Funding Sources

Riyad Bank has made its mission to help and support Saudi businesses develop and succeed. In pursuit of this goal we have created the Riyad Bank Business Guides to outline a wide variety of conventional and non-traditional financing sources and how they can work for you.

When seeking capital to fund your business endeavors, it is important to take into consideration a number of factors, which will inevitably provide you with the right solution.

In any scenario, as a first point of action we strongly recommend for you to discuss what is required with your Riyad Bank Relationship Manager (RM) or Business Banking Officer (BBO). Since they already know you and your business, it is the most logical and effective starting point.

Keep in mind that money seeks rewards in relation to the risk involved. If you have assets to pledge, you may find borrowing money is easier. Without assets you may need to seek an equity investment. But, take note that small amounts of equity (less than SAR 100,000) are frequently more difficult to raise than large ones.

Suppliers of funds will investigate you thoroughly before they make a commitment. Be prepared, the best way to forecast your needs is through the preparation of a cash flow budget.

Try to start the business funding process as early as possible, because it could take from several weeks to six months to define your real needs and arrange a loan, a grant from a government agency or equity funds from a new shareholder.

Private Sources

Business owners often approach individuals for money, including:

  • Friends
  • Relatives/spouse/partner
  • Business contacts
  • Employees
  • Private investors.

Consider the following:

  • Individuals are rarely “silent” and can (if retired) offer management, business assistance, contacts or helping with special assignments. Individuals tend to want equity – the right to participate in the future. Is the financial gain worth the loss of ownership?
  • Individual investors can create a highly personal relationship.
  • If you set up a partnership, you can supplement areas of weakness with strong and complementary experience
  • Always have a written shareholder/partnership agreement with backers/partners, with a “buy- sell” clause. If it’s a syndicate, try to deal with only one representative
  • Review all agreements with your legal counsel.

Tip: Seek individuals at business clubs, Chambers of Commerce, and so on. Additionally, your lawyer, accountant or banker can sometimes make an introduction to a potential backer.

If you seek capital from employees:

  • Every Riyal invested is a highly committed Riyal.
  • Always have a written buy back provision.
  • Unless part of an eventual plan to sell control to employees, it’s desirable to keep employees’ percentage below the 20% mark


As well as short-term, day to day lending, Riyad Bank also provides long-term loans, leasing, mortgages, support services such as payroll, letters of credit, credit references, and more.

What Riyad Bank will require from you:

  • Facts and figures from statements, records and projections
  • Stability of your company and commitment of the owners. We will look at your past and present performance, future potential, the amount you have invested, the amount you have left (equity and retained earnings) and the way you run the company
  • Information on how you will be investing the money in your business
  • The ability to service the debt; that is, to pay the funding costs and repay the loan on time
  • Security or collateral that usually involves the pledging of accounts receivable, inventory, and personal guarantee of principal. Term loans often require fixed or other tangible assets as security

If you seek for capital from Riyad Bank, consider:

  • Be open. Tell your RM or BBO in advance if there’s bad news coming. The bank’s confidence in you will remain strong if you’re straight forward
  • Prepare a cash flow budget and go over it with your RM or BBO. Keep your RM or BBO up to date each month, even when you’re not borrowing
  • To establish a credit record, borrow from your bank early in your business cycle
  • Work your loan down and if need be, let it go up again. Don’t leave it sitting
  • Use your RM or BBO as a valuable contact. Riyad Bank offices are well aware of economic conditions in their areas and the potentials in other areas, through their divisional offices. They can introduce you to potential customers and suppliers, whilst helping you with credit checks and appropriate references
  • Your RM or BBO can be your best business friend. Discuss future financing needs with your RM or BBO and take the time to nurture a good business relationship.

Tip: Ensure your RM or BBO visits your premises occasionally to get to know your operation.

Term Lenders

With assets to pledge as security, you may wish to approach financial institutions that specialize in term lending. These include:

  • Insurance companies, trust companies, mortgage companies and banks:
    1. Mortgage lending on land and buildings
    2. Usually longer-term (15 years and more)
    3. Up to 60% of recent valuation
  • Commercial term lenders such as banks, installment companies and a small group of specialist companies:
    1. Lending on commercial assets including land, buildings, and equipment
    2. Often terms are 3 years and longer
    3. Amortizations up to 20 years with floating interest rates


Leasing costs can frequently be deducted as a business expense as opposed to depreciation if you were the owner. There are three basic types of leasing:

  • Direct - For computers, cars, trucks, business equipment, and so on. The leasing company looks after the entire transaction
  • Indirect - A three-way transaction. The supplier obtains the customer’s signature on the lease and hands it to the leasing company that bills the user
  • Leveraged - This is a partial equity investment situation on the part of the user, say 20% to 40%, with the remainder being financed through leasing

Tip: Sometimes capital can be freed up for operating purposes by selling real estate to a development company, then leasing it back with a right to purchase at the end of a five or 10 year term.


Major suppliers are an often-overlooked source of capital, provided you can negotiate special terms with them. For instance, you may be able to develop a new market for a supplier’s materials or semi-finished goods and save the supplier money.

Possible Advantages:

  • Special terms during seasonal peaks and valleys could be 120 days or longer with or without an interest charge
  • Consignment deals, where you pay only for goods sold
  • Right to return unsold goods for full credit
  • A supplier who provides you with financing wants you to succeed and may lend technical, marketing and other assistance
  • Potential Disadvantages:

  • Over- dependence on one supplier
  • Less room to negotiate on price/discounts


Customers may be able to help finance your business, particularly if you can offer on- the spot, reliable follow- up and service, including a supply of components or parts.

Consider the following:

  • Cash payment instead of credit terms (your customer may want a discount, but not necessarily)
  • Deposits on orders and progress payments against work completed
  • Equalized billings, especially for service businesses with long- term customers who use services occasionally or at cyclical peaks


Some of the government’s agencies have loan, guarantee or grant programs for any or all of the following:

  • Creating jobs
  • Increasing capacity
  • Training
  • Replacing imports
  • Exporting
  • Creating or upgrading technology

Tip: Check with government’s agencies to see what’s available for you. Most government’s agencies have some form of venture capital program providing relatively small amounts of money to start- ups.

For government assistance, check:

  • Ministry of Commerce
  • Chamber of Commerce and Small and Medium Enterprise (SME) Centers
  • Guarantee Fund for SME Business Financing (Kafala) Program:
    1. Saudi Industrial Development Fund is a partially guaranteed loan of up to SAR 2 Million to finance the purchase or improvement of equipment and real property, leasehold improvements, and working capital needs
    2. Check the enclosed Kafala brochure and speak with your BBO for further details
  • Saudi Export Program (SEP) provides:
    1. Trade financing services to support Saudi exporters
    2. Credit insurance bonding and guarantees
    3. Limited recourse financing

For further information contact your local Riyad Bank Business Banking Officer, or: