SMEs in the UAE require small loan amounts over the short-term, to fund business development and growth, much less than many investors may have thought, a report said.

Typically, SMEs in the UAE are often only looking for funding from between Dh100,000 ($27,220) to Dh500,000 ($136,110), according to the latest findings from the new UAE-based online lending platform Beehive.

Beehive’s current average is circa Dh300,000 ($81,660).

However, despite requiring relatively small amounts of capital, SMEs are often frustrated by traditional lenders, reluctant to finance them, given their survival rate.

For example, according to a Forbes report, the shelf life of SMEs in the US is a statistical uncertainty and as such banks are reluctant to fund their potential growth. Only 70 per cent of start-ups are still in business after two years, 50 per cent will call close after five years, 33 per cent making it to the 10-year mark and just 25 per cent last 15 years or more.

However, Beehive the UAE’S first online marketplace for peer-to-peer (P2P) lending, has, since its soft launch in October, funded six UAE based businesses, providing a cash injection of between Dh100,000 - Dh500,000 each, lending a total of almost Dh2 million ($544,400), provided by more than 500 local investors.

Launched with the goal of directly connecting smart investors and creditworthy businesses to build mutually beneficial partnerships for growth, the first SME to be funded by Beehive was Coffee Planet, an SME 100 company and provider of premium fresh coffee to hotels, restaurants, catering companies, supermarkets and convenience stores throughout the UAE.

The Dubai-headquartered company was looking for growth capital to secure small asset purchases in order to extend brand presence in the region and Asia as it develops a solid franchising, retail and distribution model.

“Coffee Planet is a perfect example of a stellar, home-grown company with solid business credentials that Beehive is keen to support on the platform,” said Rick Pudner, Beehive chairman.

“With banks focusing on the larger corporations, the options to secure SME funding are limited. However, many small businesses are looking for smaller amounts of capital in order to kick-start the next phase of growth. Funding on Beehive is fast because we have a growing investor base of over 500 investors who compete to fund business loans.”

The P2P platform, which gives SMEs a 14-day funding period from initial listing to actual funding (subject to due diligence) - a fraction of the time that traditional lenders offer - saw Coffee Planet as an ideal candidate for investment.

“We chose to partner with Beehive as Coffee Planet is a big fan of innovation and technology and this is an innovative financial product that is fast gaining traction as an accessible and credible resource for SMEs, for whom traditional bank lending can be challenging and long winded. Due to the nature of the Beehive model, this makes the process much quicker as a lot of paperwork is reduced compared to traditional bank lending,” said Robert Jones, managing director, Coffee Planet.

“We are rolling out a new ERP product for the company, which will drive efficiency up and costs down, as well as increase our already high levels of customer service. The project was originally split into two phases, due to cash constraints, but the money raised from the Beehive platform has allowed us to fast track and bring phase two online at the same time,” he added.

“We’ve had a fantastic response to Beehive. All of our businesses have reached their funding target in 14 days or less and at highly competitive rates which has delighted our clients.” said Craig Moore, Beehive founder and CEO.

“The Beehive registration process is simple and we have no hidden fees. Our online marketplace directly connects SMEs who need credit with investors who are eager to provide it,” added Moore.

“Effectively this ensures that SMEs get faster access to lower cost finance while investors get better returns and manage their risk by diversifying their investments. So it’s a real win-win for both sides of the lending transaction,” he said.

The flexible funding approach means that businesses can apply for loans of anywhere between Dh100,000 to 500,000 with investors able to invest from as little as Dh100 ($27.2), which offers controlled risk management as they can invest small amounts into multiple businesses.

Beehive then facilitates the loan agreement between the business and investors, charging a small percentage fee of the loan amount with investors receiving monthly repayments at target rates of between 8 per cent and 12 per cent, said Moore.

Among the other four companies to have received Beehive funding is change management consultancy Genyx, which was looking for expansion capital to bring additional associates on board as part of its client portfolio development strategy.

“We found the Beehive process to be customer friendly, easy to execute, and swift. Many banks are not focused on SMEs; those that are have bureaucratic processes or often seemingly unhelpful managers who don’t clearly see SME requirements. Beehive is making a very valuable contribution to the SME community in the UAE and we see them as a strategic partner for SMEs,” said Dave Dimmell, managing director, GENYX.

Another SME, Panache International, an integrated manufacturer of disposable plastic and packaging products, secured much-needed capital to re-finance an existing term debt with another UAE lender.

“The Beehive process was very transparent, making it much more robust, quicker and cheaper than local conventional banks. We were able to make projections due to a clear timeline which would have been more difficult had we used more traditional methods of financing,” said Vishaal Shah, CEO, Panache International. – TradeArabia News Service