A Full-On Guide to Small Business Loans in the UAE

In the United Arab Emirates, starting a small business can be an excellent opportunity for entrepreneurs to bring their ideas to life and potentially solve everyday problems. Access to small business loans can help individuals get their ventures off the ground and become their own bosses. Overall, the UAE offers a favourable environment for starting and running a successful small business.

The purpose of small business loans has evolved to help entrepreneurs, and there are various types of loans available to meet different needs. Business owners need to understand their options to choose the best loan for their situation.

If you run a small business in the UAE that could do with a bit of funding from loans, this blog is for you. Read on!

Defining Small Business Loans & the Various Options

A small business loan is a type of loan provided by different lenders to businesses for a variety of purposes. Various types of small business loans have emerged over time to help entrepreneurs succeed. The type of loan determines the operation of a small business.

In the UAE, small businesses can obtain loans with average amounts ranging from AED 50,000 to AED 500,000. The loan application process involves a review of the business’s financial standing by the bank. Repayment of the loan typically takes 2–5 years, with the length of time determined by the amount borrowed. At the same time, interest rates also vary and are determined by factors such as credit history and monthly income. Generally, a business must have been operating for at least one year in order to qualify for a loan. Foreign companies or their branches may find it easier to secure financing.

A promising land like the UAE has several loaning options to help small businesses thrive and grow. They are:

  • Accounts Receivable Finance

Also known as Factoring, finance from accounts receivables is the sale of outstanding invoices to a lender in exchange for immediate cash. The lender assumes the risk associated with collecting on the invoice, and this transaction typically involves a fee. The age and quality of the receivables play a role in determining the amount of money received from the sale.

  • Working Capital Loans

It is crucial to distinguish working capital loans from other small business loans. These loans fund day-to-day operations, such as rent, salary, and debt. These loans are typically shorter and smaller than those used to finance long-term assets or investments.

  • Equipment Loans

Equipment loans can be a practical option for small businesses investing in new equipment. These loans often have less paperwork and can result in faster access to funds.

  • Credit Cards

One key difference between personal and small business credit cards is the ability of a small business card to track and categorise spending. Additionally, these cards may offer rewards programmes geared towards office supplies and marketing services. Using a credit card specific to your small business can help with budgeting and maximising rewards.

  • Line of Credit

The credit card is the equivalent of a business line of credit for small businesses. Only interest is charged on borrowed money up to a set amount. Providing you don’t go over your credit limit, you can borrow cash and repay it as often as you like.

  • Term Loans

When you apply for a small business term loan, you will be given a lump sum of money, which you’ll have to repay over a specified period with a set interest rate. A small business uses these loans to finance a specific investment. They are usually repaid in five years.

  • SBA Loans

This type of loan is backed by the government and available to small businesses to start up, expand, and buy real estate. Typically, this loan is issued by a private lender, but the federal government backs it.
In the above paragraph, we discussed several small business term loans and how they can provide a lump sum to invest in a business. All financing institutions have a set of criteria that companies must fulfil when applying for loans. Let’s explore these details.

Documents & Eligibility Criteria to Acquire Small Business Loans in the UAE

In order to obtain a small business loan in the UAE, it is necessary to have certain documents, such as:

  • A lease or letter stating your office space
  • A trade license
  • Previous year’s bank records.
  • Documents related to ownership or partnership.
  • List of employees from the Ministry of Labour

You must submit the original and a duplicate copy of the following documents:

  • High-volume transaction invoices.
  • VAT Certificate
  • Letters from the owners sharing accommodation.
  • Share Certificate or Memorandum of Association or Board of Resolution
  • Passport and visas of all partners
  • Emirates ID
  • Audit report

It is important to note that the trade license is the most crucial document for conducting business in the UAE. Trade licences are permits granted by the UAE government to investors allowing them to operate their businesses. Every trade has its own trade licence, depending on the category of your business.

Also Read: SBA Loan Handbook: What is it? Its Kinds? Procedure to apply for the loan

Eligibility criteria

In order to increase your chances of obtaining a small business loan, it is vital to understand the lender’s requirements and qualifications. Developing a solid business plan and potentially offering collateral can also help. It is beneficial to research your options and ensure you can repay the loan on time.

Following are the standard terms taken into account by all banks:

  • The business should have been in operation for at least one year.
  • An offshore company or branch would have no problem obtaining a loan.
  • The business should have at least 1 million AED in turnover per year.
  • It should be a company with limited liabilities.
  • Sole Proprietorship or Partnership.

UAE banks provide SME loans to small and medium-sized businesses. The loans are for small and medium-sized enterprises with lower interest rates than those of larger organisations.

Pointers to Consider Before Applying for Loans in the UAE

  • You should improve your personal and business credit ratings because small business loan lenders consider your credit score when deciding whether or not to extend you a loan.
  • Understanding a lender’s minimum requirements and qualifications can help you get approved for a small business loan.
  • Develop a business strategy to show lenders how your money will be spent. When drafting your business plan, describe why you think financing will be helpful and how it will increase your profits.
  • Make sure you have collateral ready to expedite the loan process. Some lenders may ask for real estate properties, inventory, or equipment as collateral.
  • Educate yourself on your options before applying for a small business loan so that you are aware of all risks involved.
  • Ensure that each loan is repaid on time, regardless of type, to avoid damage to your business.

Final thoughts

The advantages of small business loans are that you can access funds quickly without worrying about large amounts of debt in the long run. In the United Arab Emirates, many banks offer Small Business Loans. To start a business, you simply need valid, genuine documents and the zeal to do business in the UAE.

The MSMEBlog provides expert solutions and guidance for financing small and medium-sized businesses. Visit for more information on MSME finance.

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