Beehive, an online marketplace that matches small and medium-sized businesses looking to bypass high-interest bank loans with investors hunting returns, said that it is now arranging short-term loans for cash-strapped SMEs that face payment delays.
Under its invoice financing scheme, SMEs can access loans for periods as short as 60 days for as little as 0.75 per cent per month, said Beehive founder and chief executive Craig Moore.
Beehive makes money through its fees for arranging the transactions.
Many businesses in the UAE struggle to get paid on time for their services, creating not only a cash flow headache but also incurring losses because of high inflation, he said.
“This is extending our product range to continue to support different forms of SME finance because SMEs need to be able to get their money working efficiently and effectively as possible,” he said. “Cash is king for them. And one of the challenges, in this region in particular, is quite long payment times. Even when the SME believes they are on a 30-day payment term, the reality may be that they are paid in 60 days or 75 days.”
Beehive started operations in November, to lend SMEs sums between Dh100,000 and Dh500,000 for up to three years. Since it started, the company has attracted 800 investors and disbursed Dh3 million, Mr Moore said. Unlike banks, he said Beehive does not penalise SMEs for early repayment.
Typically at a bank, an SME will get financed at rates ranging between 16 per cent and 25 per cent per year and usually have to pay hefty early repayment penalties of between 2 per cent to 5 per cent, Mr Moore said.
The UAE has been striving to bolster support for SMEs. Even though they represent almost 92 per cent of the total number of companies and provide more than 86 per cent of jobs in the private sector, they make up only about 4 per cent of total lending in the country.
Banks have played their part in recent years as they recovered from the financial crisis of 2008, especially as large corporations increasingly tapped the bond market instead of bank loans, analysts say.
Banks typically do not give a breakdown for lending to SMEs, but almost every other type of lending has grown and anecdotal evidence suggests it is the same for SMEs. Still, the growth of lending to SMEs has usually come from a low base.
“Banks are coming from probably low single digits, so any improvement on that is going to look statistically quite strong,” said Mr Moore.