Working capital finance is the fund required by a business to manage its daily operations as well as to cover expenses like employee salaries, inventory, etc. For any business, an effective management of its working capital is of utmost importance to maintain its liquidity without any disruptions to it’s daily operations. This ensures the sustainability and growth of a business. In Dubai, businesses get a wide range of financing sources like banks and other financial institutions, which provide ample opportunities for businesses to get and manage their working capital effectively. By making full use of available financial resources, a company can achieve its long-term goals easily in Dubai.
The strategic location, modern infrastructure and business-friendly regulations have combined together to make Dubai a global business hub. For businesses, maintaining optimal working capital is essential to ensure hassle-free operations and consistent growth, and in Dubai, businesses find it easy to get working capital finance from banks because of the business-friendly regulations of Dubai. Dubai is home to a lot of venture capital firms, private equity investors, angel investors etc., and this helps businesses and startups get equity financing easily.
Hence businesses are able to seize growth opportunities, manage operational risks etc. easily in Dubai because of ample working capital finance options available.
With the rise of fintech platforms and online lending digital finance solutions in Dubai, businesses are able to enjoy financial services like streamlined application processes and faster access to capital. This helps businesses to get funding more easily and efficiently. Sustainability finance is also gaining traction in Dubai with businesses adopting social and environmental causes with their long-term growth plans. Such businesses get support from sustainable finance initiatives. Another financial trend on the up in Dubai is alternative financing with options like crowdfunding, supply chain finance, etc. available to businesses.
The expansion of alternative financing options, is providing businesses with diverse avenues for securing working capital. All the above options offer businesses flexibility when it comes to raising capital.
Working Capital Finance-Sources
- Loans and Overdrafts:
In Dubai, the traditional services provided by banks for working capital finance are bank loans and overdrafts. Banks generally offer loan products that are specific to the particular needs of businesses. These include short-term loans to businesses for their immediate needs as well as revolving credit lines for their daily operational costs. The competitive interest rate of banks in Dubai makes it feasible for businesses to use these services for their growth. - Trade Credit:
Businesses that are involved in export/import business in particular benefit a lot from the trade credit service, as they can free up their capital for operational needs as a result of their suppliers extending the credit terms. - Invoice Financing:
Businesses can make use of Invoice financing to get funds based on invoices that have not been cashed by factoring and invoice discounting. By selling the invoice to a third party at a discount, known as factoring, a business can get immediate cash. They can also get immediate cash through invoice discounting which is the process of borrowing money on unpaid invoices. - Equity Financing:
Equity financing can also generate funds for a business immediately but this comes at a loss of equity to the promoters as they sell shares of their business to investors to raise capital. However, since this process does not involve repayment, the businesses follow equity financing to raise capital for their growth and expansion. - Government Support:
In Dubai, the government provides support to businesses for their growth through institutes like Dubai SME, Dubai Export Development Corporation and Dubai Investment Development, which provide grants and subsidies to businesses at a low rate of interest to lighten their financial burden.
For businesses wishing to approach a financial institution or a bank for working capital finance in Dubai, whether it is in the form of an overdraft, trade credit, invoice financing or equity financing, it is highly recommended to hire a consultant like ‘GrowBiz’. The finance experts at ‘GrowBiz’ help our clients get working capital finance easily without any hassles. With the relationships that we have developed with banks and other financial institutions in Dubai along with a strong grip over the financial regulations and required documentation, our experts are able to suggest and get the right line of credit for our clients.
Regulatory Framework
- Corporate Governance: Regulations regarding corporate governance in Dubai ensure transparency, financial reporting and accountability of the businesses. The compliance of the regulations contributes to a boost in the confidence of the investors and leads to a transparent and secure business environment in Dubai.
- Legal Banking Framework: To manage and resolve all the financial disputes, Dubai has a robust legal framework of laws on commercial transactions, bankruptcy, etc. like the UAE Commercial Companies Law.