How to Obtain a Business Loan in the UAE?

It is quite common for business owners to find themselves in need of a business loan in the UAE. As running a business requires strong financing upfront, it becomes necessary to secure a constant flow of funds, and a loan gives you just that. Whether you are looking to expand your business, launch a new product/service, or purchase equipment, a business loan can provide the vital financial assistance that you are looking for.

Types of Business Loans in the UAE

Before you approach a bank to secure a loan, it is necessary to have a basic idea about the types of loans that you can obtain.

Conventional loans

These are the most common forms of loans that you can avail of. You can repay these loans through installments over a fixed period of time, and you will be charged an interest rate for the repayment.

Islamic Finance

Islamic loans are interest-free and this is what differentiates them from the standard loans. These loans are based on the Shariah framework, and usually cannot be availed for businesses that involve trade/sale of alcohol and tobacco. It is crucial to note that though Islamic finance will not charge you interest, it entails a share of your earned profits.

SBA-backed Loan

For those struggling to avail of loans through the aforementioned options, it is advisable to try loans backed by the Small Business Association (SBA). These loans are given by private lenders and are supported by the UAE government. Usually, these loans necessitate the provision of collateral.

Who is Eligible to Apply for a Business Loan in the UAE?

It is important to know that the eligibility criteria for loans vary across banks and financial institutions. However, we’ve detailed the requirements that are typically needed:

• The applicant should be at least 21 years of age.
• The business must at least complete a year in operation (though some banks may mandate this period to be two years)
• Have an existing corporate bank account
• Generate an annual turnover specified by the bank (Usually at least AED 1 million)

Documents Required

Below we have listed the documents that you are usually required to present while applying for a business loan:

• Business license
• Memorandum of Association, Articles of Association, Board Resolution, and other company documents
• Identification documents such as passport, Emirates ID
• Bank statements
• Profit and Loss statements
• Lease agreement (if required)
• VAT certificate
• Employee list

What to Consider When Applying for a UAE Business Loan?

Before you apply for financing, it is necessary to evaluate the eligibility requirements that are usually set forth by banks. Besides the criteria listed earlier, your credit score also matters to be deemed as eligible for a bank loan. Your bank may require you to ensure a specific score before granting you the loan. Moreover, it is imperative for you to pay off past debts and liabilities besides maintaining a healthy credit score.

The next thing on your checklist to be considered is the loan amount that you can avail of. This usually ranges from AED 50,000 to AED 7 million. However this varies from one bank to another, and more importantly, it is up to the bank to grant the amount based on your business size, assets, repayment capacity, and other relevant factors.

The interest rate is something that you inquire about. Again, the applicable rate depends on several factors such as the loan amount, repayment tenure, etc. Also, factors like your income, existing credit score, and collateral largely influence the interest rates as well.

Finally, contemplate the repayment tenure. This is the timeframe over which you will repay the loan amount along with the charged interest.

If you are in need of a professional business setup service, you can reach out to InZone. We are the UAE’s leading company formation experts assisting entrepreneurs with our comprehensive suite of services for banking and other requirements affiliated with business setup.