Launching a business is a daunting task. But it can be especially perilous given the country's debt laws.
In the UAE, bouncing a cheque is considered a criminal offence, which can result in heavy fines and imprisonment. However, debt is often inevitable for start-ups as they seek to get off the ground.
In an effort to remedy this problem, Gulf Finance is offering SME Advance, a specialised financial product that tackles the specific issues faced by small-to-medium-sized businesses.
Clients benefit from a secure finance option whereby SMEs are not penalised for bounced repayment cheques.
Steve Williams, the chief executive of Gulf Finance, says the programme should spur business growth in the Emirates.
"Research highlights the difficulties SMEs face in accessing capital," he says. "This problem is particularly acute in the region. The complexity of SME business models, coupled with their limited track records, often result in variable lending appetites from mainstream financial institutions."
To apply for a loan, Gulf Finance's new programme does not require more than basic financial and operational company information. SME Advance also provides an interest-only period of up to five years for cash-strapped start-ups.
Business collateral and assets aren't mandatory, and there is no fee or penalty if the client wishes to pay back the loan early.
Gulf Finance is currently offering loans of up to Dh250,000, and applications can be made on its website (www.gulffinance.com).
Mr Williams adds that SME Advance was born from the understanding that business owners must deal with a variety of unique challenges, including limited cash flow and the tremendous weight of various responsibilities.
"What is important is that a culture of entrepreneurship is developed," he says. "Gulf Finance is, therefore, taking a unique approach to support SMEs. At the heart of this proposition is an explicit acknowledgement that some SMEs may fail and that this failure should not be compounded by jail time."
That said, Mr Williams says clients are expected to meet their payments. The hope is that a softer approach will lead to a more efficient and active marketplace, which means more potential earnings for everyone.
Gulf Finance's focus on this sector is well-founded.
According to a recent report by the Union of Arab Banks and the World Bank, SMEs in the Middle East receive just 8 per cent of regional lending. Meanwhile, this sector is responsible for up to 90 per cent of the local economy.
