Dubai: All hope is not lost for small businesses, after all. Despite tight liquidity, some banks in the UAE are still lending to small and-medium scale enterprises (SMEs).
According to Pritam Mirchandani, head of business finance at Rakbank, they consider the SME sector a vital part of the UAE economy, so they continue to lend assistance to "eligible businesses" even in the current market conditions.
The bank has a dedicated business unit that caters to SMEs and offers a range of loan and deposit services tailored to their requirements.
Mirchandani says the bank still takes a prudent approach to loans, but it is open to lending to businesses that have been operating for at least one year.
Those who have been in business for three years are, however, preferred. Requirements for profit margins and annual turnover vary according to the industry.
"Even in the current market conditions, we do not insist on SMEs providing collateral for loans, which makes our offering more beneficial to the borrower. This is because we would rather have a viable business model supported by suitable collateral in appropriate cases," said Mirchandani.
At Citibank, business banking products are being offered to small businesses, although the criteria for SME loans are stringent. These products range from a "multi-functional" account with a number of cash management services, a suite of lending and trade products, as well as insurance.
"We have always maintained stringent criteria for providing facilities and loans to SMEs. This is due to a number of factors, namely, the general lack of information available on this segment and the unavailability of a credit bureau," says Satyajeet Roy, vice-president and head of CitiBusiness at Citibank.
"We also pay a lot of importance to the profile of the owners and authorised signatories. Given the overall credit climate, we have started to look for key indicators that demonstrate survival ability of businesses."
Roy says they generally look into the applicant's length of business, profit margins and past performance, including minimum annual turnover.
"We remain prudent to market changes. However, we are constantly developing new products for our clients, including the ones which are related to trade cycles that will give them the ability to maintain working capital adequacy."
Roy admits that the number of loan application has slowed since last year. However, this is not due to the bank not willing to lend, but rather businesses not wanting to take a larger exposure as they consolidate their existing operations.
The bank's lending business kicked off in the middle of 2007, when it started providing lines of credit against investments and then moved to business loans and lines of credit against property.
"This formed the bedrock of our substantial growth in 2008," said Roy.
