Within the UAE there are several obstacles to overcome beyond the usual bank decisions about your ability to pay, with even the type of business license you are in possession of having an effect on the type of, and acceptance for, a business loan of any kind.

As a result of this, for a start-up in the UAE it is essential to plan any financial strategy at the earliest opportunity. If a start-up is likely to require cash in its early years, setting everything up to maximise the chance of loan acceptance from day one is not just prudent, but likely essential to the success of the project. A good example of this is that your business license is not transferrable between Free Zones. If a business starts out small with a virtual office, when the time comes to expand into its own offices, they will be restricted to office space within the Free Zone that initially issues the licence. This system means that those first few decisions can have significant long term effects on the business and it is vital to ensure that future direction is adequately considered.

Having said that, when looking for expansion finance, businesses are expected to have certain systems and facilities in place, and it is essential to have these in place well before any application is submitted. Banks are increasingly stringent in their loan acceptance criteria, so let us look at what you will need in place to be successful for your business loan application:

  • The business must be registered for more than 2 years
  • The business must possess a corporate bank account for more than 2 years
  • The business must have a landline number, including a phone bill in the name of the company (That is, not a virtual office)
  • The business also needs a PO BOX
  • The business must have a physical office including a tenancy agreement in the company name
  • It must have an electricity bill in the company name
  • You must present a business card
  • The business must have a website
  • The business must include a company profile
  • There must be a record of invoices in the company name
  • Invoices should have a correlation between trade license business activity and invoice transaction line items
  • The business must be able to show contracts with both suppliers and consumers
  • There should be records of incoming transactions

As we can see, it is vital to ensure that those early steps (be it virtual office or other low cost start-up methods) are made with the requirements of future expansion in mind. Make sure you setup your business the right way, so that your business loan application in the future is not hindered.

Getting that license right is essential for future success, both location as we have discussed, but also because banks have strict compliance regulations and if there is a discrepancy between business activity and the license itself, the loan application will fail and could lead to government investigation. Business Loan approvals are not easy to come by, so it is important that you have the correct documentation ready, as you never know when you might run into cash flow issues.