Image Credit: Corbis and Gulf News Archives

Without financing, businesses simply wouldn’t exist. Whether companies wish to expand, are going through problematic times or simply need more capital for their day-to-day operations, businesses need to take out a loan. Fortunately, here in the UAE companies have access to various financing options.

Ajoy Kane, Head of RAKFinance, RAKBANK, says, “There are various loan products available in the market to cater to companies’ short-term as well as medium-term finance requirements.”

He explains that interest rates for the bank’s business loans are dependent on the life of the loan and the length of the company’s business. However, while interest rates may vary, now appears to be a good time for companies to take out that beneficial loan.

“Not only is the economy showing clear signs of growth this year, the government is constantly launching new initiatives that support the small and medium enterprises (SMEs) sector,” says Kane. “The Department of Economic Development (DED) says that 18,757 business licences were issued in 2013, an increase of 12 per cent over 2012. In light of this growth, more banks in the country are actively lending to businesses, and some have set up specialised SME centres to cater to all their needs.”

The right partner

Getting the right banking partner is something that all the banks agree with. Chaker Zeraiki, Head of Business Banking, HSBC Bank Middle East Limited, UAE, tells GN Focus, “A business loan can be helpful, but we need to take into consideration that each business is different in its own right. As a result, HSBC believes in a needs-based approach when serving its customers.”

Commercial Bank International (CBI) also offers various facilities such as business loans, long-term loans and working capital loans. Natasha Abdulelah, Head of Business Banking, CBI, says, “CBI’s business loan proposition follows a tiered approach, depending on the business sector. Our interest rates are flexible and market-driven depending on the tier the organisation falls under.

“Other types of medium- to long-term business loans and working capital facilities that are backed up by audited financial statements have their interest rates vary against CBI’s base rate.”

The bank offers business loans up to Dh500,000 against bank statements for the past six to 12 months, says Abdulelah. “Long-term loans are usually supported by audited financials and a full business plan and are mainly used for the purpose of fixed asset acquisition. Working capital loans are mainly needed to carry out a company’s business operations and are repaid over 
short periods.”

Kane says, “Business finance products typically include loans against trust receipts, invoice discounting, post-dated cheque discounting and others to finance short-term trade and working capital requirements.

“With our wide product range, we are committed to supporting SMEs throughout their growth cycle with solutions that meet all their needs. The share of small business finance is more than 20 per cent of our bank’s loan book and it is set to grow further over the course of 2014 in line with rising market demand,”says Kane.

RAKBANK extends collateral-free cash loans to fund SMEs’ short-term requirements and a host of other financial solutions to support their longer-term financing needs.

Zeraiki explains that HSBC’s relationship managers take the time to understand a company’s business strategy and needs in order to design a tailored solution that matches its specific requirements. “If a business is looking for a short-term requirement such as a cash flow conversion solution, examples of products that would be suitable are pre- and post-export financing. If a business is seeking to expand with the help of long-term debt, we can design specific term loan products to meet its strategic objectives.

“The more tailored the solution, the less riskier it is, and the more competitive it becomes for our customers from a pricing perspective.”

Kane has some advice before any business head signs on the dotted line. He says, “When scouting for a business loan, we urge SMEs to consider the following before deciding on a financial partner: ease of processing the loan, the documentation required for the application process, the need for collateral against the loan, the overall product offering that can sustain the business throughout its growth cycle and, last but not least, the loan provider’s reputation for customer service.”

Friendly advice

On the type of loan SMEs choose, Abdulelah has some suggestions: “Blanket borrowing often results in the customers having surplus loan amounts beyond what they need immediately, which could end up being utilised outside the actual business requirement,” she says. “They should know their repayment capacity, as over-lending will affect their business cash flow.”

Abdulelah recommends a three-point checklist for the SMEs, she says, “Ask yourself: what is the loan amount my business needs currently? Am I ensuring the optimum benefit from my loan and have I chosen the right banking partner?”

By getting the right bank behind you and following this straightforward advice you can hopefully avoid liquidity problems in the future.