Aspiring entrepreneurs with a brilliant business idea up their sleeves may not always have immediate access to strong financing. Be it to kickstart your business or to boost your current venture, a business loan can be extremely beneficial.
First, let’s explore the different types of business loans available in the UAE.
Types of Business Loans in Dubai
Term Loans
Term loans are easily the most common type of business loan in Dubai and in the UAE. Operating as a traditional loan, they include fixed repayment terms and interest rates. From funding an expansion to purchasing equipment or providing a strong capital, these loans are used for multiple business purposes.
Trade Finance Loans
A trade finance loan is used to facilitate international trade and commerce. These loans are incredibly helpful for export and import businesses, potentially covering the cost of inventory, shipping, and other trade-related expenses.
Equipment Financing Loans
For businesses that require very specific equipment to function, an equipment financing loan can come in handy. This can include machinery used to manufacture products or even specialist vehicles used for transportation or in industries such as construction.
Startup Loans
For new businesses that are eager to make their mark in their respective industries, startup loans are fairly common. Banks or other institutions that offer startup loans tailor them to keep in mind the constraints startups typically experience. For example, they may be specifically designed for businesses that don’t have a long track record or collateral. They typically have smaller loan amounts and shorter repayment terms, and can cover costs affiliated with the launch, marketing and advertising, equipment, and operations.
Small Business Loan
With the UAE’s rapid growth, small businesses are swiftly increasing in number. Designed to help small enterprises, a small business loan in Dubai and the UAE is generally seen as more favorable, since they include lower interest rates and smaller down payments. It’s a financial tool that provides entrepreneurs with the capital to start or grow their businesses.
Business Line of Credits
Often seen as a flexible financing option for small businesses, a business line of credit allows a startup to access funds up to a predetermined credit limit. As such, a business doesn’t need to keep reapplying for loans when necessary – they can manage cash flow fluctuations and cover unexpected expenses when required. Every bank may not offer a line of credit, however, so we recommend researching multiple loan options and types before committing.
Islamic Finance
Based on the Shariah framework, Islamic loans and Islamic business financing solutions are interest-free. Instead, these loans employ profit-sharing or leasing arrangements. Here, too, it’s important to research your options thoroughly and connect with the bank that best suits your needs.
SBA-backed Loan
If none of the options above work out for your business, entrepreneurs can try loans backed by the Small Business Association (SBA). Facilitated by private vendors and supported by the UAE government, these loans usually require collateral – but can prove incredibly useful.
Before You Choose A Business Loan
We recommend businesses thoroughly research the options available to them before choosing a loan. For example, when you apply for a business license (which is required in order to carry out your business activities in the UAE), you will encounter certain costs. However, with a bit of research, you can minimize expenses on this front.
For example, SPC Free Zone offers an online cost calculator that provides you transparency on all your business setup costs upfront. You can also access an Easy Payment Plan if you hold a credit card from an affiliated bank. Along with this, SPC Free Zone provides you with a guaranteed banking account in three working days and unlimited visas for investors, partners, and employees.
Next, research the eligibility criteria set forth by banks. Typical requirements are as follows:
- Applicants must be at least 21 years of age
- Your business must have been running for at least 1 year
- Your business must show an annual turnover of at least 1 million AED
- You must have a business account with an UAE bank (You will secure this when you get a business license through SPC Free Zone)
Apart from this, it’s important to make sure you have a healthy credit score, with past debts paid off.
The most important factor to consider is interest rates. This varies from bank to bank, according to your loan amount, your income, and your repayment tenure – which is the timeframe during which you will repay the loan.
Documents You May Need– Apply for Business Loan
While you may need a variety of documents to apply for your business loan, the following documents are generally required:
- Financial statements
- Proof of business ownership
- A comprehensive business plan
- Valid identification
- Outline of how you plan to purpose the funds
Choose Your Loan Wisely
The UAE is a booming hub for businesses, so it’s the perfect place to let your entrepreneurial dreams soar. A wide range of loans from diverse banks are at your fingertips.
Consider all the above criteria to choose the loan that suits your needs the best, and connect with business setup advisors at SPC Free Zone on everything from how to get a business license to ensuring your business setup process is smooth, efficient, and in good hands.
