford 20-30% down payment
• Can wait 4-6 weeks for approval
• Want potentially lowest rates

When Alternative Lenders Work Best

• Equipment over 5 years old
• Credit score below 650
• Newer business (under 2 years)
• Need 0% down payment
• Need fast approval
• Banks already rejected you

Equipment Financing FAQ

How much can I borrow?

Typically RM30,000 to RM10,000,000+ depending on equipment value, business size, and repayment capacity.

What interest rate will I get?

Rates vary based on lender type, equipment, your profile. Bank rates typically 4-8%; alternative lenders competitive based on assessment.

How long is the financing period?

Usually 1-7 years depending on equipment type and your preference. Longer = lower payments but more interest.

Can I finance used equipment?

Yes, especially with alternative lenders. Banks restrict age; Ing Heng has no age limit.

What if I’m rejected?

Bank rejection is common. Apply to alternative lenders. Different lenders have different criteria.

Is 0% down payment real?

Yes. Some lenders offer 100% financing where you pay nothing upfront. Not everyone qualifies, but many do.

Your First Step

Ready to explore equipment financing? Here’s what to do:

Contact Ing Heng Credit

WhatsApp: +60175700889 Phone: 03-3324 8899

Tell us:

• Equipment type and approximate price
• New or used
• Brief business description
• Any specific concerns

What We Offer

• ✅ 40+ years equipment financing experience
• ✅ 0% down payment available
• ✅ No equipment age limit
• ✅ Fast approval
• ✅ Flexible credit assessment
• ✅ We finance what banks won’t

---

Start with the basics. Get the equipment. Grow your business.