While many small and mid-size businesses in Saudi Arabia and around the world find it difficult to tap into sources of capital, a great number of entrepreneurs miss outlying funding sources that can help them obtain credit and fuel their growth. A staggering amount of businesses from Saudi Arabia find it especially hard to raise funds in the gulf’s giant oil and petrochemical producer, where much of creditors’ focus is on dominant drillers and important agents.
Recent governmental and private initiatives, however, are leading the way towards increased small business lending, but with a number of requirements.
The Saudi Industrial Development Fund (the “Fund”) is a leader amongst these initiatives, mandated with facilitating private investments and economic growth in The Kingdom through financial and advisory provisions. The essence of the Fund’s SME financing is to guarantee up-to 75% of loans provided by local banks to a qualifying small business. The loans start from SAR 100,000, and go up-to 2,000,000, and can be for asset purchases and working capital. This guarantee can remove a large portion of the entrepreneur’s personal financial exposure to his or her venture.
Despite the Fund’s name, it is not limited to providing guarantees for industrial projects. It covers large portions of the services, education, and commercial sectors. The main requirements of obtaining bank loans guaranteed by the Fund are:
This program can provide a great tool for entrepreneurs to start or expand their ventures; by reducing personal financial risks and supplying much needed capital.