One thing SMEs learn early on is the importance of funding in getting their business off the ground. This can sometimes take years and the process can be quite tricky, strict lending restrictions imposed by banks in the UAE.
Yet, there is a lot of other support available in varying forms for both UAE nationals and expats. Financial support from various funds, grants, venture capitalists, angel investors, incubators and government departments have been the common types thus far. Support also can often come in the form of office space, training, mentorship, business services and even through special benefits that accompany membership with business councils.’
Government-funded programs for UAE business owners
1) Dubai SME and Mohammed bin Rashid Fund for SMEs
Dubai SME which operates under the Department of Economic Development in Dubai, is one of the biggest organisations solely focused on supporting entrepreneurs and growing the Emirate’s SME sector.
Its list of support programmes has grown over the years and now includes the Mohammed bin Rashid Fund for SMEs which is a $600 million fund designed to offer Emiratis loans for their start-ups. Its seed capital offers direct loans (valued between AED 50,000 and AED 500,000), while the credit scheme loan (AED 500,000 to AED 5 million) can be issued through banking partners and guaranteed by the fund. Its “Intilaq” programme also offers Emirati entrepreneurs non-financial support such as training courses, legal, marketing, technical support, and consultancy during the first three years of enrolling.
2) Khalifa Fund
The Abu Dhabi-based Khalifa Fund operates under a similar model, but is more primarily focused on providing attractive financing options for Emirati small business owners. The fund offers loans up to AED 100,000 and flexible repayment periods of up to 24 months. It also provides selected candidates support services during the business setup phase through its partners and also waives some government fees that would have usually been the responsibility of the business owner.
The application process for funds under these two organizations is usually quite simple, and requires proof of UAE citizenship and establishment for a certain number of months or years (depending on the type of programme), financial statements, business license and registration. Other criteria that will be taken into account is business proposition/plan a well as the associated risks.
3) Tejar Dubai
Tejar Dubai, an initiative launched by Dubai Chamber, is a unique and comprehensive program that takes a slightly different approach in that it supports UAE nationals through the entire entrepreneurial process. After filtering through applications, candidates with the best business ideas are enrolled into a training and mentorship program. Those deemed successful can avail of funding from Dubai Chamber (up to 50%), while 30% of loans can be provided by participating banks. Emirates NBD allows successful applicants to apply to its Credit Guarantee Scheme for a loan up to $3 million.
What financial support is available to expatriate business owners?
For expats, financing programmes tend to be a lot more competitive. HSBC has launched two SME funds in the UAE in recent years (each worth AED 1 billion), which are open to both UAE nationals and expats. The funds’ aim is to help SMEs that actively trade and have an annual turnover of AED 30 million.
Dubai Silicon Oasis has its own venture capital investment fund, in addition to its own incubation programme which offers a special Entrepreneur Business Licence (EBL) at a low cost licence in return for a small stake in the business. Then there are the larger VC players like Rocket Internet which has invested in more than seven companies in the Middle East region and is constantly looking for fresh startups to add to its portfolio.
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Envestors, is a Dubai-based consultancy firm which specialises in raising equity finance for established small businesses in the UAE through a network of angel investors and venture capital funds. These types of investors usually invest a minimum of $500,000 with some even funding up to $10 million. Businesses who apply must have a full-time management team, demonstrate a proven track record and growth opportunity, as well as a realistic exit strategy.
Crowd funding and other lending networks
Alternative funding channels have also become increasingly popular in recent years Eureeca.com, a crowdfunding site targeting SMEs in the country allows people to invest as little at $100 into a business seeking funding, in exchange for equity in the company. The transaction only goes through if the SME achieves its fundraising goal.
Beehive.ae, on the other hand, is a peer-to-peer lending network. Its online marketplace offers flexible funding for established businesses that seek anywhere from AED 100,000 to AED 500,000 in funding. It also facilitates loan agreements between businesses and investors in exchange for a small percentage fee of the loan amount. Both of these platforms are designed to facilitate financing for SMEs, without the hassle and high costs associated with the traditional lending process via banks.