Are you facing trouble in trying to get hold of funding for your Dubai business? It is important to know that the vibrant city offers numerous types of business loans that are designed to aid entrepreneurs. 

This blog will shed light on the process of how to get a business loan in Dubai, right from the eligibility criteria down the application process, and cover numerous related aspects. Let us get started:

How to Get a Business Loan in Dubai: Exploring the Different Types of Business Loans in Dubai, UAE | Business Finance in Dubai 

Conventional Business Loan

There are various loan types or loan options when it comes to business loans in the UAE. One of the most popular ones is a conventional business loans. Conventional big or small business loans in Dubai feature a fixed repayment period along with interest rates ranging between 15% and 26%.

These kinds of loans are highly ideal for old or new businesses who are seeking loans in the UAE ranging between AED 50,000 and AED 7 million. For instance, Emirates NBD provides loans of up to $82,000 with variable tenures that can go up to 3 years or 36 months. 

This variant of loan requires in-depth documentation, including the Memorandum of Association, Articles of Association, etc. Financial institutions and companies in Dubai might also take a glance at individuals’ credit score as well as their financial history before providing approval for the loan.

Commercial vehicle loans generally cover almost 90% of the total costs, thereby making it much more convenient for businesses requiring transport solutions. Getting this form of business loan might aid businesses in achieving success. 

Options in Islamic Finance 

Options in Islamic finance in Dubai provide numerous interest-free models of lending, abiding strictly by the Shariah law. One very common model is the Ijarah, which is similar to lease agreements wherein the bank purchases an asset and leases it to an individual for a set time period. 

Another viable option is the Murabaha, wherein the bank buys an item and re-sells it at a margin of profit agreed upon by both the parties involved. 

Wakala includes the appointment of an agent (the bank) for undertaking transactions on the loan seeker’s behalf for a particular fee or commission. The famous Noor Bank offers such financing options with choices of tenure ranging between 6 to 36 months along with highly-competitive rates for new or pre-existing clients. 

SBA-Backed Business Loans

Another type of loan is an SBA-backed business business loan. SBA-backed business loan can help in providing a lifeline for businesses in Dubai that are struggling to get a loan from banks. Such loans, which receive support from the UAE government, generally need collateral in addition to carrying penalties or fines for default.

They are the perfect option for SMEs as well as startup businesses that are not getting approval from other lenders. Loan amounts can be very substantial, depending on the business needs as well as their financial history. Tons of small-sized or medium-sized SMEs leverage this kind of loan for fueling economic growth in addition to managing the working capital in an effective manner. 

Loans for Self-Employed Individuals 

Individuals who are self-employed usually face numerous unique obstacles when it comes to securing traditional business loans. Banks generally need proof of having a stable income source along with extensive documentation. If you are self-employed, you are required to give up to a year of bank statements along with audited financials for receiving loans which go beyond $272,300. Moreover, your minimum salary per month must be at least $8,170. 

Banks might inspect your official credit history very closely. A proper credit score enhances chances of receiving approval. Financial institutions must see that you are able to manage credit properly and that you have minimum depth. The eligibility criteria for business loans can change depending on the type of business loan that you are applying for in the Venice of the Gulf. 

Securing a Business Loan for Starting a Business or Company in Dubai: Eligibility Criteria for Business Loans

Basic Requirements for Business Loan Applicants

Starting a business in Dubai demands capital, which is where loans come in. One of the first steps in the process of getting your business a loan is applying for one. Applicants are mandated to meet specific criteria in order to qualify for a business loan in Dubai. They must be at least 21 years old and possess a pre-existing business bank account and corporate bank account in the United Arab Emirates. 

It is important for the business to be operational for a minimum time of 1 year, although certain banks might require 24 months. A minimum yearly turnover of AED 1 million is also essential. Having these fundamentals aids in showcasing creditworthiness and stability. Banks might also take a look at the individual’s credit history. 

Vitality of Credit Score & Financial History

A credit score ranging between the 700 and 750 mark is exceptional for obtaining seamless loan approval. A higher score usually leads to individuals securing lower business loan interest rates on bank loans, thereby helping them save money in the future. Applying for multiple loans can have a catastrophic effect on your credit score or credit history. 

It is very important to manage finances properly before seeking an official business loan. Longer repayment terms aid in managing cash flow in addition to boosting profitability, thereby making it more convenient for small as well as medium businesses in the UAE to thrive. 

Required Documentation for Loan Application

1. Bank Statements: Offer bank statements of the last 12 months in order to present financial stability and well-being. 
2. Trade License: Submitting the photocopy of your trade license or business license in addition to the original document for authentication. 
3. Company Agreements: Provide Articles of Association, Power of Attorney, or Memorandum of Association. Include any kind of partnership agreement if applicable. 
4. Residence Proof: Provide either the home residence tenancy contract to the business owner or a sharing letter of accommodation as proof of the residential address.
5. Transaction Invoices & VAT Certificates: GIve transactions featuring high-volume transactions and the official VAT certificate for demonstrating business operations. 

Steps to Apply for a Business Loan in Dubai, UAE

Detailed Business Loan Application Process

1. Prepare Legal Documents

• Gather the Articles of Association as well as the Memorandum of Association. 
• Make sure that they are up-to-date in addition to being signed or attested. 

2. Complete Filling the Application Form

• Fill up all the sections precisely.
• Double-check for mistakes or missing information. 

3. Give Identity Verification Documents

• Submit photocopies of your official passport as well as Emirates ID. 
• Ensure that they are legible and clear.

4. Include Important Financial Statements

• Offer recent financial statements. Make sure to include balance sheets as well.
• These documents aid in establishing creditworthiness.

5. Include Business Plan

• Outline your business model along with the set objectives. 
• Include revenue projections besides market analysis. 

6. Submit Bank Statements

• Present at least the bank statements of the last 6 months. 
• Doing so showcases your financial history as well as liquidity. 

7. Present Credit Score Report 

• Attach a recent copy of the credit score report.
• A nice score amplifies the chances of receiving approval.

8. Attach Income Proof

• Include pay or salary slips, or any other proof of income if applicable. 
• This offers extra assurance to lenders. 

9. Meet and Fulfill Lender-Specific Requirements

• Every lender might have unique requirements.
• Check the specifics with your chosen institution. 

10. Select the Appropriate Institution

• Research about different banks as well as private lenders operating in Dubai
• Take into consideration their interest rates as well as loan terms before making a decision. 

Choosing the Right Financial Institution for a Business Loan in Dubai | Interest Rate Evaluation

1. Evaluate Interest Rates along with Repayment Terms: Banks provide numerous interest rates as well as repayment tenures. Compare the said parameters to select the right financial institution that fits perfectly with your financial plan. 
2. Look for Additional Benefits: Certain banks offer dedicated relationship managers as well as insurance funding. These additional services can prove to be very useful in the long run. 
3. Consider the Business Structure: Ensure that the chosen financial institution, whether it is a bank or a third-party lender, aligns well with your UAE business type, such as LLC or sole proprietors. 
4. Current Account with the Same Bank: Maintaining a current bank account with the same banking entity can significantly smoothen transactions in addition to helping build a much better relationship with them. 
5. Consider Islamic Finance Options: If you are on the lookout for Shariah-compliant loans, make sure that the bank in the UAE or lending institution provides Islamic finance options. 

Final Thoughts

Business loans in Dubai provide ample opportunities for business-oriented individuals and entrepreneurs. Numerous options, such as conventional loans as well as Islamic loans, all cater to different requirements. Meeting the criteria for eligibility significantly boosts the chances of achieving success. 

Refer to our detailed guide at any time during the loan-seeking process for valuable insights or to know about business loan types and requirements. Moreover, if you have secured a business loan and are considering setting up a business, consider getting in touch with us at Xpert Advisory for receiving comprehensive business setup assistance from top-notch business setup experts. Doing so will guarantee a smooth and seamless business formation in the thriving business hub that Dubai is. Start the process of obtaining a business loan in UAE and take your business to the next level!

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