Many entrepreneurs in the UAE opt for a business loan to support, expand or refinance their business. Banks and other financial institutions in the UAE offer business loans at reasonable interest rates with or without security, depending upon the possible risk amount.
Whether you are applying for a business loan to start a brand new or an up and running business, there are specific eligibility criteria that you need to meet. In this post, we will take you through the features, eligibility criteria and documents required when applying for a business loan.
Features of a Business Loan in the UAE
Here are the major features of a business loan in the UAE.
- Loan Amount: The business loan amount in the UAE primarily ranges from AED 50,000 to AED 5 Million. The banks go through the applicant’s finances and provide them with the loan amount based on the same.
- Repayment Tenure: The repayment tenure for a business loan ranges between 2 to 5 years. The repayment term also depends upon the loan amount taken.
- Interest Rates: The interest rates on business loans may vary from bank to bank. However, there are a few factors such as credit history, monthly income, number of active loans, loan amount, etc. that affect the interest rates for the applicants. The average interest rates for a business loan range from 15 per cent to 24 per cent, reducing per annum.
- Relationship Manager: Most banks in the UAE assign a relationship manager to the loan borrowers so that they can contact the person in case they have any queries.
- Business Account: The applicants must have an active business account in one of the banks in the UAE the day they apply for a business loan. This helps the lender get a reference from the bank about their relationship with the applicant.
Eligibility Criteria to Apply for a Business Loan in the UAE
You must contact your bank and ask for the eligibility criteria you need to meet when applying for a business loan in the UAE. The criteria may vary from bank to bank.
Here are some common basic requirements that all the banks in the UAE consider.
- Income: Your business must be functional for at least a year.
- Bank Account: You must own a business account in one of the banks in the UAE.
- Operation: You can easily obtain a business loan if your business is a subsidiary or branch of an offshore operational organisation.
- Turnover: Your annual turnover must be at least AED 1 million when applying for a business loan.
- Age Limit: Your age must not be less than 21 years old.
The banks and other financial institutions offer different categories of business loans for different types of businesses. The term of a business loan ranges between one to four years.
Required Documents to Apply for a Business Loan in the UAE
Whether you run a small or a large-scale business, applying and getting your business loan approved is as easy as pie if you have all the valid documents. Here is the list of documents you need to provide when applying for a business loan in the UAE.
- Bank statements of last 12 months
- Memorandum of Association/Board of Resolution/Share Certificate (whichever is applicable) - Original and a copy
- Passport and visa of all the partners - Original and a copy
- Emirates ID - Original and a copy
- Audit Report - Original and a copy
- Office contract of tenancy (if applicable) - Original and a copy
- Owners sharing accommodation letter - Original and a copy
- List of employees obtained from Ministry of Labour
- High volume transaction invoices - Original and a copy
- VAT Certificate - Original and a copy
- Trade License
Note: If you do not have a valid trade license, you will not stand eligible to apply for a business loan in the UAE. A trade license is permission provided by the government to operate the business in the country. The type of license you need to get depends upon the type of business you run.
How to Enhance Business Loan Eligibility in the UAE?
Here are a few simple steps that you can follow to improve your business loan eligibility.
- Credit Score: Make sure you maintain your credit score above 750. It helps in getting a business loan approved without any hassle.
- Settle Your Past Debts: Try to settle down your existing debts such as loans, credit card bills and other liabilities. And make sure you pay all your instalments on time. This way, you can build a spotless repayment history that helps you in improving your business loan eligibility.
- Avoid Taking Multiple Loans at a Time: Analyse your financial requirements before you apply for a business loan. Also, try not to file multiple loan applications that can affect your creditworthiness.
- Choose Longer Repayment Tenure: Try to opt for a longer repayment term for the loan. It will help you repay your business loan with ease over an extended period. Another good thing about choosing higher repayment tenure is that it reduces the instalment amount.
We hope this article helps you understand almost everything you need when applying for a business loan. You can now go ahead and explore various loan options to choose the one that caters to your financial requirements.
If you need help finding the same, you can visit our website and go to the business loan section or contact our financial experts to know more about the available business loan options.