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Most factory loan rejections in Malaysia come from one of two places: the borrower (losses or thin profits in the accounts, a short track record, too many existing loans, or problems in CCRIS or CTOS) or the property (a valuation below the price, a short leasehold, missing building approvals, or a location the bank does not like). A rejection by one bank is not the end. Find out which reason it was, fix it, and apply to a bank that suits your case.
Here are the eight most common reasons, and what you can do about each.
Reasons linked to your company
1. The accounts show a loss or thin profit
Banks lend against your ability to repay, and the audited accounts are their main evidence. A loss year, even with a good reason, often leads to a rejection or a lower margin.
What to do: explain one-off items in a short letter, show the latest management accounts if business has improved, or wait until the next audit is ready. Some companies apply with a stronger related company or a director as co-borrower.
2. The company is too new
Most banks want at least two to three years of trading. A new Sdn Bhd with no history is hard to lend to, even if the directors are experienced.
What to do: use the directors’ income and track record, offer extra security, or look at government guarantee schemes for SMEs through the banks. Renting first and buying later is also common; see factories for rent in Johor.
3. Too much existing debt
If your existing loans and hire purchase already take up most of the company’s cash flow, the bank will not add a factory loan on top.
What to do: list all facilities and show the bank that the new factory will replace rent you pay now. A business paying RM30,000 a month in rent is moving that money into a loan, not adding a new cost.
4. CCRIS or CTOS issues
Late payments in the last 12 months, legal cases, or a director who is a guarantor for another company with problems can all lead to a rejection.
What to do: check the reports for the company and every director before you apply. Settle small arrears, get a settlement letter, and correct any wrong records. Banks treat a clean recent record far better than old problems that were resolved.
Reasons linked to the property
5. The valuation is below the price
The bank lends on the lower of the price and its valuation. If the valuation is low, the loan is smaller, and the gap may be more cash than you have.
What to do: ask another bank, since valuers differ; renegotiate the price with the valuation report; or ask the bank for a valuation before you sign the SPA. Current prices are on our factories for sale in Johor page.
6. A short leasehold
A leasehold factory with 30 years or less left is hard to finance, because the loan must end well before the lease. Some banks will not lend at all.
What to do: ask the land office about renewing the lease and its cost, look for banks with more flexible policies, or choose a freehold factory. Our guide on how to buy a factory in Johor explains what to check on the title.
7. Missing approvals or extensions without plans
If the factory has no CCC or CF, or has extensions built without approval, the valuer may exclude those parts or the bank may decline.
What to do: ask the seller to regularise the extensions before completion, or to reduce the price. Check the approvals before you pay the deposit.
8. The location or use does not suit the bank
Banks are cautious with factories on agricultural or non-industrial land, in areas without a clear industrial zoning, or for industries they see as high risk.
What to do: confirm the land use category and express condition on the title. A factory in an established industrial park is easier to finance; see our guide to industrial parks in Johor.
Before you apply again
- Ask the bank, politely, for the main reason. Officers often tell you even if the letter does not.
- Fix what you can: documents, arrears, an explanation of the accounts.
- Choose banks that suit your case. Some are stronger with SMEs, some with specific industries or locations.
- Apply to two or three banks at once with a complete file. See the documents banks ask for.
- Make sure the SPA gives you time. If the sale is conditional on your loan, ask the seller for an extension in writing before the deadline.
👉 If your SPA is conditional on the loan and every bank rejects it, the SPA usually lets you cancel and get your deposit back. Check the clause and the deadline with your lawyer.
Frequently asked questions
Does one rejection affect my next application?
Loan applications appear in CCRIS for a period, so many rejections in a short time look bad. Prepare properly and apply to a few suitable banks at once, rather than one after another.
Can I buy a factory if my loan is rejected?
Yes, if you can raise more cash, bring in a co-borrower or partner, or arrange financing from overseas. Some sellers also agree to longer completion periods.
For how factory loans work in general, read our guide to factory loans in Malaysia. To discuss a property that suits your budget, contact Jimmy Toh.
This article is general information, not financial advice. Each bank sets its own margins, rates and conditions, and they change over time, so please get a written offer from your bank before you commit.
