How to get Business Loan in Dubai?

By Sakshi Srivastava - 15 Dec 2021 Last Updated: 28 Jan 2022
How to get Business Loan in Dubai?

The United Arab Emirates might be thought of as an inviting place for entrepreneurs to establish their businesses. Many entrepreneurs travel to this kingdom of gold to try their luck. The UAE is the first place that springs to mind for anyone looking to start a business abroad. In terms of money, this is a country that is thought to be stable. As a result, for financial assistance, one must turn to UAE banks for a loan. For assistance in acquiring a Business Loan in Dubai, contact our specialists at Dhanguard.

A business loan is an unsecured, instalment-based product meant to satisfy the needs of small businesses, such as business expansion or working capital financing.

What are the Advantages of Getting a Business Loan in Dubai?

Apart from SME loans, UAE banks offer a variety of benefits to those who obtain business loans.

  • Free credit card;
  • Free life insurance cover;
  • Business loans which follow Shariah complaints;
  • Interest rates in UAE can be selected between fixed rates or decreasing rates;
  • Security for the loan need not be provided.

What are the Requirements for Obtaining a Business Loan in Dubai?

The qualifying conditions offered by the concerned bank are the most crucial factor to consider when approaching a bank for a loan. The following are the common parameters that all banks take into account.

  • The company must have been in operation for at least a year
  • If your company is a branch or subsidiary of an offshore company, obtaining a loan will be simple
  • An annual turnover of at least AED 1 million is required to receive a loan.
  • Banks in the UAE offer several types of loans to various types of businesses.
  • The term of a Business Loan ranges from one to four years.

What Documents are Necessary to Obtain a Business Loan in Dubai?

Obtaining a Business Loan in Dubai, whether for a small or large business, is simple if you have real and valid paperwork. When it comes to paperwork, the most crucial and required document is the bank statement.

The following are the documentation needed to obtain a loan in the United Arab Emirates.

  • Bank Statements for past 12 months
  • Memorandum of Association/ Share Certificate or Board of Resolution (if applicable)
  • Passport and Visa of all the Partners
  • Emirates ID
  • Office Ejari
  • Owners Home Residence Tenancy Contract or Sharing Accommodation Letter
  • High Volume Transaction invoices
  • VAT Certificate
  • Audit Report
  • List of employees obtained from Ministry of Labour
  • Lading Bill (if applicable)
  • Trade License

A trade licence is a permit issued by the UAE government to investors that allows them to conduct business in the country. Every trade has its own set of trade permits, which are determined by the type of your firm. The trade licencing prices will range from AED 10,000 to AED 30,000. The majority of business owners choose a general trade licence that will allow them to operate their company for all goods and supplies. A trade licence is advantageous not only for obtaining a company loan, but also for obtaining other loans in the UAE. For self-employed people, a trade licence is a crucial document.

Rejection of a Business Loan in Dubai on Common Grounds

If your business loan application has been denied, don't panic; Dhanguard will assist you in resubmitting your application. Furthermore, there are various procedures that can be taken to improve the bank's prospects of acceptance.

Let's take a look at a few frequent reasons why your loan application can be denied: 

Low Credit Score

A low credit score is the most prevalent reason for loan refusal. When reviewing business loan applications, banks look at the personal credit score of the business owners. Personal credit score is a crucial consideration when considering a loan application for a small business, a startup, or even a large corporation.

The cause for this action is that banks are concerned about the management of funds by the firm owner. How can the bank trust the owner to repay the loan if he is unable to manage his own credit? Lenders also scrutinise corporate credit accounts for any prospective defaults.To overcome the problem of a low credit score, attempt to maintain a clean payback history. If you have any credit cards or personal loans in the UAE, make sure you pay them off on time.

Low Business Performance

If a business has minimal sales and the cash flow statements show that there is no money for day-to-day operations, banks will assume that the business is unable to repay loans. Although cash flow problems are common in business, if your company operates on these lines of poor cash flow, the bank will not approve your loan.

If you currently have a well-established firm or are starting one, you should require vendors to disclose payments to business credit agencies so that you may easily qualify for a business loan. You can simply build an excellent credit score by doing so.

Too Much Debt

Banks assess your monthly financial obligations when you apply for a loan. If the bank discovers that you are unable to pay your monthly bills, your business loan will be denied right immediately. When approving a business loan application, banks look at the credit usage ratio. According to banks, one should not spend more than 30% of available credit.

 

Banks consider you a high-risk candidate if you have spent all of your credit on your available limit. A greater credit usage rate suggests a larger chance of your loan application being rejected. On the other side, if you don't have a history of managing credit payments responsibly and you don't have any debt in this case, your loan application may be denied.

To remedy this issue, the applicant can make timely payments and maintain track of overall credit limitations, which include personal credit cards, company credit cards, and other forms of credit.

Insufficient Collateral

A company asset, such as an investment, property, retained income, automobiles, or any other related assets, is referred to as collateral. When it comes to business loans, banks need collateral. If your collateral is insufficient, your loan application may be denied by the bank.

You can fix this problem by looking for alternative sources of finance, such as unsecured loans, which require no collateral.

Incomplete Application

The application for a loan may be rejected if the applicant has not provided adequate information or has not provided comprehensive details in the application form. Banks typically want supporting documentation such as three- to five-year company plans, bank account statements, personal tax returns, financial predictions, business credit reports, and any other relevant information. If these documents are not submitted, there is a potential that the loan application will be rejected.

Conclusion

A business loan is an unsecured, instalment-based product meant to satisfy the needs of small businesses, such as business expansion or working capital financing. Business loan in Dubai will assist you in expanding your company. Small and medium-sized firms can acquire a business loan with minimal paperwork and effort to satisfy their short- to medium-term cash flow demands. Contact our specialists at Dhanguard for help obtaining a Business Loan in the UAE.

Grow your business with business loan, term loan, capital loan available at attractive interest rates and minimum documentation with no hidden cost with Dhanguard.

By Sakshi Srivastava

15-Dec, 2021

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