If you are looking to finance your business and wondering how to get business loan Dubai, you are in the right place. In this blog we will show you various types of loans, their eligibility criteria and how to apply. Dubai is an ideal location for doing business due to its tax policies and location. Another benefit that makes it an attractive option for setting up business is the facility of business loans that can be helpful for your new business setup or upgrading an existing one.
There are different types of business loans available in the UAE according to the requirements of your business. Many banks offer interest free or competitive interest rates for new business loan Dubai on flexible terms. You can get the capital you need and pay it off with regular payments on easy terms. Let us look at the tips on how you can apply for a business loan in Dubai.
How to Get Business Loan Dubai? – Complete Guide
Before applying for commercial loan Dubai, it is necessary to meet the following requirements and eligibility criteria.
Eligibility Criteria for Company Loan Dubai
If you want to apply for a small business loan Dubai, you need to meet certain criteria. The criteria can different according to the type of bank you are applying for. However, basic requirements are as follows,
- The company must be operating for at least 2 years.
- Minimum annual income (different for each bank)
- Business/personal bank statements for the last 6-12 months
Select the Type of Business Loan
There are different types of business loans that you can choose from, such as,
Business Loan
This is a standard business loan which includes,
- Fixed amount of repayments for a long period of time
- Fixed payments terms unless there is a variable rate on it
Long-Term Loans
Long-term loans are provided to the businesses for longer periods of time i,e. 1-25 years. However in order to get a long term loan you need to provide your property as a collateral. It can be risky for you, as if you do not pay on time they can sell you property to get their money back. In addition, the interest rates for long-term business loans are very high which can be challenging for you.
Short-term Loans
Short-term loans are useful for making sure the stability of your existing business and you can pay them back within one year. The criteria for this kind of business finance Dubai are easier to meet and the interest rates are also low. The only disadvantage is that they are small in amount and you have to pay the loan in a short period of time.
Credit Card Loan
You can get a loan on credit card,
- In the form of advanced funds
- Mostly the interest rates are very high on this type of loan
Friends and Family Loans
Asking friends and family for business loans comes with various conditions,
- Payment terms for your loan can be flexible and changed easily
- There is a risk of losing your relationship if you fail to make payments on time
Small Business Association Backed Loan
This loan is supported by the government and it is very useful if your loan application has been declined in the past. The only disadvantage is that you will face heavy penalties by the government for not paying the loan on time.
Islamic Business Finance Dubai
Islamic finance means all financial investments and financial activities are according to the Sharia Law. Some of fundamental beliefs of Sharia Law are,
- The borrowing or lending of money through interest is forbidden
- One should earn money through legitimate trade and investment
- One should spend their money in productive ways
Difference Between Islamic Finance & Traditional Finance
Under Sharia Law, interest is forbidden therefore Islamic finance follows the concept of profit and loss. There are many profit and loss contracts, but the most common is mudarabah. Under this contract, the profit and loss is divided among the investor and entrepreneur. Additionally, the investor will bear all the loss. On the contrary, in traditional finance, the entrepreneur has to pay interest despite the financial position of the company. The Islamic Finance Banks are given below,
- Dubai Islamic Bank
- Emirates Islamic Bank
- Abu Dhabi Islamic Bank
Preparing Documents
Preparing the right documents beforehand can make the application process efficient.
Below are the documents required by the bank for company loan Dubai.
- Bank application form
- Bank statements from last 6-12 months
- Photocopy of business trade license
- Photocopy of your passport
- Memorandum of association / Articles of association / partnership agreement
Aside from the necessary documents mentioned above, the bank may ask additional documents,
- Owner’s home residency lease contract
- VAT certificate
- Large volume of transaction bills
- Audit report
- List of employees
- Bill of lading
Attributes of Business Loan Dubai
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- Whether you apply for a small business loan or islamic loan, the amount you get will be between AED 50,000 to AED 7 million. The loan applicant’s liquidity history and assets will be considered when coming to a decision.
- The average interest rate in Dubai is about 15-26% on certain conditions. The fluctuation on interest rate depends on the lender’s income, credit history, and other financial collateral.
- The business must have a functioning bank account in the UAE in order to apply for a commercial loan. The bank will analyze all financial transactions before granting a loan.
- The repayment period for a new business loan Dubai can vary from 2 to 5 years according to the amount of loan and funds.
Eligibility Criteria for Company Loan Dubai
Getting approval for your loan application can be difficult if you do not meet certain criteria of the banks. Here are some of the criteria for loan applicants,
- The applicant must be at least the age of 21 or above.
- Your business must be running for at least one year.
- Having a corporate bank account in the country.
- Bank statement of past 6-12 months
- Having yearly income of at least AED 1 million
- It is easy to get a loan for offshore branch companies due to the need for larger funds.
Benefits of Applying for Business Startup Loan Dubai
There are several benefits of getting business loan in Dubai, such as,
- Low interest rates on corporate loan
- Flexible repayment options according to the cash flow of your business.
- The process of getting a loan is swift which gives you access to funds on time.
- Some banks may not even require collateral for granting loans which is a huge benefit.
Factors to Consider before Applying for Business Loan Dubai
There are certain things that you should be aware of before applying for a new business loan Dubai.
- There are two types of finances in the UAE, i.e, Islamic finance and traditional finance. Traditional loans involve interest rates charged by the bank whereas in islamic finance there are no interest rates and loans are designed as asset-based financing or partnerships.
- Your credit score is checked by the bank when you apply for a business startup loan Dubai. Having a good credit score will help your application to be approved swiftly.
- It is important to select the repayment method that fits your budget. If you select a longer repayment method, you may have to pay less every month but that will ultimately lead to higher interest payments.
- Before applying for company loan Dubai, it is best to carefully consider your monthly profits, expenses and debts. Use a loan calculator to estimate your monthly repayments that fit your budget.
- Be aware of any kind of hidden costs like service charges, late payment fees, and other costs.
Final Words
In the end, we hope you have fully understood how to get business loan Dubai? Each type of business loan has its own risks, therefore it is important to understand your business needs, get the required documents and do your research to find the best bank for getting a loan. Having clear understanding and preparation can make the application process faster and easier.
Consult our expert team at Al-Riyady, if you are struggling to find the right lender for your company loan. Our team of business consultants can handle everything from the application process, getting the right documents and approvals. We also provide Corporate Tax, PRO Services, Bookkeeping and more.