In today’s times, businesses have the constant need to be at the top of their game. Whether it is adopting a new technology, mergers, acquisitions or opening the gates for imports and exports, they need to have it all. This has led to a regular need of funds at the disposal of the business owners
UAE, which ranks among the top 30 countries in the World Bank’s Report on the ease of doing business, recognized this need and offers business loans to customers to help them meet their business requirements. There are many banks and financial institutions offering business finance today.
A business loan is usually an unsecured loan provided to businesses to meet their small financial needs. The loan must be paid back in instalments with interest over the agreed tenure.
As a business owner, you must be careful in choosing a business finance provider. Here is a look at some salient features of business loans in UAE:
- Most banks do not require a security against the loan. However, you must check with the bank before applying.
- Customers having a current account are usually offered preferential rates and other benefits when they apply for home loans.
- Some banks offer top-up or loan extension facility if you meet their requirements.
- Business loans under the Shariah laws of Islamic Banking are also available in UAE.
- Some banks offer free credit cards and insurance cover along with the business loan.
- The loan amount usually varies from AED 100,000 to AED 2 million.
- Many banks put in a lot of effort to ensure that you have seamless experience. Relationship Managers are assigned to majority business loan customers for query handling.
- Some banks may set a minimum balance requirement to offer business loans.
- You have an option to choose between flat and reducing interest rates.
Business owners have a constant requirement of finance for some or most of these reasons:
- Working capital
- Expansion of operations
- Inventory purchase
- Launching a sister/support company
Regardless of the reason behind applying for a business loan, most banks in UAE are welcoming the possibility of a mutually beneficial borrower-lender partnership with business owners.
Every bank has its own eligibility criteria which needs to be checked individually. However, some basic requirements are as follows:
- The business should be at least 1 year in operation.
- Minimum annual turnover upwards of AED 1 million
- Entities eligible to apply for a business loan usually are:
- Limited Liability Company (LLC)
- Sole Proprietorship
- Free Zone companies
- Branches/Subsidiaries of offshore organizations
As is the case with eligibility, every bank can have its own requirement of documents to process your loan application. Apart from the application form, some basic documents needed are:
- Memorandum and articles of association / Partnership agreement / Power of Attorney (POA)
- Passport copy
- Copy of the trade license
- Bank statements
If you already have an account with the bank, then the number of documents needed might reduce. Please ensure that you arrange all the documents before submitting your application.
There are different kinds of fees and charges associated with business loans and they can vary with each bank. These may include an arrangement fee which usually is a small percentage of the loan amount, processing fees of around 1.2-2% and early settlement fee of around 1% of the outstanding amount. While most of these charges would be standard across banks, it would be in your best interest to go through the detailed schedule of charges thoroughly before applying.
Banks are slowly recognizing the need for business loans in the market and are continuously improving their products. Some leading banks offering business loans are:
- Mashreq Bank – Small business loan
- Abu Dhabi Islamic Bank – business finance
- RAKBANK - finance
- Dubai Islamic Bank – business finance
Remember, a business loan can go a long way in expanding and improving your current business. However, ensure that you research well as this will be a long-term financial association and you wouldn’t want to find yourself at the shorter end of the stick. Consult a business/financial advisor, if need be.