How to Apply for Business Loan in Dubai, UAE?

Can someone make more than AED 5000 per day just by renting out their car to individuals and businesses for photoshoot purposes or simply to put it on display as part of their promotional strategy? Seems elusive! But that’s as true as steel! There are car enthusiasts in Dubai and other parts of the world who first spend an arm and a leg on their car’s head-turning customisation and then start making a fortune from their quirky idea. All we are trying to reiterate is – “Money begets money“! which clearly means it takes money to make money.” And the best part is, it can be loaned if you have got a superb money-making idea at any point in your life, whether you are on the verge of starting a business or already running one (or two).

Starting a business in Dubai is increasingly becoming more attainable in the wake of a 30% reduction in government procedures as an initiative to make the city a world-class startup ecosystem which is already sugared heavily with an entrepreneur-friendly business environment, favourable regulations, and tax benefits worldwide. But no matter, how lucrative your business location is, you can’t move a single step ahead until you have sufficient balance in your bank account. But don’t worry if you don’t. When savings can’t finance your dreams, loans can! And there is nothing wrong with taking a business loan from UAE banks when you’re running short of capital at the beginning of the business formation in Dubai or later stage of your existing business for survival or growth. Ahead, we will talk about the process of taking a business loan in Dubai, in addition to some pieces of advice from our qualified Dubai business advisors.

Things to know before applying for a business loan in Dubai

Business loans are easily disbursed by the UAE banks and financial institutions to eligible budding entrepreneurs and established business owners at reasonable interest rates with or without security, depending upon the possible risk amount, so they can support, expand or refinance their business. Whether the motive behind applying for a business loan is to start a brand-new business or uplift your existing business or keep it in a good shape, knowing the following feature is always helpful. eligibility criteria and documents required when applying for a business loan.

Loan AmountAED 50,000 to AED 5 million (depends upon the applicant’s financial profile)
Repayment Term2 – 5 years (depends upon the loan amount taken)
Interest RatesRanges between 15% – 24%, reducing per annum (depends on certain factors including credit history, monthly income, number of active loans, loan amount, etc.)
Point of ContactUsually in the UAE, banks assign a relationship manager to the loan applicants
Corporate AccountThe lender must have an active current account in one of the banks in the UAE for reference

Check your eligibility for the type of loan you want

First and foremost, to apply for a business loan with any bank in the UAE, you must determine whether you meet the bank’s eligibility criteria for the same and if you do, then how much amount you can borrow for your cause. The banks review the applicant’s financial history and offer them the loan amount based on their conclusions. This can be checked from the bank only, as different banks have different requirements for different clients. Nonetheless, all banks have at least these prerequisites for loan applicants:

  • They must be at least 21 years old
  • They have to present current (or savings) bank account statements for the last 6 (or 12) months
  • Their firm must be operational for no less than 2 years (in some banks such as RAK Bank it is 1 year and even 6 months)
  • The lender must have a corporate account in any of the UAE banks from the bank about their relationship with the applicant. This helps them get a reference from the bank about their relationship with the applicant
  • They can easily obtain a business loan if their business is a subsidiary or branch of an offshore operational organisation
  • Their annual turnover must be at least AED 1 million when applying for a business loan (amount varies from bank to bank)

Ways to enhance business loan eligibility in the UAE

You may increase the chances of your business loan getting approved by making sure that:

  • Your Credit Score is maintained above 750
  • Your previous debts such as loans, credit card bills and other liabilities are already settled, and you don’t miss the due dates of your instalments or EMIs (if any). Your spotless repayment history can work like a charm in convincing the bank to loan you.
  • You are not applying for more than one loan at a time, as multiple loan applications can sure impact your creditworthiness
  • The repayment tenure is as long as it can get, so you have plenty of time to repay the big amount with little effort over an extended period. The trick is – the higher the repayment tenure, the lower the EMI (or monthly burden)

Opt for the business loan type that’s right

You must know what type of loan is reasonably suitable for you. Before considering one, you might want to know the most common types of business loans available in the UAE with benefits:

Business Loan TypePros/Cons
Standard Business Loan1. Fixed monthly instalments over an extended period of time
2. Payment terms are typically fixed unless the loan is under a variable rate
Friends & Family Loan1. Directly approaching friends and family for a loan
2. Payment terms are more flexible and can be amended easily
3. The risk of losing relationships over repayment
Credit Card Loan1. In the form of advance funds through a credit card
2. Extremely high interest rates
Small Business Association (SBA) Backed Loan1. Supported by the government
2. This is a good option when your bank loan applications have been unsuccessful
3. If payment terms are not met, the government may impose harsh penalties
Islamic FinanceAll the financial activities and investments that are compliant with Sharia (Islamic Law) come under Islamic Finance. Some of the core principles under Islamic Finance include:
1. It is forbidden to earn interest through the lending or borrowing of money
2. Money must be earned through legitimate trade and investment of assets
3. Money must be spent in productive ways

Paperwork for a business loan in the UAE

The bank loan paperwork is almost the same for small and large-scale businesses and if you have all the documents required by the bank to sanction a loan for your business, the process becomes as easy as falling off a log. You should keep your folder ready with the below-mentioned documents when approaching a bank for a business loan in Dubai or any emirate of the UAE:

  • Current bank statements, featuring transactions done in the past 12 months
  • Memorandum of Association/Board of Resolution/Share Certificate (whichever is applicable) – Original and a copy
  • Original and xerox copies of your partners’ passport and visa
  • Original and a copy of Emirates ID
  • Original and a copy of Audit Report
  • Original and a copy of commercial lease papers (if applicable)
  • Original and a copy of owner’s sharing accommodation letter
  • Original and a copy of hefty transaction invoices
  • Original and a copy of VAT Certificate
  • List of employees obtained from Ministry of Labour
  • Trade Licence
  • Lading Bill (if applicable)

Financial advice from money experts in Dubai

Check out below what loan experts say to make your life easier:

  • Do not skimp on consulting with an experienced financial advisor or loan brokers in Dubai such as Adam Global to avail better deals on business loans or visit private SME lending companies
  • Take a loan when you have confirmed and secure business in hand, as in for trading businesses
  • Take a loan with proper scenario planning and analysis
  • Have a proven record that business is viable
  • Assess the pros and cons of a loan versus obtaining an equity investment
  • Figure out how rapidly your business can generate cash to repay the loan
  • Use loan options with business growth in mind and never as a tool for survival
  • When you are confident about taking a loan in Dubai, be prepared with all lender’s requirements

Meet the best financial advisor at Adam Global

Your business needs booster shots of money time to time, and that’s what banks and financial institutions are here for. But it’s not necessary that they will approve your loan application just like that. Finding funding is difficult to secure in Dubai, UAE, particularly for newbie start-up owners. The moneylenders, whether they are private small and medium-sized lending companies or banks, need solid and reliable documents supporting your business loan application. Plus, determining which source of financing is the most viable option can get a little tricky, if you are not a finance expert. Therefore, before you proceed with your loan application, it absolutely makes sense to get in touch with an Adam Global business advisor not just to gain expert guidance but also to get the documentation done in the correct way. Our business setup specialists can also help you explore various loan options and pick one that squarely fits into your interim financial requirements. Contact us today to get a free consultancy from our corporate banking experts. We are more than happy to help you in your turbulent times!

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