Funding Options for your Growing Business in the UAE

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  | Published: 08 July 2020 | Last Updated On: 29 December 2020

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No matter you have just begun your business or are already been active for some time now, as the entrepreneur of a small venture, you may face situations where you may need some instant funding.

Although a traditional loan fund may seem to be an appropriate way out of the situation to the business owners, the lenders or financial institutions in the market might not always be ready to help the small business owners.

Moreover, in case your business reaches that point where you are unable to fulfil the eligibility requirements determined by the lenders or the financial institutions, the options that you are likely to look for are maxing out the credit limit on your credit cards, taking some funds out of your fund set up for retirement, selling personal assets that you have, or borrowing money as a loan against your home or office.

These options can definitely be a good solution; however, there are also many other funding alternatives, which you can go for to support your small business ventures without putting any of the property in line or by disturbing your savings funds.

If you are prepared to consider other financing options, then here are some suggestions that could be useful for your business requirements.

1. Lines of Credit

This funding solution for your business will help in covering your expenses in the short-term including your operation costs, purchase of equipment pieces, inventory, and more such costs. Lines of credit involve a similar function as a credit card, where you have access to a fixed amount of money, which can be utilized for the functioning of your business as you consider fit.

The finance company honours the regular payments and you have the option to withdraw the amount of money you want. The best of all is that the rate of interest is charged only on those funds, which you withdraw.

However, in some of the cases, the rates of interest charged on the lines of credit may seem a little higher than the main lending rates. Still, they are generally lower than the rates of interest charged on credit cards

2. Asset-Based Loans

This option for financing needs assets, which you own and you intend on buying in the way of collateral for the amount of loan borrowed. Simply put, the finance company or the lender remains the owner of the assets till the time the last payment is made.

With this financing option, you have these two purchase alternatives- lease or hire. If you hire, your assets will be included on your balance sheet. On the other hand, if you lease, your assets will remain off your balance sheet until the amount has been paid off in full with the purchase fees. 

3. Personal Loan in UAE

This type of loan is unsecured and is considered by those people who may need financing for many purposes. The term on these loans is usually lower than the traditional funds; however, the personal loan interest rate charged is comparatively high. Generally, such funds do not need any kind of collateral against getting them due to which they become an attractive option. The decision to use these funds of the business requirements are based on many factors, which should be evaluated properly and carefully. 

4. Merchant Cash Advance

This option is available only when the lenders or financial institutions are done examining the company’s cash flow and consider it to have a steady inflow. This kind of funding is protected by your credit cards’ future transactions. Hence, it is a good alternative for the business loans & other types of traditional funding options available in the market, especially for those businesses that lack the credit ratings or collaterals needed to secure the loans. 

5. Invoice Factoring

This financing alternative is perfect for those companies, which deal with products and services business-to-business. Under this option, there are invoices that get issued to the clients or customers and their copies are sent to the lenders or financial institutions.

When they receive copies of the invoices, the lenders move forward for paying a fixed percentage of such invoices to your company. As soon as your company receives the payment from the clients/customers, the concerned lenders or financial institutions pay the remaining amount on the invoice after they deduct the application fees. 

6. Purchase Order and Trade Finance

The growing businesses do not consider the production or sale of their products to be quite a big challenge. In their case, locating funds for getting the raw materials or merchandise, which is pre-sold, is a greater challenge. By using this method for financing, the producers, distributors, suppliers, or wholesale distributors can grow their firms or companies without selling their equity or adding to their bank debts.

This option of financing is flexible and fast. It lets the businesses meet huge orders, which they receive and make more profits and helping them, make on-time deliveries and increase their market share. 

7. Turnaround Finance

The businesses which are viable, however, are struggling at some level and need financial help can go for specialist debt companies & equity finance to turnaround. For affecting a turnaround, the said companies need to identify and acknowledge the issues first, and then they can move on to changes in the management. Following this, they can come up with a strategy that would work and then implement it.

This option is helpful only for the companies, which have a proven model for their business along with stable revenue and profitable history. This is an appropriate solution for those businesses, which could be facing temporary issues that could be a result of credit restrictions or cash flow disruptions. For example, it can be due to losing an important customer, late payment by the creditor, or other such reasons. 

The Bottom Line!

Because of the strict requirements set by the financial institutions or lenders for providing the traditional loans, it may be hard for the entrepreneurs of the small and growing business ventures to get funds for their companies if they want to go for the traditional methods.

However, other funding options such as personal loan in UAE, lines of credit, merchant cash advance, and others mentioned above have easier credit criteria along with flexible terms, which can be personalized according to the funding requirements of the business.

Hence, you should not assume that the only option of funding for your business is a bank loan. Go through all the options above and find the one, which is suitable for your business requirements.