Getting a commercial vehicle loan in the UAE is easy if your financial statements are right, says Indian businessman Vishak Mathew, 31, the owner of Brown Expat Technical Services. His company took a loan to purchase two pick-ups worth Dh80,000 each at around 4 per cent interest about ten months ago from RAK Bank. Transportation forms a vital part of Mathew’s business since his company is involved in a lot of maintenance and glass and aluminium fabrication works.
“Our bank’s statements were all good, so the loan process was smooth for us,” he says. “The bank required us to provide them three months’ financial statements, a trade license copy and passport copies of all the partners. Our company was eligible to acquire loans from all lenders.”
Read the fine print
Mathew’s advice to those looking for commercial vehicle loans is to look closely at the fine print and review whether the bank offers an early settlement on loans. “Some banks don’t offer early settlement options, so watch out before committing because this is an important clause that helps you save money.”
He adds that, for instance, if you take a loan for five years at 4.5 per cent and after three years you manage to have sufficient cash, you can easily settle the amount with just a 1 per cent settlement fee. This way you save the interest amount to be paid for the remaining term.
Like Mathew, if your company is looking at expanding your business fleet size — with trucks, heavy buses, pick-ups or light commercial vehicles — using bank finance, UAE banks are offering the credit products that meet your needs. You can acquire funds from the bank, provided your company is a UAE-registered entity that has been in the market for at least six months or between one and two years — the minimum length of business criteria varies between banks.
Mahdi Kilani, Head of Business Banking at Abu Dhabi Islamic Bank, says that any company operating in trading, manufacturing or service, rent-a-car and transportation can apply for a commercial loan. “A commercial vehicle loan eases business owners’ cash flow and preserves their working capital, ultimately fulfilling their business needs to grow further.
“Companies applying for finance should have an annual sales turnover between Dh1 million and Dh100 million to be eligible. They should also maintain a dedicated business account to manage cash flow, ensuring they have the ability to pay.”
Banks in the UAE can finance 80-100 per cent of the total cost of the vehicle, with flexible tenor terms ranging between 48 months, being offered by most banks, to up to 84 months being offered by a few institutions. For instance, Abu Dhabi Commercial Bank funds up to 100 per cent of the vehicle cost with a flexible loan tenor of up to 84 months.
Companies can acquire maximum loans for these products of Dh35 million. Banks may take two to seven days to process the loan, provided a business complies with the bank’s terms and conditions.
Get docs in order
“Customers usually have to provide proper financial documents — monthly bank statements for the past six to 12 months, audited financial statements [not mandatory], cash flow statements, proof of ownership of existing fleet of vehicles [minimum current size to be between ten and 20 vehicles], in addition to legal constitutive and identity documents,” says Hani Mohammad Abu Damis, Head of Business Banking at Commercial Bank of Dubai.
Abu Damis’ advice for prospect entities is to manage their accounts with banks and demonstrate sound financial management. “The company should always route all business transactions through their account and reduce the number of financing banks.
“Sourcing business based on long or medium term contracts is a good sign of financial strength and stability of income. Clients must be aware that banks have certain restrictions on some vehicle brands or types, and a minimum down payment or contribution toward the new asset will be required. Thus, it is essential to check with their banker to be better advised in advance,” he says.
