We pulled rejection letters from eleven Malaysian SMEs that applied for working capital facilities in March and April. Eight of the eleven had been approved for similar facilities at the same banks within the last eighteen months. The eight are now rejected. The reasons given are vague. The pattern is not.
The official position from the lending sector is that there has been no change to underwriting standards. The unofficial position, gathered from three credit officers across two banks, is that internal scoring thresholds were adjusted in February. Loans that would have passed at 65% confidence in October are now requiring 78%. The same applicant, with the same numbers, gets a different answer.
This is normal behaviour during a credit cycle. It is also under-reported. The SME owner who gets rejected typically assumes there is something specific about their file. There usually is not. The threshold moved. They did not.
What this means operationally: if you are planning a capital raise from a bank in the next two quarters, assume your previous benchmark is no longer valid. Pad your numbers. Sharpen your documentation. Apply earlier than you need the money, not when you need it. By the time you need it, the threshold may have moved again.
The banks are doing their job. Tightening in a soft cycle is what they are supposed to do. The problem is not the tightening. The problem is the operators planning their cashflow on the assumption that nothing changed.
