UAE while being famous for many things has been the home for many start-ups. SMEs (Small-Medium Enterprises) make up a large percentage of the Gross Domestic Product. This is possible because of the continuous support from the UAE government, which encourages startups that one day can become globally renowned companies.
If you have a start-up or a start-up idea and cannot decide which loan best fuels your business, this is where you should invest your time as we make it clearer for you!
Personal Loan is a loan that is given by the lender for a specified tenure. Personal loan interest rate in UAE is of two types: flat interest rate and reducing interest rate. Flat rates as the name suggests are a percentage charged on the total loan amount. Reducing rates, on the other hand, are calculated every month after considering the EMI (Equal Monthly Installments) payment. It is a preferred means of short term financing in the UAE. A personal loan doesn’t require any security, which increases the risk and therefore, the interest charged is usually higher as compared to other loans.
Below are some features of personal loans, however they vary across different lenders:
- High loan amounts are available, based on the monthly salary and length of employment of the applicant.
- Many banks offer free optional insurance coverage.
- Many Bank offer personal loan in uae without salary transfer.
- General salary requirement is a minimum of AED 5,000 depending on the customer income and the amount of the loan
- Many banks offer free lifetime credit card
- Customer can also top-up in case of a salary hike or individual requirement
- Few banks offer the option of no payment for the first two months
- In some cases, pull-over finance from other banks is offered
- Free debit card to expatriates is offered by some banks
The eligibility and documentation for a personal loan vary from lender to lender. However, the general requirements usually are:
- Applicant’s age should be above 21 years
- Applicant’s salary should be ranging between AED 3,000 to AED 5,000 (in some cases it can be more, up to AED 15,000)
- Salary transfer
- Maximum age of the applicant should be 60-65 years at maturity
- Complete loan application
- All identity documents such as Passport, Visa, Emirates ID.
- Salary transfer letter
- A bank statement
- Trade license in case of a self-employed applicant
A business loan is a loan availed for business purposes such as expanding the business, requirement for working capital, etc.
Different lenders provide different features; however, the general features of a business loan are:
- Collateral is not needed by most of the banks
- The loan amount can range between AED 5,000 and AED 5 million
- The documentation is easy
- The approval is not a lengthy process, provided you have the correct documents
- Re-payment options offered by banks are flexible
- A relationship manager to cater to client’s needs are offered by some banks
- Many banks offer a credit card along with the loan
- Some banks also give you a current account with them with zero balance requirements
The eligibility and documentation for a business loan vary across providers. However, usually the requirements are:
- A bank statement of the business or your personal account
- The business should be up and running for a minimum period of one year
- Typically the business turnover should be at least AED 50,000
- Trade license copy
- All incorporation documents that are applicable
- Passport for the owner and/or partners
Personal Loan v/s Business Loan
Both the sources of funding provide numerous benefits and can be used for various purposes of a start-up. The ultimate decision lies with the entrepreneur and what best suits their needs. However, the factors that hold importance while deciding may be:
|Business Loan||Personal Loan|
|Credit Score||The financial background and credit score of the business are taken into account.||The credit score and financial background of the individual hold a great weight in evaluation for the loan.|
|Annual Percentage Rate||Interest rates vary across lenders. Some might offer you attractive rates depending on the scope of the business.||Interest rates are charged in two ways: reducing rate and flat rate.|
|Duration||Both, long and short term options are available.||The tenure is shorter than business loans.|
|Loan Amount||They can be of a large amount.||They are comparatively of a smaller amount.|
|Application||The application of a business loan is more tedious and requires a business plan, and other financial documents.||The application of a personal loan is comparatively easier. It can even be done online in case of some lenders.|
|Usage||They can be used to cater to wide business purposes such as expansion, working capital needs, etc.||They can be used for a large number of general uses, without any restriction.|
Whichever loan you decide upon as per your start-up’s requirements, it is best to compare across the numerous lenders available. This can be done with the help of a web aggregator. Web aggregators compile and give you information about various lenders in the market as per your budget and requirements.