It’s common knowledge that starting a business in Dubai comes with many benefits, from favorable tax policies to strategic locations. The benefit that makes it more attractive for foreign entrepreneurs and locals is that it provides the facility of business loans that can be helpful in starting a business or upgrading your existing business.
Types of Loans
The UAE offers various loans, including small business loans, startup business loans, business loans in Dubai without collateral, and many others. This article will cover everything you need to know about business loans in Dubai.
Long Term Loans
Long-term loans are provided to businesses/ businessmen for longer durations, from 1 year to 25 years and more. They have many benefits and can be used to Start and Expand a Business. But as it is said, everything comes at a price, they also have some downsides.
They require you to provide your valuable property as collateral. It can be risky for you, as the loan provider can sell your property to get their money back if you do not repay on time.
Moreover, you also have to pay interest on long-term loans, which can be challenging to manage. Interest is an extra amount you must pay along with the money you borrowed from the bank.
In simple words, it is a fee for using the money. Another disadvantage of long-term loans is that the interest rate is higher than that of short-term loans.
Short Term Loans
Short-term loans are only useful for business purposes, and you have to pay them back within one year. You can use this loan to manage expenses and ensure the stability and continuity of the existing business.
Short-term loans are preferred as the requirements and eligibility criteria are easier to meet and solve the cash flow mismanagement. Also, the interest rate is lower than other types of loans due to shorter periods. The disadvantage is that the amount is small and you have to pay it sooner.
Startup Business Loans in Dubai
Starting a business is not an easy process and a huge amount is required to manage all the expenses. It is challenging to manage all the expenses with personal savings and investments.
That’s why startup business loans in Dubai were introduced to help entrepreneurs to manage marketing expenses, equipment purchases and operational costs.
In business, planning is everything and a detailed Business Plan is required that covers all the details of the project, goals and how the loan will be used.
Before getting started, it is important to do practical calculations regarding how much money is required, the monthly cost, and possible risks as it will give you the idea of the loan required from the bank.
Small Business Loans in Dubai
Every single business contributes in the economy of the UAE whether it is small or large enterprise. Especially small business holds great importance in UAE as they are source of jobs opportunities.
Small business loans in Dubai are designed for small businesses to overcome the challenges and obstacles that hinder business growth. If you are running a small business or planning to start it, you can also apply for one of the small business loans in Dubai.
Business Loans in Dubai Without Collateral
Collateral is something valuable like property and equipment that you promise to give to the lender in case you cannot return the loan. If you do not have any property or assets to offer as collateral, it is a bit difficult to get a loan, but don’t worry!
In Dubai, it is possible to get a business loan without collateral. However, the process and the requirements are different than other types of loans. Before applying for a loan without collateral, ensure that you are eligible and well aware of all the terms and conditions set by the lenders.
Eligibility and Requirements
The eligibility criteria vary with the type of loan, but you must meet the following criteria to get a business loan for new company in UAE.
Age Limit
Minimum Age: Applicant can get a loan only if he is 21 years old. This shows that the applicant is an adult and can start his own business.
Maximum Age: Depending on the selected bank, the maximum age can be 60 or 65. You can provide your passport or national ID card as proof of your age.
Business Duration
Your business must be active for more than 1 year. Moreover, it should have stable income to ensure reliability and good performance.
Business Plan
To clarify the purpose of loan, banks require a detailed business plan. It also important so that banks can assess the potential for growth and risks associated with it.
Annual Turnover
Your business’s turnover must be more than 1 million AED. It is to ensure that earnings are enough to repay the borrowed loan.
Bank Account
It is mandatory to have a bank account to apply for a business loan for new company in UAE.
Business Loan Interest Rate in Dubai
A complete understanding of the interest rate in Dubai is important before applying for a loan, as it significantly contributes to the total cost of a loan. Interest rates differ for each loan type and vary from bank to bank. It depends on various factors and mainly on
- Lender: Each bank has its own interest rate policy
- Loan Type: Long-term loans have a higher interest rate than short-term loans.
- Credit History: A good credit history can help you get a loan at a low interest rate
- Loan Duration: If the borrowed loan is for a shorter duration, you pay a lower interest rate. However, the interest rate increases with each passing year.
Conclusion
At the end of this article, we hope it has provided you with comprehensive information about business loans in Dubai, including the key requirements. By keeping the eligibility criteria and requirements in mind, you can also apply for a business loan.
Make sure you choose the right type of loan according to the needs of the business. Starting a business in the UAE is a challenging process.
For assistance, you can reach out to Al Riyady. We provide various services to help you set up your own business in both the Freezones and mainland Dubai. You can trust us with our services that include Business Licenses, Opening a Bank Account in Dubai, Bookkeeping, Corporate Tax and much more.
