Loans
How to get Business Loan in UAE?
United Arab Emirates can be considered as an encouraging land for the businesspersons to start their business. Many entrepreneurs come and try their luck in this land of gold. For anyone who wants to set up a business abroad, the first place that comes to the mind is UAE. This is a country that is considered to be stable in terms of finance. So for financial support one has to opt for taking loan from the banks of UAE. Connect with our experts at Betterway Consultancy for assistance in obtaining Business Loan in UAE.
Eligibility Criteria to obtain Business Loan in UAE?
The most important thing one has to contemplate before approaching a bank for acquiring loan are the eligibility criteria provided by the concerned Bank.
The following below are the common criteria that all the banks consider.
- The business should be in operation for at least a year;
- If your association is a branch or subsidiary of any offshore company then getting a loan will be considered to be easy;
- Annual turnover of AED 1 million at least is required to obtain Loan.
In UAE banks provides different category of loan to different category of business. The tenure for Business Loan is 1 to 4 years.
Common grounds for Rejection of Business Loan
If your application for a business loan has been rejected then don’t panic, we at Betterway Consultancy will assist you in filing for the application. Besides, there are some steps that can be taken to increase the chances of approval from the bank.
Let’s look into few common grounds due to which your loan application can be rejected:
The most common reason for rejection of loan is a low credit score. Banks examines the personal credit score of business owners in the process of evaluating the applications for Business loan. Personal Credit Score is an important factor to examine loan application for a small businesses or startups or even for a big company.
The reason for such step is just because banks are concerned about the management of funds by the owner of the business. If the owner is unable to manage his personal credit then how the bank can trust them in repayment of the loan.
The Lenders also check the business credit accounts as well as any potential defaults.
To resolve the issue of Low Credit Score try to keep your record of repayment clean. If you own any credit cards or personal loans in United Arab Emirates, then try to make payments on time.
If any business that is operating in low revenue and the cash flow statements demonstrates that there is no money for everyday operations then banks considers that the business is not in a situation to make repayment of loans.
Cash flow difficulties are persistent in business but if the business operates on these lines of low cash flow then the bank will not approve your loan.
If you already have an established business or you are owning a business that is comparatively new, building up enough credit history and effortlessly qualify for a business loan you should demand vendors to report for the payments to business credit agencies. By doing this, you can easily make a good credit score.
When you apply for a loan, banks consider your monthly debt responsibilities. If the bank finds that you cannot afford to pay your monthly debts then straightaway your business loan will not get approved.
Banks considers the credit utilization ratio for approving Loan application of business. Banks suggests that one should not use more than 30% of the available credit.
If you have used maximum credit on your available limit then you are considered as a high-risk applicant by the banks. A higher credit consumption means a higher risk that will get your loan application rejected.
On the other hand, if there is an absence regarding history of how to handle credit payments responsibly and you don’t have any debt in such situation also your application for loan can be rejected.
To resolve this issue, the applicant can make payments responsibly and keep a track of total credit limits that consists of personal credit cards, business credit cards and any other credit sources.
A collateral is known as a business asset such as investment, property, retained income, vehicles and any other relevant assets.
Banks require a collateral security for issuing business loans. If the collateral is insufficient then there are chances that your loan application can be rejected by the bank.
To resolve this issue you can look for alternative sources of funding such as unsecured loans where there is no security to acquire a loan
If the applicant has not provided sufficient information or did not provide complete details in the application form then the application for loan can be rejected.
Banks ask for supporting documents such as business plans for the coming three to five years, bank account statements, personal tax returns, financial estimates, business credit reports and any other relevant reports. If these documents are not provided then there are chances of rejection of the loan application.
Banks also reviews the legal documents of the business like permits, leases, contracts and other business related documents.
Required Documents For Taking Loan In UAE
- Bank Statements for past 12 months
- Memorandum of Association/ Share Certificate or Board of Resolution (if applicable)
- Passport and Visa of all the Partners
- Emirates ID
- Office Ejari
- Owners Home Residence Tenancy Contract or Sharing Accommodation Letter
- High Volume Transaction invoices
- VAT Certificate
- Audit Report
- List of employees obtained from Ministry of Labour
- Lading Bill (if applicable)
- Trade License
FAQs
Most frequent questions and answers
The bank of UAE provides flexible repayment option that can range from one to four years.
Yes, the application for loan can be rejected if the applicant has not provided the reason for such loan with proper documentation.
No, your application for loan will be rejected if you apply for Multiple Loan.