Turned down at the bank, UAE’s small business owners turn out their own pockets

While SMEs represent almost 92 per cent of registered companies in the UAE, they only account for about 3 per cent of total loans by banks.

Ambareen Musa, Souqalmal.com’s chief executive, says UAE banks often do not give straight answers to small business owners' questions on how to apply for loans. Jeffrey Biteng / The National

Small- and medium-sized enterprises in the UAE find the process of getting bank funding a hard one, and therefore prefer to fund their business operations out of their own pockets, according to the findings of a new survey from Souqalmal.com.

A survey of SMEs carried out by the personal finance website – which has recently begun to offer price comparisons for SME banking products – found that just 28 per cent of respondents had taken out business loans and financing from a bank.

Of those that had managed to get bank loans and financing facilities, more than half described the process as “not easy”.

“Start-ups in services, particularly consulting, require a lot of faith in the individual regardless of the thoroughness of the business plan,” said one small business owner surveyed.

“Bank financing is out of the question, as they generally require three years of audited accounts to even consider you.”

While SMEs represent almost 92 per cent of registered firms in the UAE, they account for about 3 per cent of total bank lending. The survey found that 31 per cent of SMEs are self-funded, the most popular option. This was followed by taking out a bank loan (28 per cent), borrowing from friends and family (26 per cent), finding strategic investors (10 per cent) and a broad mix of funding (6 per cent).

Souqalmal.com last month launched Souqalmal.com Business, which compares banking products targeted specifically at SMEs, including business and equipment finance, bank accounts and credit cards. It did so after numerous requests for comparison data from small business owners.

“We had a number of people who used the website to compare personal finance products but were specifically looking for more details on products geared more towards small business,” said Ambareen Musa, Souqalmal.com’s chief executive.

“When you start a business in the UAE you’re often not aware of the eligibility criteria for business loans and other banking products, such as the need for a minimum turnover and a certain number of audited accounts. Often banks will not give you a straight answer right away when you contact them.”

A separate survey released on Thursday conducted by Zurich Financial Services found that 29.5 per cent of SMEs in the UAE said that acquiring new customers was their biggest opportunity at the present time, indicating confidence in the strength of the local economy.

While this figure suggests a higher level of confidence than the average across Europe and Asia, it represents a fall in confidence from last year, when 40 per cent of respondents in the UAE gave the same answer.

Seventeen per cent of Zurich’s survey respondents in the UAE perceive opportunities in expansion into foreign markets, although this in turn is down from 28 per cent last year.

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