Experts said that cutting interest rates is an opportunity for companies to get financing at lower prices, which enables them to expand their business, restructure debt obtained at high interest, and can use that liquidity to seize opportunities to make acquisitions in the market.

The central bank cut interest rates by 25 basis points on August 1, after which it cut further on September 19 by 25 basis points.

Motivating companies

Wadah al-Taha, a member of the National Advisory Council of the UK's Institute of Investments and Securities in the UAE, said that lower interest rates are a catalyst for companies to borrow, so they can seize opportunities to expand their business, or increase their stake in their companies, and acquire companies. Other.

He added that lower interest rates awaken new customers and encourage them to borrow, pointing to the presence of investors in the markets exploiting the periods of calm economic conditions, and looking for new investment opportunities, and therefore they can exploit the low cost of financing in the process of buying assets, and acquire other companies.

Taha pointed out that the acquisitions add additional costs to the acquired company, and therefore the company must take into account that the acquisitions to be of value added, and does not put pressure on the company to pay its obligations.

Taha pointed out that the most important issue for banks, is that their interest rates reflect the cuts made by the Central Bank of interest rates, pointing out that there is a reservation and hedge with some banks to prevent some of cutting interest rates when lending companies, for fear that this will affect the interest margin .

He pointed out that banks can compensate for the decline in interest margin by stimulating the loan turnover.

Financing at low prices

Mohammed Ali Yassin, Chief Strategist and Client at Al Dhabi Capital, said that the decline in interest rates gives companies a real opportunity to obtain financing at low prices, and its exploitation is based on the company's outlook.

"With interest rates falling, companies can issue bonds and sukuk instead of borrowing from banks," he said, noting that the cost of issuing debt instruments would be lower than getting loans from banks. Yassin explained that the cost of issuing debt instruments benefits companies, as their interest is fixed in the long term, unlike the interest of bank loans to companies that change every period from six months to a year.

He said companies could also get financing to repay or restructure loans they received at high interest rates, easing pressure on their cash flows.

He stressed that access to finance during the current time, should be aimed at either reducing the cost of debt, or financing strategic expansions of the company.

Restructuring

Iyad Al Bariqi, general manager of Al Ansari Financial Services, said that companies are always using lower interest rates to restructure their loans or develop their projects to reduce interest on loans and thus increase their cash flow and profitability.

He said that companies usually use the low cost of financing to develop and accelerate their existing projects, and to enter into new projects, thus contributing to the increase in profits in the short and long term.

- On companies

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Acquisitions

Of added value.