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Business Loan In Dubai
How do you finance your business in the UAE?
First, we need Capital investment at the start of the Business. Therefore setting up the company in Dubai or anywhere else in the world, for that matter is a little complicated if you do not have enough money.
The good news is that the UAE has developed a favorable setting for startups with financial opportunities accessible to aspiring entrepreneurs, startup companies, and small-scale enterprises.
There are five methods to obtain Business Loan in UAE. These include local business Loans and outreach programs angel investors, venture capitalists, Business incubators, and institutional investors. Let’s explore the various financing options.
One way you can raise funds for your company is to use local financing, like Dubai SME, Dubai SME is the name of an organization within the Department of Economic Development offering funding options, in addition to assistance services to entrepreneurs as well as established SMEs.
Dubai SME: As an agency of the Department of Economic Development in Dubai, Dubai SME also provides funding options and support services such as advisory and incubatory support for SMEs and startups. Another option for entrepreneurs is to apply for financial assistance through the Intilaq program, which is where Emiratis living in Dubai receive assistance throughout the stages of establishing an enterprise.
To assist you in assessing the different types of business financing in the UAE we’ve put together some of the most interesting alternatives available to entrepreneurs who want to take their startup or SME further to another stage.
Non-bank lending: The challenge of obtaining bank loans as well as the necessity to access working capital has prompted some entrepreneurs to look into non-bank lenders. These lenders can provide businesses with the five-to-six-year capital they need to expand. They also offer a solution to companies, such as tech startups that cannot satisfy banks’ demands to secure assets for loans.
Private financing: asking family and friends for cash is a natural but unwise option for entrepreneurs. It could end up destroying a positive relationship should the business fail. But, offering shares to the company is an option from the equity in the perspective of equity interest.
Crowd funding: is a popular option in the UAE platforms like Aflamnah and Eureeca let startups attract private capital, but you require the capability to market your concept widely through social media to draw attention. The downside of crowdfunding is that should you choose an equity-based model, you might have a large number of investors who have equity in your portfolio and this could slow down the corporate business.
Angel investors are high-net-worth people as well as families and entrepreneurs who “invest in early-stage or startup companies in exchange for an equity ownership interest.”
This is among the fastest ways to obtain financing, as it typically requires the least paperwork and a more simple process for funding.
Finding the best angel investor can be a difficult aspect, since it requires a deep understanding of the most reputable angel investors within the UAE or, at a minimum, an entity in the local area that has the resources to search for and communicate with such investors. If you’re in search of angel investors, look up the official website for Dubai Angel Investors and use this as a base.
Venture capitalists (VC) can be another financing source for small businesses. They can be private equity buyers who are generally willing to invest huge amounts of money, despite the risk since they can earn huge returns if the companies they invest in can manage and succeed in launching their businesses and continue their operations.
This kind of financing is similar to having angel investors in the mix. Many entrepreneurs feel more comfortable when partnering with venture capitalists if they have local partners, a local agent, or a business setup consultant acting as their representative.
Angels and Venture Capital: The explosive growth of the startup economy in the United Arab Emirates and tech startups have attracted the attention of venture capitalists from all over the globe. One of the most frequent investors, Wamda Capital, has reported that it has funded more than 20 companies. Venture capital refers to the financing investors offer to start-ups and small-scale businesses that they believe have a high growth potential over the long term. It typically comes from wealthy individuals (HNWIs) who are referred to as angel investors. It’s also available through banks that invest and other financial institutions.
To get venture capital, you must present a compelling business plan. If the company is interested, the firm or investor will carry out due diligence. This includes an exhaustive examination of the company and its model of business, its products or services, as well as management. If the company is satisfied the venture capitalist can pledge to invest capital to be exchanged for equity in the company. They will often ask for convertible “preferred shares” as a reward for their investment. It is a share that gives the owner an annual fixed dividend, and which is paid before the regular dividends of shares.
Seed financing: Perhaps a more suitable option for startups to start would be seed capital. It’s like venture capital, but without the risks. It is typically sourced via an angel investor or personal connection A seed investment involves an equity-for-cash (or the future equity) exchange, but you do not have to repay the money or provide any personal guarantees. It’s usually utilized as a source of funding at the beginning of the process before going on towards venture capital.
The most active venture capitalists in the UAE include VentureSouq which invests in high-growth early-stage technology companies, Shorooq Partners, a prominent start-up venture capital firm as well as BECO Capital, a young-stage venture capital company.
A loan from local banks to help establish an enterprise in Dubai or anywhere else in the UAE is also an option. In the case of institutional investors(Banks, Pensions funds, Mutual funds, Insurance Companies) are firms that are able to access other people’s funds and put them in a range of projects.
While banks are among the most well-known types of institutional investors, other organizations like mutual funds and insurance companies offer business financing solutions as well.
A person will inform you that getting an unsecured loan from a bank within the UAE is almost impossible for businesses that are just starting out and extremely difficult for SMEs. But, this should not be overlooked. There are loans available, but ensure you have a credit score that is good. There are conditions, but the interest rates aren’t as high and you might require some type of collateral; however, certain entrepreneurs prefer the security that bank loans provide.
One of the prominent institutional investors in the United States includes Greenstone Equity Partners, the largest fund placement company in the region, as well as Gulf Capital, a leading alternative investment company.
Startups and small-scale businesses who require a cash loan for a short period or working capital for the purchase of items like plant vehicles or equipment should think about the possibility of financing assets. This is a kind of finance that is used for the purchase of tangible and moveable assets. It assists in the purchase of the equipment required to run the day-to-day operations of companies.
At one time, financing for assets was usually regarded as an unaffordable option. Since then, it’s become more well-known, particularly among small and medium-sized enterprises that do not have the experience or credit rating to be eligible for other sources of funding. The asset that is being financed is the principal security offered to the lender. The profits generated from this asset can be used to pay the debt and to service interest payments.
With a variety of international and local institutions in the UAE Startups have the backing they require to be successful on the market.
Business incubators are organizations that provide full-time support to startups starting from market positioning and launch, through marketing and financial assistance. Some of the most prominent business incubators within the UAE include Astrolabes as well as The Dubai Technology Entrepreneur Centre (DTEC), In5, FinTech Hive, Turn8, and Techstars Dubai.
Every businessperson in the UAE will ask what they require to expand their business? And the majority of them are likely to answer ‘finance’. The process of sourcing finance in the initial phases of growth is essential to moving the company up to the next stage. It can help business owners stay clear of cash flow issues and obstacles to growth.
Be aware of your UAE financing options
Shari’a-compliant financing: Islamic products are now popular with borrowers in UAE specifically the ijara structure of financing, which allows borrowers to make use of existing assets, like real estate, in order to secure working capital while being able to access and use their assets. The lessee’s ownership is transferred to the borrower at the end of the lease.
The asset’s ownership will then be transferred to the client at the end of the term of the lease.
Another alternative is the Shari’a compliant Murabaha. It’s a form of direct financing in which the lender purchases an asset from directly a third party and then resells that asset to the lending entity with a profit. The payment is secured in the form of an agreement to pledge. This type of arrangement is not appropriate for financing long-term or mid-term since the profit rate might not be measured against the London Interbank Offered Rate, or Emirates Interbank Offered Rate and is required to be fixed.
The support of the Government: Financial assistance that includes interest-free loans is available through the UAE Government’s Khalifa Fund for Enterprise Development that aims to help and promote small and medium-sized investment opportunities within the UAE. The assistance offered will depend on the type of business. The official website that is operated by the UAE government says the Khalifa Fund provides finance solutions to ‘a wide range of feasible projects that support the interests of the nation’s economy across different sectors and areas like fishing, agriculture, farming, and even home-based business’.
How can you get UAE finance?
The assistance of a specialist in the field of startup and SME financing is highly recommended before you dive into complicated and diverse business finance. With the competition for lenders increasing and investors, it is the perfect time to shop for great value finance deals. Expert advice from a local expert can help ensure that you find the most beneficial deal for both you and your company.
For a complimentary consultation with one of our experts, complete the form below and we’ll be to you.
- Limited Liability Company (LLC)
- Sole Proprietor
- Partnership
- Free Zone Businesses
- Branches/Subsidiaries of Offshore Entities.
- Startups
- Limited Liability Company (LLC)
- Sole Proprietor
- Partnership
- Free Zone Businesses
- Branches/Subsidiaries of Offshore Entities.
- Startups
- Limited Liability Company (LLC)
- Sole Proprietor
- Partnership
- Free Zone Businesses
- Branches/Subsidiaries of Offshore Entities.
- Startups
Documents Required:
- A valid passport or national ID or passport with UAE residence visa as well as Emirates identification of each of the signatory authorities, shareholders, or Partners in the event of a partnership.
- Legally valid and legally binding documents (i.e. Trade License Certificate of Registration for Commercial Zone Certificate, and Free Zone Certificate of incorporation) in the event that they are required.
- MOA, amendments, if any, in the event for LLC, Partnership Agreement.
- Information on the Ultimate Beneficial Owners
- Bank Reference Letter and Company Profile, if applicable.
- There is no need for financial statements that are audited
- Original bank statements from 6 to 12 months to the company entity
- Office Ejari
- Power of Attorney or Board Resolution If required.
- Address Proof.
