The Complete Process of Applying for a Business Loan in Dubai

Dubai, as we all know, is becoming a booming business hub that has been revamping its rules and policies to accommodate foreign entrepreneurs and investors who want to set up their businesses and other ventures in Dubai. Right from the processing of documents to getting a claim over the profits, the land’s policies have been revised in multiple ways to be the breeding ground for businesses and an indispensable part of the global economy. The effective change in the rules and regulations has made people come to Dubai, and now it is easier to find the seed capital or investment you need to set up your business. Business loans are now provided at an affordable rate for local and international entrepreneurs to set up their entrepreneurial ventures in Dubai. 

Here we are trying to discuss the complete process of applying for a business loan in Dubai. 

Things to consider when applying for a business loan in Dubai

Business loans are provided by different banking institutions in Dubai for upcoming entrepreneurs and investors. These loans have reasonable interest rates and can be obtained by businesses with or without collateral. The deal with getting finance without the necessary financial support will depend on the kind of business, the risk factors involved in the business, and the amount of money that has been requested as a business loan. The motive behind applying for a business loan can either be to start a completely new business or to uplift an existing one. 

Check your eligibility for the loan you choose.

The first and foremost step to making sure that you are eligible for the business loan is to understand the requirements laid out by the bank and make sure that you check off the checkboxes for all of the listed terms and conditions. Even if you meet those requirements, the bank will conduct an investigation of you and then grant you the loan based on the findings of that investigation. 

Different banks have different criteria for qualifying for a business loan, but there are some basic prerequisites that every bank expects the business to meet, and they are:

• The loan applicant should be more than 21 years old.
• The applicant must share the current or savings account details for the past 6 months or 12 months.
• The business firm should be operational for not less than 2 years, and some other banks may even dial it down to 1 year.
• The loan can be easily obtained by businesses that have been opened as branches or representative businesses of an offshore company.
• The annual turnover of the business should be at least 1 million AED at the time of applying for the business loan. 

Choose a suitable sort of company loan

There are many business loans available out there, and it is necessary to understand your needs to choose the right loan for your business. Here are some of the different business loans available in Dubai. 

1. Standard Business Loan: With a standard business loan, you are bound to pay fixed monthly installments. The payment terms are fixed, but these terms are subject to change only if the loan terms are in a variable structure. 
2. Friends and family loan: This kind of loan is much easier to get through. There are no strict rules and regulations and no hard penalties when it comes to borrowing from friends and family. Lending from friends can lead to strain in the relationship.
3. Credit Card Loan: The credit card loan is where you can borrow and advance money from your credit card. The con of advancing through a credit card is that it provides loans at high-interest rates.
4. Small Association-Backed Loan: These loans are supported by the government and are an ideal option to take if you don’t receive a bank loan. If the payment terms are not met, then the government might impose harsh penalties. 
5. Islamic Finance: This particular mode of financing is in compliance with Islamic law, or Sharia law. The money should be earned from legitimate sources and not from interest on lending and borrowing money.

Familiarize Yourself With The Concept of Islamic Finance in Dubai

As discussed above, according to Sharia law, it is prohibited under the law to collect money as interest from money that is borrowed or lent. Therefore, when you borrow under Islamic law, it comes under the concept of a profit and loss sharing contract. There are many different contracts under Islamic finance, and the most common one is known as Mudarabah. The profits and losses are shared between the entrepreneur and investor, and the losses are only borne by the investor. 

Documentation for a business loan in Dubai

Once you get the nod of approval from the bank for the business loan, you need to submit some documents for the sanctioning of the loan:

• Bank statements for the previous 6 - 12 months.
• Completed bank application form
• Documents that prove the constitution of the business, like an AoA, an MoA, a partnership deed, a sole proprietorship agreement, and so on.
• Copy of the trade license and the original documents
• Passport copy of the person who is applying for the loan.
• Audit Report
• List of employees obtained from the Ministry of Labour
• Lading Bill (if applicable)
• Trade Licence
• Owner's Home Residence Tenancy Contract or Sharing Accommodation Letter
• High-Volume Transaction Invoices
• VAT Certificate

Methods to Improve Business Loan Eligibility in Dubai

If you are planning on applying for a business loan and feel that you might not be eligible for the same, then you can choose to abide by some methods that will help enhance your eligibility for getting the loan:

• The credit score should be above 750.
• All your payments have to be on time, like loans, debit card dues, and credit card bills, and you have also missed any EMI dates. A clean payment history will help you get a business loan in an easy way.
• Multiple loan applications can actually affect your creditworthiness.
• The repayment tenure should be higher, as when the tenure is longer, the EMI is lower.

The business loan is an aid to the growth and development of your business. The help of a business consultant can help you align the documents that are needed to obtain the business loan. Business loans are not something that can be easily obtained. We, at Kiltons, will help you understand the financial goals of your business. We make sure that you achieve your business goals in the best way possible.