Dubai is a dream marketplace to build a new start-up due to its efficient business environment and business-friendly tax policies. But to start any business in Dubai, first, you need some investment or funds to raise primary capital. Getting a loan from someone is a great way to gather initial funding.
If you want a sufficient amount to start your new business, you can choose different options to apply for various business loans. This article will guide you through top tips for applying for a business loan in Dubai and the benefits of each business loan, including four critical types of loans.
Apply for a Business Loan in Dubai
To acquire a loan in Dubai, you apply to higher authorities, Banks, and other loan funding organizations.
You have to apply for a business loan in Dubai with a step-by-step procedure. Otherwise, you will end up with the need for more required documents. That might lead you to high waste time, ruin your plans and screw your business schedule.
Here is a step-by-step guide to applying for a small business loan in Dubai.
1. Check your eligibility for a loan in Dubai.
Many small businesses in Dubai are eligible for loans, and your business might qualify for one too. Here are the eligibility criteria. Compare it with your business details, and if they match, proceed to the next step.
Your business age must be at least two years old. It means you have had a registered business in Dubai for the past two years.
Your business per anum turnover must be at least AED 1 million (depending on bank/loan funding organizations).
Bank statement of your business for the last 6 – 12 months.
If your business fulfills the criteria mentioned above, complete the next step.
2. Choose the correct type of loan.
To apply for a business loan in Dubai, you must pick the right kind of loan for your business. There are four different types of loans in Dubai for a small businesses.
These four types are described below.
1. Standard business loan
This type of loan is a bit strict compared to others as it is strictly for business purposes. You have to repay a fixed monthly installment over an extended period. Another is that it typically has set payment terms unless the loan is under a variable rate.
2. Friends and family loans (F&F Loans)
You can directly approach your friends and family for the desired amount. You can achieve the goal of flexible payment terms when you acquire this kind of loan. On the other hand, you can lose your relationship or friendship if repayment goes the wrong way. You need to be wise when choosing this type of loan.
3. Credit Card Loan
You can get an advance payment from banks through credit cards. Most banks charge high-interest rates. If you are not good in revenue in the initial stage of your business, you may end up in debt.
4. Small business Associations (SBA) backed loan.
This loan is supported or backed by the government of Dubai. You could go for this type if your bank loan applications got rejected. But the worst side is that the government will impose harsh penalties on your business if you do not meet the payment terms.
3. Familiarise With the Concept of Islamic Finance in Dubai
- You cannot earn interest through lending or borrowing money; it is forbidden.
- You must make money earned through legitimate trade and investment of assets.
- Your money must be spent in productive ways.
4. Prepare the correct documentation.
Suppose you prepare all your documents to Apply for a Business Loan in Dubai. It will ease and fast your next step in the procedure.
Here are the few primary business documents that the bank requires to apply for a business loan in Dubai:
- past 6-12 months Bank statements
- Bank application fulfilled form.
- Association document / Power of Attorney of your business / Agreement document for partnership;
- Your original trade license for verification;
- Your passport copy (the one who apply for a business loan in Dubai).
Besides these essential documents listed above, some banks usually require additional documents. There should be with you as well:
- Your Home Residence Tenancy Contract or your Sharing Accommodation Letter
- Transaction invoices (should be high volume)
- VAT Certificate
- Financial Audit statements / Reports
- List of employees provided by the Ministry of Labor
- Your business Trade License
5. Final step
Visit any of your nearest bank branches, which have the facility to give you a loan for business in Dubai. Ask for their terms and conditions, minimum time to get access to your loan, range of business loans, repayment methods, repayment time, monthly repayment amount, and most importantly, their interest rate.
If you feel satisfied with their methods and conditions, fill out their application form. Attach all of the required documents and submit your application to the manager.
They will let you know the time taken to process your amount; wait for that time. And yeah, your loan is delivered to your business account.
Benefits, if you'll apply for a business loan in Dubai
- No security requirements: free and easy access to finance with rock-bottom formalities.
- Best and fair pricing, with a commitment to maintaining fees and profit rates amongst the lowest in the market.
- Fast decision-making and processing turn-around times, with most credit decisions made within 48 hours.
- Transparency; Clear and straightforward terms, conditions, and eligibility requirements.
- Convenience; All installments will be automatically debited from your business bank account.
- Flexible repayment tenure; Choice of repayment periods between 12 and 48 months.
- Loan top-up facility after 12 months of satisfactory loan performance.
- Buy-out option; you can take help to transfer your existing loans and credit facilities from another bank.
- No requirement to submit audited annual statements.
Risk involved in business loans in Dubai
1. Credit Score
If you rely on debt financing too much in Dubai can help your personal or business credit score if you make timely payments. But if you will not be able to make timely returns, it will hit your reputations in Dubai and might affect you, when you will try to apply for a business loan in Dubai other time.
3. Personal Liability
If your company goes out of business, before it can pay its debts, you may be left with a personal financial load that may take years to settle and may even result in personal bankruptcy. Finance grows slowly in the first few years of operations to prevent acquiring too much debt before your company model sustains your operations.
4. High Debt
If you secure a loan and then borrow more before the initial loan is returned, it could indicate that your company is experiencing significant financial difficulties.
5. Interest Rate Volatility
Depending on the type of business loan, you may be required to repay the principal and interest. A fixed-rate loan means your company will pay a fixed amount in interest over the loan’s tenure.
Each type of business loan in Dubai has its threat. Therefore, there are no exact right or wrong choices. Evaluating what loan features you prioritize more is crucial, which will help your business succeed. Being aware and prepared for the application process before apply for a business loan in Dubai can make the process much simple and more sophisticated.
Many banks give business loans easily in Dubai, such as:
- Emirates NBD
- Mashreq Bank
- Rak Bank and more
Yes, applying for a business loan in Dubai is a smooth process. But sometimes, the process looks complex. Banks in Dubai demand to meet the set of companies’ requirements to approve a loan.