As interest rates peak, should UAE business owners go for collateral-free loans? How about gold?

As interest rates peak, should UAE business owners go for collateral-free loans? How about gold?

Dubai: Owners of small and medium sized businesses in the UAE are looking towards collateral-free loans and even using their gold holdings to pull in much needed funds to keep their operations going.

Some of the leading UAE banks are pushing no collateral backed loans to businesses, especially those that are relatively new or those that don’t have the physical assets or receivables to put up as collateral.

For that matter, even single individual businesses can apply for such loans.

Sure, such collateral-free loans come at a higher interest rate, but business owners who have taken these recently say this made sense because interest rates have peaked and sometime next year, the first set of rate cuts could happen. (If they are lucky, that could even happen during first quarter 2024 itself, as the US Federal Reserve signalled rate cuts are on their way after the meeting on Wednesday (November 13). The UAE rates rise or drop depending on the Fed decisions, given the dollar-dirham peg.)

“Collateral-free loans are not exclusive to SMEs in the UAE, but they are more common and beneficial for them,” said Bal Krishen, Chairman and CEO of Dubai-based Century Financial. “Banks also offer collateral-free loans