The guaranteed way to raise money for your small business

Business loans used to be the responsibility of the banks, but that is no longer the situation. Banks want to lend to companies that carry a low risk or have enough assets to secure against the loan amount.

Business loans in Dubai are even more difficult, especially since 80% of the population is made up of Expats that could exit anytime their situation changes either in Dubai or in their hometown. Not that they would leave without paying their debts………..

Small businesses are the lifeline of a any country but most small businesses struggle with cashflow and this can significantly hinder growth. Lack of funding is also required when a business ends up having to write off bad debt and lack of access to timely funding can cripple a business if that was to happen.

So how can a small business owner access funding in such a global market when they are competing not only with local competition but with a freelancer living on the other side of the World with less than half the overheads.

Good Practice for Business Owners

Investors, individuals or institutional, look for a number of things when making a decision to lend:

1. Owner – the individual behind the company is the most important, so become a likeable person and professional in your business endeavours. If you arrange a meeting, keep to it, if you need to make a payment do it straight away, if you make a promise, make sure to deliver on it. Your reputation will spread quickly within the business community and amongst your peers. These are the same individuals who could be contacted or approached for lending in future.

2. Accounts – maintain good accounts from the day you start and not when you need a loan. Maintaining accurate books is so important and should not be ignored. Try to use a cloud accounting software that gives you access to real-time management accounts.

3. Processes – create solid workflow in your business, get organised, paperwork goes in files not draws. Keep records well organised, maintain a CRM system if possible.
These are just the basics of any company and without these you will struggle to raise even the smallest loan.

Personal Loans

When borrowing for your small business it may be easier to borrow personally, especially if you are on an employee visa within your own company. Banks and Credit Cards (not recommended) will lend to employees with 3-6 months of salary proof.

The following are links to platforms that would be a good start to personal lending:
• SouqMal: This is a great place to start for personal lending. Applying through SouqMal will help you access hundreds of lenders in the UAE with just one application.
• MyMoneySouq: Another great platform to access hundreds of personal lending options with just one application. Review the lending rates and the terms all online before speaking to anyone.
• Friends & Family: Always the best and cheapest option, hence the reason to be a nice person 😊.

Business Loans

Banks are the last place we recommend for Business Loans, there are many small business friendly options and we analyse some of these below:

1. Friends and family. At the top of the list is friends and family. Consider approaching those who are employed rather than entrepreneurs. People who work have less time to consider creative investment options and usually end of storing their money in savings accounts paying less than 3% per annum. If you can offer them a return of over 5%-10% per annum then you could be a better option for most people who simply work and save.

2. Beehive.ae, consider going to people but through a platform. Beehive is a peer-to-peer lending platform that connects small business owners with investors without the need for a conventional intermediary. Its focus is on finance from AED 100k on repayment terms from 6-36 months. Check it out on www.beehive.ae

3. Eureeca.com, an amazing platform for those wanting to raise more than $200k. Launched in 2013 the team at Eureeca have helped many high growth businesses raise significant amounts. Check them out on www.eureeca.com

4. Dubizzle, What the…? I hear you ask, Dubizzle, Really? Well, Yes. Dubizzle is amazing platform in Dubai and posting in their business section for an investor, with as much detail as possible, does actually work. Just be careful to select the right person.

Although there are many other options I personally believe these are a great place to start, but remember to ensure the following information in place:

1. Access to a good set of accounts. We can help with that www.profitsplus.ae
2. Good processes, softwares, and CRM. Check out Zoho CRM
3. Try to keep the business in the blue by lowering overheads and increasing your fees. Only grow when it is justified.
4. Solid website will also help and a good positive online presence.

Good Luck with your fund raising exercise and do message me if you need any help. If you want to speak to an advisor to help you with VAT, Funding or Accounting then contact me, Ali Afzal, on +971585442030 or email me on [email protected]

Zero-Rated VAT for Companies in the UAE

Zero-rated vat companies based in the UAE should review their original VAT application.

We have many clients who are based in the UAE and deal in zero-rated supplies. The question this creates is whether or not this client should be registered for VAT or not.

Firstly we have had many clients join Profits Tax Consultants where they registered for VAT last year in 2017 assuming they had to be registered or else they would have banking issues. In fact we have even had clients claim they were forced to register by their bank account managers because they had large amounts of money going through their account.

So, what is the right approach?

Well we asked the FTA and this is the reply we got;

‘If you only make zero-rated supplies, you may apply to be excepted from registering for VAT.
You must still complete a VAT registration application, but you should answer “Yes” to the question: “Are you applying for an exception from VAT registration?” (Please refer to the additional instructions provided in the Authorized Signatory section in the application).’

So what does this mean, well firstly if you have a company based in the UAE making zero-rated supplies then you still have to register with the FTA BUT that the Vat application must be done correctly.

To put is into perspective till date every one of our xero-rated clients have made their vat application incorrectly and have not made it clear that they are applying for ‘an exception’.

This causes major problems and as such some of our clients have experienced AED 20,000 penalties as a result of requesting amendments incorrectly. Amendments must be made within 20 days of ‘realising’ the error.

Going forward, please check that your initial vat application was made correctly, we expect the FTA to start asking companies to explain why they are not making AED 2m to AED 6m sales when it was clearly stated on the application.

Note: zero-rated must not be confused with exempt of vat which we will discuss in our next post.

Let Profits Tax Consultants with over 20 years of VAT experience and dealing with UK tax inspectors deal with your VAT matters email us on [email protected]