Business Loan

United Arab Emirates can be considered as an encouraging land for the businesspersons to start their business. Many entrepreneurs come and try their luck in this land of gold. For anyone who wants to set up a business abroad, the first place that comes to the mind is UAE. This is a country that is considered to be stable in terms of finance. So for financial support one has to opt for taking loan from the banks of UAE. Connect with our experts at Dhanguard for assistance in obtaining Business Loan in UAE.

The most important thing one has to contemplate before approaching a bank for acquiring loan are the eligibility criteria provided by the concerned Bank.

The following below are the common criteria that all the banks consider.

  1. The business should be in operation for at least a year;
  2. If your association is a branch or subsidiary of any offshore company then getting a loan will be considered to be easy;
  3. Annual turnover of AED 1 million at least is required to obtain Loan.

In UAE banks provides different category of loan to different category of business.  The tenure for Business Loan is 1 to 4 years.

Be it a small business or large business organization, obtaining a business loan in UAE is easy if you have genuine and valid documents. Talking about the documents, the most important and compulsory document is Bank Statement.

Following are the required documents for taking loan in UAE.

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

Trade license is a permit that is provided by the government of UAE to the investors giving them permission to run the business in the country. There are distinct trade licenses for every trade that depends up on the category of your business. The fees for trade license will be around AED 3,900 to AED 183,000. Most of the entrepreneurs select a general trade license that will be beneficial to run the business for all commodities and supplies. Trade license is highly beneficial; not only for acquiring a business loan but also for other loans in UAE. A trade license is a significant document for self-employed persons.

There are many advantages that UAE banks provide after acquiring business loans apart from the SME loans.

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

If your application for a business loan has been rejected then don’t panic, we at Dhanguard will assist you in filing for the application. Besides, there are some steps that can be taken to increase the chances of approval from the bank.

Let’s look into few common grounds due to which your loan application can be rejected-

your loan application

Low Credit Score

The most common reason for rejection of loan is a low credit score. Banks examines the personal credit score of business owners in the process of evaluating the applications for Business loan. Personal Credit Score is an important factor to examine loan application for a small businesses or startups or even for a big company. 

The reason for such step is just because banks are concerned about the management of funds by the owner of the business. If the owner is unable to manage his personal credit then how the bank can trust them in repayment of the loan.

The Lenders also check the business credit accounts as well as any potential defaults. 

To resolve the issue of Low Credit Score try to keep your record of repayment clean. If you own any credit cards or personal loans in United Arab Emirates, then try to make payments on time.

Low Business Performance

If any business that is operating in low revenue and the cash flow statements demonstrates that there is no money for everyday operations then banks considers that the business is not in a situation to make repayment of loans.

Cash flow difficulties are persistent in business but if the business operates on these lines of low cash flow then the bank will not approve your loan. 

If you already have an established business or you are owning a business that is comparatively new, building up enough credit history and effortlessly qualify for a business loan you should demand vendors to report for the payments to business credit agencies. By doing this, you can easily make a good credit score.

Too much Debt

When you apply for a loan, banks consider your monthly debt responsibilities. If the bank finds that you cannot afford to pay your monthly debts then straightaway your business loan will not get approved.

Banks considers the credit utilization ratio for approving Loan application of business. Banks suggests that one should not use more than 30% of the available credit.

If you have used maximum credit on your available limit then you are considered as a high-risk applicant by the banks. A higher credit consumption means a higher risk that will get your loan application rejected.

On the other hand, if there is an absence regarding history of how to handle credit payments responsibly and you don’t have any debt in such situation also your application for loan can be rejected.

To resolve this issue, the applicant can make payments responsibly and keep a track of total credit limits that consists of personal credit cards, business credit cards and any other credit sources.

Insufficient Collateral

A collateral is known as a business asset such as investment, property, retained income, vehicles and any other relevant assets.

Banks require a collateral security for issuing business loans. If the collateral is insufficient then there are chances that your loan application can be rejected by the bank. 

To resolve this issue you can look for alternative sources of funding such as unsecured loans where there is no security to acquire a loan

Incomplete application

If the applicant has not provided sufficient information or did not provide complete details in the application form then the application for loan can be rejected. 

Banks ask for supporting documents such as business plans for the coming three to five years, bank account statements, personal tax returns, financial estimates, business credit reports and any other relevant reports. If these documents are not provided then there are chances of rejection of the loan application.

Banks also reviews the legal documents of the business like permits, leases, contracts and other business related documents. 

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