• Written by Salim Al Jundi, Ph.D
• Posted on:Nov 30, 2018
• (03)No comments

SOURCES OF FUNDING SMALL ENTERPRISES

When captivated by a prime, creative or innovative business idea, that has the potential of being a successful business opportunity, do not allow funding to be a barrier to the implementation of such ideas. Today’s young generation most often than not have superior business ideas but the major impediment to the implementation of their ideas is funding. Thus, most brilliant business plans are smothered at an embryonic stage and go down in flame due to the lack of funding. The aim of this article is to assemble the most obvious strategies of how to best tackle the ever-present dilemma of attaining funding to establish a business.

Without thinking very hard and straining the brain the first option almost always seems to be borrowing money from the bank; what many do not know is that borrowing money should ideally be the last resort and not the first. Should you arrive at such a decision, please think again and let the path of your thoughts led you to the most paramount questions before attaining funding, which is “what is the cost of establishing such a business, approximately?”

Do yourself a favor and start saving for your business plan while it’s still in a nascent stage. Whilst saving, maybe you would like to consider liquidating any fixed assets you might be in possession of. Have you given selling your extravagant car a thought? Or if you have strong faith in the success of the project, maybe you would like to take the risk and sell your home, your family heirlooms’, and quite possibly liquidating securities such as stocks and bonds you may possess in the financial markets. All these could be some options to fund your business without having to shoulder the burden of paying hefty interests to the bank.

Start negotiations with family members, relatives, and even friends by presenting them with your business plan and investigate the possibilities of obtaining interest-free loans and in order to make the project more tangible present them with loan repayment schedule in light of expected revenues. One other possible source of funding is searching for a business partner who can inject funds into the business.  This option also gives way to reducing the risks associated with business failure due to inability to provide the necessary capital and accordingly having a business partner somewhat ensures the credibility and profitability of the business. Let’s not disregard the knowledge that business partner might be able to inject into the business.

Have you forgotten the governmental sources of funding, if you have, then don’t worry because you still have it as an option and can give it some consideration? Government funds include, but are not limited to, the Khalifa Fund for Small and Medium Enterprises. If you think that this option is not within your reach, then here is a news flash for you, based on recent directives from HH Sheikh Mohammed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Commander in Chief of the armed forces, the services provided by the Khalifa Fund has now expanded to develop businesses in the Northern Emirates, whereby raising the capital to two billion United Arab Emirates Dirhams. So go for it!

Now, that we have reviewed options that not related to funds provided by the bank, let’s review what needs to be done if you have exhausted your every other option and have arrived at your last resort, a bank. In short, your target should be to look for a bank that will provide you with the necessary capital that would cover the needs of establishing a business at the lowest possible interest rates, flexible repayments periods and longer grace periods.

You now have the funds and are raring to go. Remember, the establishment of any business generally entails the purchase of supplies, equipments, furniture and renting space that facilitate the smooth operations of that business. However, before blowing the fund that you have gathered for the purpose of starting the business on purchasing necessary supplies, think about using the supplies/equipments that you might already have at home and can spare for the purpose of running a business. Do you have furniture, computer, or even a fax machine that you would like to utilize during, at least, the initial stages of your business life cycle? Think about all you can spare in order to reduce the capital cost of the business – think rationally. By utilizing what you might already have in terms of supplies, you are in a position to produce certain quantity of commodities or services at the lowest possible cost. As such, the best and finest décor are not always accountable for the success of a business; a modest décor might have the same impact as the finest décor. Thus, if you can start modestly without sacrificing the marketing prospective of your business, then do so.

In final thought, in line with the efforts of commercial banks in the United Arab Emirates to service the society as best as it can, they should make an attempt to shift from providing personal loans to developmental loans to finance small and medium enterprises, regardless of whether those businesses are under establishment or in need to finance an increase in capital fund (Expansion). As a government endorsement and encouragement, the Ministry of Economy can organize an annual award for the best banking practices in the development of small and medium enterprises.

Think smart, think economical!