It is important for entrepreneurs to have a clear and extensive understanding of the business loan structure in Dubai, especially for those who are looking to expand or start a new business in Dubai. It is important for businesses to understand the types of loans and their eligibility criteria before proceeding with the loan application as banks in Dubai offer a wide range of loans with different options to cater to the different needs of businesses and entrepreneurs. Entrepreneurs can achieve their business goals easily by carefully selecting the right loan option to get the capital they need for their business.Taking the services of a reputed consultant is highly desirable for this purpose, as a consultant can help an entrepreneur immensely in securing the right loan easily and without any hassles. This is where ‘GrowBiz’ comes into the picture. We at ‘GrowBiz’ take pride in the success of our clients in getting the desired business loans with our help. With our clear understanding of Dubai’s banking and business structure, we are able to guide our clients to get the right type of business loan without any hassles. In the following text, we will try to explain business loans in Dubai.
Types of Business Loans
- Term Loan:
Term loans are common in Dubai amongst businesses and individuals as they come with a predetermined and fixed repayment plan with floating or fixed interest rates. Businesses usually opt for a term loan to expand their businesses or to enhance their operations. - Working Capital Loan:
Working capital finance is the fund required by a business to manage its daily operations as well as to cover expenses like employee salaries, inventory, etc. For any business, effective management of its working capital is of utmost importance to maintain its liquidity without any disruptions to its daily operations. - Trade Finance Loan:
For businesses that are involved in export and import or any form of international trade, the trade finance service offers them specialized services such as letters of credit or LC, trade loans, etc. - Sme Loan:
As compared to traditional loans, banks also offer loans known as Sme loans to small-scale businesses with flexible terms and lower interest rates to cater to the needs of small businesses. - Project Financing:
Big projects such as infrastructure projects and power projects are offered financing by banks and financial institutions. This type of financing does not need the creditworthiness of a company but rather its projected cash flows for a bank to finance it. - Equipment Financing:
Equipment financing is used by businesses to get a loan from a bank to buy or upgrade their equipment. The equipment bought or upgraded is used by the bank as collateral for the loan. - Franchise Financing:
To open a franchise or for its expansion, entrepreneurs go for franchise financing to cover the cost of franchise fees, equipment, etc.
Eligibility Criteria For Business Loans:
Some of the common eligibility criteria for business loans in Dubai are:
- Business Plan:
A complete business plan outlining the business model along with growth and financial projections of the business is an essential requirement, as it is used by banks to assess the viability of a project. - Credit History:
Banks avoid lending to individuals and businesses with a bad credit record. So they ask for the credit history of any potential borrower. - Business Registration:
Another important document on the list is the registration document of a business. A bank asks for all the relevant permits and licenses along with the registration papers. - Financial Statements:
To check the financial stability of a business and to judge if a borrower can repay the loan, banks ask for the balance sheets and cash flow statements of a business. - Collateral:
Some types of loans require the borrower to provide some kind of collateral against the loan amount. - Operational History:
Startups and new establishments face some extra scrutiny and need to provide additional documents to a bank as they don’t have an operational history to back them.
Application Process:
- Prepare Documentation
After deciding on the type of loan and the bank, it is important to update all the documents required by the concerned bank for the approval of the loan. There are no glitches with the application if all the documents are in order. - Submission of Application
After filling out the application correctly, it should be submitted to the bank along with all the required documents. - Assessment of the Documents
Once the application for loan is submitted to the bank, it assesses the application and all the documents to see if all the requirements of the bank for loan approval are met. - Approval and Disbursement
After the approval of the loan, the bank sends a letter to the borrower outlining all the terms and conditions of the loan. If the borrower accepts the letter, the bank disburses the loan amount into the account of the borrower. - Repayment
To avoid any defaults and penalties associated with defaults as per the loan terms and conditions, the borrower should make sure to make timely repayments.
FAQ's
Some of the different types of loans popular in Dubai are loans like term loans, secured loans, working capital loans, trade loans, etc.
Some of the main eligibility criteria associated with business loans in Dubai are credit history, balance sheet and operational history. Some of the criteria may change depending on the nature and size of the business.
The most common documents required by a bank with a loan application include a business plan, balance sheet, business registration and license.
Approval of a business loan in Dubai depends mainly on a bank’s policies but usually, it takes from a few days to a number of weeks depending on the type of loan.
Interest rates for business loans in Dubai vary from 5% to 15% depending on the bank policies, and credit history of the borrower.