If you are planning on starting a business in the UAE, one of the biggest challenges you’ll have to address is finding enough capital. Securing the funding you need through traditional routes can be difficult as a new setup has no track record, but thanks to the ongoing modernisation of the UAE, there are a growing number of ways you can raise the capital you need. Here we go into more about how to raise funds for a business in the UAE.
Funding for business setups in the UAE has changed in recent years. Traditionally, capital was raised by lending money from banks and similar financial institutions.
However, that model has been modernised as business investors and incubators in the UAE have become the norm, leading to a rise in private equity funding, crowdfunding and venture capitalists. The UAE government have also increased support for business start-ups with a range of new initiatives, especially within the technology sector.
A good place to start is with family and friends. Getting over the initial barrier of asking people you know may be difficult, but they may be more than willing to help. Before asking, make sure you have a solid business plan in place and write out a contract regarding repayments, as you want to avoid any potential fallouts with loved ones.
Taking out a bank loan is still a viable option, even though it can be overlooked in favour of other channels. Before approaching a bank, your numbers will need to be watertight as there can be some caution on their side, especially with SMEs. With banks competing against each other to win customers you may also be able to use that to your advantage when it comes to securing a low interest rate.
The use of angel investors for business setups in the UAE is increasing all the time, with the likes of the Dubai Angel Investor network, the Falcon network and the Women’s Angel Investor network just some of those that can be approached. This can be a good point of entry for funding, as there tends to be less focus on facts and figures and more emphasis on your relationship with the potential investor, which can bode well for the future if you get on well.
The importance of networking cannot be overstated when it comes to the early stages of developing your business. Ideally, you want to build a strong network with skilled and experienced individuals especially those you can provide talent and knowledge that you don’t. You can easily start by using platforms like LinkedIn and search out local networking groups and events where you can make more personable connections.
Another option could be to work with venture capitalists who are looking for other businesses to invest into. If this is a model that works for you, it means you receive an agreed level of capital in exchange for an agreed level of equity. You may be able to build an agreement that enables you to buy back the equity share, so consider this at the start. Most venture capitalists are located offshore, so you’ll have to look beyond your local network.
Over the past few years, it has become the norm to present your project ideas to a group of investors to secure funding. Smart investors are always on the lookout for the next big thing or projects that can offer stable returns, so once you have your pitch ready and all your financial figures in order, search for some of the many investor events that are held across the UAE.
If going further afield isn’t practical, you may be able to secure funds from a local source. There are business incubators across the UAE that can provide help, such as the Dubai Technology Entrepreneur Centre, FinTeach Hive and Astrolabs. Get in touch with the Small Business Development Centre in the local area who can guide you in the right direction, helping small businesses to access capital and improve strategy and business planning.
Depending on the type of business you plan to run and its scope, you may be able to benefit from a strategic investment. This can be particularly beneficial if you connect with a strategic investor looking to make an entry into the UAE, as their funding can be used to help your business grow quickly.
If you are ready to set up a new business in the UAE there will be a lot of red tape to deal with. Operating in a new country can also be difficult if you aren’t aware of the laws and compliance regulations. Charterhouse Lombard’s consultancy services can make the process much easier to manage, helping with everything from licence applications, advice on visas, corporate banking support and much more. To find out more, contact a member of our team today.
Stay up to date with the Charterhouse Lombard Offshore Newsletter.
