Business

Applying For a Business Loan in Dubai

Often, there are instances where you need a financial lift to kick-start your newly registered business or open up another branch and generate more revenue. In situations like these, a business loan can prove useful. However, raising funds and gaining investment can be a daunting task at times. Hence, to empower your start-up financially, it is vital to equip yourself with the right knowledge and learn how to get business loan in Dubai.

Types of Business Loans in Dubai

A business loan refers to borrowed capital that is granted to business owners specifically for entrepreneurial purposes. The UAE has its own regulatory environment and conditions that every Emirates bank has to conform to while carrying out transactions. Before we delve into the specifics, let’s quickly go through the types of notable business loans available for entrepreneurs to secure funds for their business setup in Dubai

  • Standard loans – Banks in Dubai offer a range of loans for business purposes, such as term loans, working capital loans, equipment financing, etc. These loans have competitive interest rates which makes them a popular choice for enterprises with a strong credit history.
  • Islamic finance – Dubai is the center of Islamic banking and therefore, businesses can easily avail financing solutions that adhere to Islamic finance principles, which is a possible option for companies that want to avoid interest-based loans.
  • Government-backed loans – There are various SME loan programs and initiatives provided by the UAE government in order to support small and medium-sized enterprises (SMEs). These loans have favorable terms, low interest rates, and longer repayment duration.
  • Private financing – Dubai’s business financing landscape is also supported by private lenders, venture capitalists, and angel investors. They lend money to businesses for equity or a share of future returns.

Features of business loan in Dubai

The significant characteristics of a business loan include comprises the following:-

  • Loan amount – Business loans in Dubai can vary in amount, which is contingent on factors like the type of loan and the financial standing of the company, including cash flow history and assets.
  • Interest rates – The general interest rates for business loans in Dubai range from 15% to 26%. However, the exact interest rate will rely on multiple factors, such as credit history, income, existing loan obligations, and other financial assets of the company.
  • Bank account – The company must have an operational corporate bank account within the UAE to apply for a business loan in Dubai. Hence, in order to approve the loan application, the bank will closely assess the transaction history and relationship of the company with the bank.
  • Payment period – The loan repayment duration for businesses in Dubai is 2 to 5 years. Nevertheless, the precise period shall be determined on the basis of the available funds and the loan amount requested.

Eligibility criteria to apply for a business loan in Dubai

It can be a challenge to get instant approval for a loan from the lending institution unless you meet the specified eligibility criteria. Banks in Dubai focus majorly on previous financial history and availability of funds while accepting a loan application. Here are some basic criteria for applicants to meet while applying for a business loan:-

  • The minimum age requirement of 21 years.
  • An operational business for at least a year to get substantial proof of profit and loss statements to ensure that the business has enough cash flow to pay upcoming installments.
  • Maintenance of a proper corporate bank account.
  • A bank account statement for the past 6 to 12 months.
  • At least AED 1 million of annual sales revenue (it may vary from bank to bank)

An important point to note is that if the applying entity is a subsidiary or an offshore branch company, then obtaining a business loan might be easier considering the diversity of operations and the need for more funds.

How to get business loan in Dubai: Important tips

There are certain things businesses must know before applying for a loan in Dubai –

Understand Islamic finance

There is a significant difference between traditional finance and Islamic finance which the business owners need to understand. Islamic finance aligns with the regulatory environment of the UAE, and it prohibits the payment of interest. Besides, it focuses more on profit and loss sharing, where both parties in a contract can equally share the outcome rather than engaging in an interest-based financial arrangement.

Read also: Streamline The Operations Of Financial Institutions With Customer Due Diligence

Credit Score and Debt Management

Before granting credit, banks meticulously assess the company’s ability to meet loan repayments. Therefore, business owners must ensure to maintain a moderate credit score to enhance their chances of loan approval. Moreover, they must focus on addressing any outstanding debts, credit card bills, and overdrafts, to strengthen their creditworthiness.

Repayment Period Selection

Opting for loans with longer repayment periods can be beneficial for businesses. This will enable easy management of the business, thereby extending the repayment installments over a prolonged timeframe. This, in turn, will help in reducing immediate business payments and further contribute to long-term growth.

How to get business loan in Dubai: Steps

Applying for a business loan in Dubai can be tricky unless you are armed with the right expertise and information. The business finance experts at Shuraa Business Setup can help you navigate the procedure effortlessly so that you can make your entrepreneurial aspirations a reality.

Here’s how the process goes: –

  • Create a business plan – Start by crafting a comprehensive business plan that outlines the business concept, financial projections, and the reason for applying for the business loan. The plan will be further scrutinized by the lenders to assess the feasibility of the company.
  • Determine the type of loan – Depending on your business needs and preferences, select a suitable type of loan. Consider factors like interest rates, repayment terms, or any specific industry-related loans that cater to your business requirements.
  • Confirm your credit score – Your personal and business credit scores should be in adequate class in order to increase your eligibility and improve your chances of securing a loan at favorable terms.
  • Choose a lender – Research potential options for lenders such as traditional banks, Islamic banks, government agencies, or private investors. It is recommended to compare offers from multiple sources to see which is the optimum fit for your business.
  • Prepare the documents – Arrange all the necessary documents including business plans, financial statements, bank statements, tax returns, and other legal documents as requested by the lender.
  • Submit the application – Finally, submit your application and be prepared for the evaluation process. The lender will review your financial history and business performance.
  • Understand the terms – Once the loan application is approved, carefully review the loan terms, which may include the interest rate, the repayment period, and other collateral requirements. It is always better to seek legal or financial advice to avoid any confusion with the terms.
  • Get the loan – Once you agree to the terms and conditions, the lender will pay out the amount of the loan to the company. Nonetheless, the business owner must make sure to utilize the funds exclusively for the objectives stated in the business plan.
  • Repay the loan – Make sure to maintain a constant repayment schedule. This will not only build a positive credit history but also help in sustaining a healthy financial relationship with the lender.
  • Monitor your business – Track the performance and financial health of your business continuously to ensure that the goals outlined in the business plan are properly met.

Conclusion

With the attentive assistance of Shuraa Business Setup, you can easily obtain the desired loan amount to accomplish your entrepreneurial goals and achieve financial success. Contact Shuraa for further inquiries at www.shuraa.com

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