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Working Capital Loan

Working Capital Loan

💼 Working Capital Loan Process

A working capital loan helps businesses manage short-term financial needs such as payroll, inventory, and daily operational expenses. Here’s the step-by-step process to apply for a working capital loan:

1. Eligibility Check

  • Business Type: Most banks provide loans to LLCs, sole proprietorships, and partnerships

  • Business Age: Usually 1–2 years minimum; startups with strong potential may qualify

  • Revenue: Typically requires a minimum annual turnover of AED 500,000 or more

  • Creditworthiness: Evaluation of personal and business credit history via Al Etihad Credit Bureau (AECB)

2. Pre-Approval / Initial Application

  • Submit an initial loan application with general business details and loan requirements

  • Define loan amount and repayment tenure (usually 6 months to 3 years)

3. Document Submission

  • Provide required documentation (see Documentation Requirements section below) to enable the bank’s financial assessment

4. Loan Assessment

  • Bank evaluates financial stability, cash flow, profitability, and loan necessity

  • Business plan may be requested, especially for startups or new sectors

5. Approval & Offer Letter

  • Receive loan offer letter detailing loan amount, interest rate, repayment terms, and fees

  • Collateral requirements, if applicable, will be outlined

6. Sign the Loan Agreement

  • Review and sign the loan agreement once terms are accepted

  • Agree on collateral terms if required

7. Loan Disbursement

  • Funds are disbursed to your business account or directly to vendors/suppliers

  • Use loan for operational expenses such as inventory, salaries, utilities

8. Repayment

  • Repay monthly installments covering principal and interest as agreed

📄 Documentation Requirements for Working Capital Loan

For UAE Nationals

  1. Emirates ID (valid copy)

  2. Passport copy

  3. Trade license and company registration documents

  4. Audited financial statements (last 2–3 years)

  5. Business bank statements (last 6 months)

  6. Tax returns (if applicable)

  7. Detailed business plan

  8. Completed loan application form

  9. Personal guarantee from owner/directors (if required)

For Expats

  1. Emirates ID (valid copy)

  2. Passport copy with UAE residence visa page

  3. Trade license and registration documents

  4. Audited financial statements (last 2–3 years)

  5. Business bank statements (last 6 months)

  6. Tax returns (if applicable)

  7. Credit report from Al Etihad Credit Bureau (business & individual)

  8. Business plan

  9. Completed loan application form

  10. Personal guarantee (if required)

Additional Documents (If Applicable)

  • Collateral ownership and valuation documents

  • Bank guarantees or letters of credit

  • Partnership agreement (if business is a partnership)

🔑 Key Considerations

  • Loan Amount: Typically up to 50%–75% of monthly revenue

  • Interest Rates: Fixed or floating, depending on lender and market conditions

  • Tenure: Usually 6 months to 3 years

  • Repayment Flexibility: Some banks allow payment adjustments based on cash flow

  • Collateral: Often unsecured, but collateral or personal guarantees may be required

  • Fees: Processing fees and early repayment penalties may apply; check upfront

❓ Frequently Asked Questions (FAQs)

  1. How much can I borrow?
    Usually 50%–75% of your monthly revenue, depending on your business financials.

  2. What are typical interest rates?
    Vary by bank, loan tenure, and credit profile; can be fixed or floating.

  3. Is collateral mandatory?
    Many working capital loans are unsecured, but some banks may require collateral or guarantees.

  4. How long does approval take?
    Typically 5–10 business days, depending on documentation and bank process.

  5. Can I use the loan for payroll and inventory?
    Yes, working capital loans are designed for short-term operational expenses like payroll, inventory, and utilities.