How to Apply for a Business Loan in Dubai – A Step-by-Step Guide

Julian DRozario

Julian DRozario

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A business loan can prove useful in instances where you need a financial boost to jump-start your newly registered business, or require financial collateral to open up another branch and generate higher sales. Raising capital and gaining investment can be a daunting task for some newly established businesses—however, to have a smooth flow in the long-term, or your day-to-day operations, securing loan funding is a must.

With a tremendous figure of AED 93.4 billion being provided to enterprises by Emirate banks, as reported by WAM, Dubai is considered a particularly attractive location for SMEs to strategically plan for the long term and secure their cash flow. Dubai is widely known for its emphasis on creating flexible economic policies, a tax-exempt business environment, and magnificent infrastructure. With favourable interest rates and funding to ensure your business survival, UAE as a business location would be a great choice. To empower your start-up financially, it’s better to equip yourself with knowledge about this process.

Features of Business Loans in UAE

A business loan is borrowed capital granted specifically for entrepreneurial purposes. The UAE conforms to its own regulatory environment, and certain conditions apply to how Emirate banks carry out transactions. Before we delve into the specifics of eligibility and benefits, it’s important to be aware of the important characteristics of a business loan.

The new entry permits and tourist visa changes that will come into effect October 3 2022:

  • Loan Amount Provided
    Depending on the type of loan you decide to apply for, whether it be an Islamic loan or a small business loan, the amount you receive will vary from AED 50,000 to AED 7 million. The loan applicant’s liquidity history and assets will be taken into account when arriving at a consensus.
  • Interest Rates
    On average, Dubai’s interest rates range from approximately 15% to 26% with favourable conditions. The fluctuation of the interest rate will depend on the applicant’s credit history, income, number of loans and other financial collateral.
  • Bank Account
    The business must have a functioning bank account in the UAE assigned to them in order to apply. The bank will analyse all transactions and relationships with the lender to decide whether the loan should be granted or not.
  • Payment Period
    In Dubai, the repayment period for a business loan ranges from 2 to 5 years, depending on your funds and the amount taken.

Other than this, you will also encounter a minimal amount of documentation and paperwork to go through, whilst having a consultant to guide you through any doubts during the process. At Meydan Free Zone, the process of hefty documentation and applying for a business loan can be managed by our panel of talented consultants.

Types of Business Loans in the UAE

There’s a plethora of notable business loan types available that you should consider before deciding on one to quickly secure your funds

  • Standard Loan
    The standard business loan in Dubai loan is granted with certain conditions such as repayments having to be made in fixed monthly installments and having both fixed and variable rates. Loan amounts can be negotiated with interest rates cordially.
  • Islamic Loan
    Islamic finance is an important aspect that you must bear in mind. In simple terms, this type of financing is permitted under all conditions of Sharia law. A business loan is interest-free and instead, your business will give the bank a share of available profits. If you plan to operate in Dubai, this type of loan may be useful in reaching ethical and moral business dimensions
  • Small Business Association (SBA) Backed Loan
    If you find that most of your business loan applications are being rejected, it would be a good idea to opt for this option as it is solely supported by the UAE government.

Eligibility Criteria for Loan Application in UAE

Getting instant approval from the lending institution can be a bit of a challenge unless you meet most of the crucial eligibility criteria. Banks in Dubai are quite particular about accepting a loan application, with a major focus on previous financial history and availability of funds.

Here are some of the basic criteria for applicants;

  • Being at least 21 years of age.
  • The business should have been operating for at least a year — this is because a time period less than that would not provide substantial proof of profit and loss statements to make sure that the business has enough liquidity to pay upcoming instalments.
  • Have a proper corporate bank account.
  • Effective presentation of bank account statements for the past 6 to 12 months.
  • Although it varies from bank to bank, the yearly sales revenue should amount to at least AED 1 million to receive the loan.
  • If your company is set up as a subsidiary or an offshore branch company, obtaining a business loan may be easier due to the diversity of operations and the need for larger funds.

Having a corporate bank account is one of many eligible requirements you need to have, and with Meydan Pay, setting up your business bank account will be as convenient as it gets. You can choose from our banking partners who have a range of foreign and local currencies to aid payments and unparalleled banking services, all whilst accessing your accounts on an interactive, digital platform.

How To Apply For A 5-Year UAE Multi Entry Visa

Requirements for Business Loan Applications in UAE – Documents Required

There’s an extensive documentation process that you need to carefully follow to get approval from the bank you desire. You have to obtain the relevant business license and collate the needed paperwork to be accepted.

A general trade license is vital to operate your business in the UAE. At Meydan Free Zone, you can access a wide range of business licenses that suit various business activities, at some of the most affordable bundle costs.

Here’s a list of the documents you need to prepare;

  • Trade License
  • Bank application
  • Passport copy of loan applicant
  • Bank statements from the past 6 to 12 months
  • Copy or original of Articles of Association
  • Copy or original of Power of Attorney
  • Copy or original of Memorandum of Association.
  • Home residence tenancy agreement.
  • Audit reports.
  • List of employees from the Ministry Of Labour.
  • VAT certificate copy

 

Get Your Trade License With Meydan Free Zone Today

Things to Know Before You Apply for a Loan in UAE

Before you apply for a loan in the UAE, there are some pointers regarding finance procedures you need to have adequate knowledge on. This can help you improve your eligibility score and meet other requirements.

    • Educate Yourself on Islamic Finance
      As mentioned earlier, it’s important to distinguish between traditional and Islamic finance so that whatever business transactions and credit you take adhere to the regulatory environment of Dubai. A vital point to note if you choose to pursue an Islamic loan is that paying interest is prohibited in Islamic Law. Instead, both parties trading need to share equal amounts of profits and losses instead of paying interest.
    • Credit Score and Debt
      The ability to pay the installments for the loan is assessed carefully by Emirate banks. The first step you could take is to make sure your credit score remains moderate, preferably at a score around 700-750 which would result in the loan getting approved quickly. Also, sort out previous debts like credit card bills and overdrafts to increase your creditworthiness.
      It’s also best to avoid taking several loans in the same time period to prevent Emirate banks from speculating on your ability to repay.
    • Repayment Period
      It’s always better to opt for loans with longer repayment periods so that the ease of doing business is higher. The instalments you have to pay will also be spread out over a longer time period, hence, reducing your business costs and improving your profitability in the long run.

How To Apply For A 5-Year UAE Multi Entry Visa

Benefits of Applying for a Business Loan in Dubai

After reading the aforementioned information, we can gather that loan application in Dubai consists of certain benefits like;

  • Assistance to prepare essential documentation – Economic jurisdictions like Meydan Free Zone specialise in helping you set up your new business with optimum ease, which includes eliminating irritating paperwork.
  • Loan amounts can reach up to AED 5 – 7 million.
  • Loan types are available for SMEs, large enterprises, startups and business models of all sorts.
  • Flexible repayment plans and tenures

Why Meydan Free Zone?

Meydan Free Zone is located in the very heart of Dubai, burrowed in the midst of skyscrapers that give structure to the visually-abundant skyline. With gorgeous views, luxurious hoteliers, and transport links to seaports and airports—Meydan Free Zone is a hub that excites up-and-coming start-up entrepreneurs that have goals to accomplish.

It’s no doubt that every business requires a boost when it comes to achieving financial success, which is the centre point of all business decisions and future planning. Having tight security when it comes to your business’s financial health is quite important because it affects your operational risks, financial risks, marketing objectives and human resource planning. With Meydan’s attentive assistance and availability of business licenses, obtaining the desired loan amount for the prospects of your entrepreneurial goals will be an easier task.

Contact us for further inquiries!

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