Business Finance
In the modern business landscape, staying competitive and agile is necessary. This entails embracing new technologies, engaging in mergers and acquisitions, and participating in global trade. Consequently, business owners often find themselves in need of readily available funds.
Recognizing this demand, the UAE, ranked favorably in the World Bank's report on ease of doing business, offers a range of business loans to assist enterprises in meeting their financial requirements. Various banks and financial institutions in the UAE extend these financial solutions to businesses.
Typically, a business loan is an unsecured financing option tailored to cater to the modest financial needs of businesses. It entails the repayment of the loan and interest through scheduled installments over an agreed-upon timeframe.
Businesses have the potential to transition from being merely good to achieving greatness, and business finance plays a pivotal role in this journey. Business finance is structured as an unsecured installment-based financial product, with the repayment period typically spanning 36 to 72 months. The precise installment duration may vary depending on the specific bank offering the facility.
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Documents Required for Business Finance
Business Loan EMI Calculator
Features of Business Finance
Loan Amount: Business loan amounts typically range from AED 50,000 to AED 5 million, with the specific amount determined by the applicant's financial assessment.
Repayment Tenure: The repayment period for business loans spans from 2 to 5 years, and the loan amount may influence the exact duration.
Interest Rates: Interest rates for business loans can vary across banks, influenced by factors like credit history, monthly income, existing loans, and the loan amount. On average, these rates range from 15% to 24% annually, with reductions over time.
Relationship Manager: Many UAE banks provide a dedicated relationship manager to assist loan borrowers and address their inquiries.
Business Account: Applicants are typically required to hold an active business account in a UAE bank on the day of applying for the loan. This account serves as a reference for the lender to assess the applicant's relationship with the bank.
Security: While most banks in Dubai do not demand collateral for business loans, it's advisable to confirm this requirement with the bank before applying.
Current Account Benefits: Having a current account often leads to preferential rates and additional advantages when applying for business loans.
Loan Extensions: Some banks offer a top-up or loan extension facility, provided applicants meet the necessary criteria.
Islamic Banking Options: Business loans adhering to Shariah laws under Islamic Banking principles are also available in the UAE.
Additional Incentives: Certain banks may offer complimentary credit cards and insurance coverage as part of the business loan package.
Minimum Balance Requirement: Banks may sometimes stipulate a minimum balance condition for granting business loans.
Interest Rate Options: Borrowers typically have the choice between flat and reducing interest rate structures to suit their preferences and financial circumstances.
Eligibility for Business Finance
Business Operational Duration: The business should have been in operation for at least one year.
Minimum Annual Turnover: The business should have a minimum annual turnover of AED 1 million.
Entity Types: Entities eligible to apply for a business loan may include Limited Liability Companies (LLC), Sole Proprietorships, Partnerships, Free Zone companies, as well as branches or subsidiaries of offshore organizations.
Bank Account: Applicants must possess an active business account with one of the banks in the UAE.
Branch/Subsidiary Status: Businesses that are subsidiaries or branches of offshore operational organizations are also eligible.
Age Requirement: The age of the applicant should not be less than 21 years old.
Documents Required for Business Finance
Bank Statements: Submission of the last 12 months' bank statements.
Legal Documents: Provision of the Memorandum of Association, Board of Resolution, or Share Certificate (whichever is applicable) in both original and copy.
Identification and Residency Documents: Presentation of original and copy of passports and visas for all partners, along with Emirates IDs.
Financial Records: Submission of the original and copy of the Audit Report.
Tenancy Agreement: If applicable, the original and copy of the office tenancy contract.
Accommodation Letter: Original and copy of the owners' sharing accommodation letter.
Employee List: Furnishing a list of employees obtained from the Ministry of Labour.
Transaction Invoices: Providing original and copy of invoices for high-volume transactions.
VAT Certificate: Submission of both original and copy of the VAT Certificate.
Trade License: Possession of a valid trade license is a prerequisite for eligibility to apply for a business loan in the UAE. A trade license is government permission necessary for conducting business operations in the country. The type of license required depends on the nature of the business
Fees and Charges on Business Finance
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Business loans may involve various fees and charges which can vary between banks, so it's essential to compare them.
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Common fees include:
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Arrangement fee: often a small percentage of the loan amount.
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Processing fees: typically in the range of 1.2% to 2% of the loan.
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Early settlement fee: around 1% of the outstanding loan balance.
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It is advisable to thoroughly review the comprehensive schedule of charges before applying.
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Understanding specific fees associated with the business loan is crucial.