Commercial Banks Evaluation Strategies of Financing Entrepreneurial Start-Ups in Malaysia

Small and medium sized firms especially the technology businesses have been widely acknowledged to find it difficult to raise adequate financing for growth and expansion. This is despite the general knowledge that financing is very significant to growth and survival of every new venture which eventually help in speedy and rapid economic development of every nation. The aim of this investigation is to shed more light on the selection criteria traditional lending institutions adopt in screening a few of the young firms they grant loans to, and how the monitor their investments against perceived risk and of unexpected business failure. The research methodology adopted in this study is through a qualitative approach by interviewing 25 senior managers of commercial banks out of 30 interview schedule/request letters sent out to randomly selected commercial lending institutions in Malaysia. Conventional lending organizations in Malaysia are very strict in evaluating potential young firms for financing probably as a result of the perceived high risk nature of the sector. Keywords: Debt Financing; Young Firms; Selection Criteria; Qualitative Research, Malaysia.