Introduction
As UAE grows as a flourishing land for startups and large enterprises setting up their roots, it becomes paramount for existing and new business to sustain and expand in a competitive land. To do so, financial assistance is required. Getting a business loan can be a big challenge if you are not aware of the nuances like the types of business loan, choose the right lender or interest rate.
However, with the right knowledge and reliable support you can conveniently get a loan in UAE and support your business’s operations, growth, or expansion plans. These loans come in various types and structures, each tailored to meet the diverse requirements of different businesses. Whether you’re a startup looking to scale up or an established company seeking to invest in new opportunities—this is a must read article for you.
Types of Loans for Businesses
Before securing or even applying for a loan in the UAE, it is essential for you to understand the various types of loan available in the financial realm. A business Loan is specifically intended for business purposes. As with all loans, it involves the creation of a debt, which will be repaid with added interest.
There are different types of loans, including working capital loan, POS Loan, Express loan, Inventory loan and Equipment business loan in UAE.
Working Capital Loan
As suggested from its name, this type of loan helps support the daily operational expenses incurred in a business. Expenses such as inventory and payroll can be covered through the working capital loan. Since it is short-term, typically, you can flexibly repay this loan in accordance with the cash flow cycle of your business. On the flip side, it has a higher interest rate compared to the other loans.
POS (Point of Sales) Loan
It is one of the best options for such companies who are merchant establishments using the credit card Point of Sale (POS) machines for daily business transactions and looking for a boost in working capital, inventory purchases, business expansion, purchase and upgrade of equipment etc. These businesses can leverage Point of Sale (POS) receivables to avail loan.
Express Loan
If your company has been in business for more than two years, you are eligible to apply for an Express Loan with minimum documentation and the shortest possible processing time, and can also take over your existing business loan with another bank at attractive terms.
Inventory Loan
A machinery loan is a credit facility that helps you borrow funds to buy, lease, repair or upgrade machinery. It is a type of business loan that enables you to improve your productivity and efficiency without compromising your working capital
Equipment Loan
Evident from its name, you can use this kind of loan to purchase vehicles or equipment essential for your business operations. It supports sustainable success as the loan repayment is generally aligned to the equipment’s life cycle.
Key Factors in Selecting the Right Business Loan
- Interest Rate: The interest rate for your loan is what directly impacts the total amount you need to pay for it. When getting a loan, make sure you check the rates of all leading banks for your loan type or category and then settle for the one that offers a loan at the lowest interest rate. Also, understand the hidden charges, processing fees and any additional expense associated with the loan.
- Loan Repayment Conditions: The terms and conditions associated with your loan is the second most important factor to note. Go through the repayment schedule (monthly, quarterly or yearly) and compare it with your ability to afford and repay on time.
- Lender’s Reputation: Borrow a loan for your business in Dubai, only from a reputable vendor. Their application process, customer/client service, past record of offering loan and instalment plans are a few things you must check. Go through their online reviews and check for recent news about the lender or financial institution.
- Objective of the Loan: Make a clear plan of how you will use the funds received from this loan. Having a specific plan in place will ensure that the amount gets utilised in the best interest of your firm in UAE.
- Personal Situation: In addition to the above factors, you need to assess the collaterals for loans, repaying capacity and your credit history to ensure that the repayment process is convenient and stress-free.
Trade and Working Capital Finance Solutions
The Trade & Working Capital Finance solutions help businesses manage their cash flow efficiently. Whether you need to finance your inventory, pay suppliers or manage your receivables, you need to have the following documents handy with you.
- Letter of Credit (LC): You can receive payment commitments against transactions, ensuring smooth cash flow throughout the order and delivery process.
- Loan Against Trust Receipts (LATR): This is utilised for financing the shipment of imported goods. It requires minimal setup and no interfaces.
- Short Term Loans (STL): It is used for advance payment to business suppliers.
Eligibility to Apply for a Business Finance
A lot of businesses are unsure whether they are eligible for getting finances. But unfortunately, there are only a limited number of them who meet the eligibility criteria. The specific requirements differ from bank to bank in the UAE. Having said that all banks have these minimum requirements:
- Business must be running for at least 2 years
- Minimum annual turnover (amount varies per bank)
- Business or personal bank statements for the last 6 to 12 months
Document Requirements
- Valid trade licence
- Valid passport, EID, visa (for all signatories and shareholders)
- Bank statements and VAT filings receipts
- Business documents, such as constitutional documents & Account mandates viz memorandums, Shareholders Resolution, etc.
- Company location document such as Ejari, lease agreement, etc. (as applicable)
- Banking or lending assessment insetup or documentation (if and as applicable)
- Capacity to meet the bank’s lending criteria
Conclusion
Business loans in Dubai play a pivotal role in the growth and sustainability of enterprises across various industries. As a business owner, understanding the intricacies of different loan types and their implications is crucial for making informed financial decisions. By leveraging the right business loan at the right time, you can empower your business to seize opportunities, expand horizons, and reach new heights of success.
AB Capital Service is one of the top business consultants in Dubai, with an excellent and vetted team of financial experts who can guide your business expansion. It has worked with Multinational banks and UAE banks, earning decades of experience in business banking, mortgage finance, investment banking, consumer banking and various divisions and departments of many financial institutions in the UAE.
Simply book a free consultation call with us and let us take care of the rest. You can also connect with us on call at +9171523655193 or send an email to us info@abcapital.ai.
