The stumbling blocks – SMEs, Entrepreneurs & Empowerment

The stumbling blocks – SMEs, Entrepreneurs & Empowerment

Having the confidence to start a business from scratch is one thing, but weathering out difficult times is quite another thing altogether. Being in constant survival-mode can make it hard on new and small-time business owners, especially if they have families to support as well.

Image by: TheNational.ae

Image by: TheNational.ae

With weaker oil prices, 2016 already seems to be a bit of a struggle for SMEs. They have had to bear the ripple effects. This has resulted in payments being withheld or delayed by their suppliers or clients, which as a result has led to the situation getting worse for such businesses. With default payments reaching an all-time high of more than Dhs 7 billion in 2015, according to UAE Banks Federation, this has reduced lending and loans to SMEs by banks and other financial institutions.

According to Rachel McArthur, the Managing Director of Digital Ink, a Dubai-based company that offers web content and digital solutions, it is imperative to have a contract signed before any undertaking as the contract serves as the main protective cover. She also suggests that some clients wouldn’t mind paying 50% upfront, so it really is quite alright to ask for it.

Also, according to Mohammed Nasser, Managing Director of WMS Metal Industries, the Dubai Department of Economic Development generally comes to the rescue in cases like these. Sometimes, delayed payment takes 4-5 months, but in some cases, it can take a couple of years whilst getting paid in installments. He also suggests that smaller companies need to choose their battles when, if the situation gets out of hand, suing big companies would just add on to the costs and charges, for example legal fees.

The main concern for new businesses is payment being delayed or in worst cases defaulted payments, and the only way to manage this is not to put all your eggs in one basket, that is, not just deal with a few large clients or suppliers, because if these companies decide to delay payment due to internal policies or financial crises, it can result in a serious cash flow predicament for SMEs.

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