In the World Bank’s Doing Business report for this year, the UAE ranks 23rd when it comes to ease of doing business. A large part of the success of any business is determined by the capital at its disposal, whether it has an initial corpus, a group of angel investors backing it or the assistance of a bank loan.
Applying for a business loan in the UAE can be a tricky matter. Research shows that only 4 per cent of the bank lending in the UAE goes to small and medium enterprises (SMEs), which make up the lion’s share of businesses. But the tide is changing and the lending from banks and financial institutions to SMEs is increasing. From realising the importance of SMEs to the economy to the UAE Cabinet stipulating that government agencies, institutions and companies wholly or partially owned by the government will allocate 5 per cent of their budget to SMEs, things are looking up for smaller enterprises in terms of borrowing from banks.
Kazim Ali, Head of Corporate Banking, Noor Bank, says, “There are no fixed criteria. It depends entirely on the business and industry of the client, historical performance, financing or risk mitigation needs versus what has already been sourced and what plans the client has for the future.
“The criteria are examined and depending on an individual assessment, the eligibility is determined. It is not a one-size-fits-all policy. Noor Bank takes pride in assessing specific requirements,” he adds.
Having said that, it is essential to do your homework. To get a business loan easily, here’s what you should keep in mind.
Business should be in existence for at least a year, although RAKBANK lends to six-month-old businesses.
The minimum turnover of the company should be Dh250,000 a year, says Preeti Harrison Bhambri, Managing Director, MoneyCamel, a personal finance site.
So why the risk and rejection? “Essentially, banks look at the nature of the business and the profile of the directors/partners. A bank assesses the risk in a company by studying business-related elements such as how established is the industry and the kind of assets the company owns,” adds Bhambri.
But, she warns, the turnover is the most important factor in determining the loan amount. It depends on the turnover the company earns, which is reflected in the company’s bank account and audited financials.