SMEs make up over 90 percent of all business establishments in the UAE, but account for a meager four percent share in overall bank lending. These statistics highlight the wide gap and more importantly, an even bigger opportunity for banks and finance companies to shift their focus to this highly under-served sector.
Depending on the sector an SME is operating in, it would need to invest in the assets critical to its long-term growth like equipment, machinery and commercial vehicles. And since SMEs, unlike big corporate establishments, may not always have the liquidity or the funds to invest in these assets, this is where the role of bank finance comes into play.
What types of equipment and vehicle finance options are available for SMEs in the UAE?
Commercial equipment and vehicle finance loans help SMEs in financing the purchase of industrial equipment, machinery, construction equipment or commercial vehicles. Hospitals and clinics can also avail finance to purchase medical equipment. Car rental companies who need to buy a large number of cars to build a fleet, can also take a loan tailor-made for this purpose.
SMEs can finance the purchase of these vehicles with specifically designed business loans:
- Commercial vehicles – Light, medium or heavy commercial vehicles, for example trucks, buses, trailers, multi-utility vehicles and pick-up trucks.
- Construction vehicles – Vehicles and equipment used on construction sites, for example bulldozers, excavators, cranes etc.
- Passenger vehicles – New and used cars and other passenger vehicles, especially to finance a fleet.
[Related: Guide to SME loans]
Key features of commercial vehicle & equipment finance products in UAE
An analysis of the various bank finance products available in the UAE for the purpose of financing commercial vehicles, fleet, medical equipment etc. reveals the following trends in eligibility, interest/profit rates and other important parameters:
- Minimum annual turnover requirement for these loans varies from AED 250,000 to AED 10 million. Higher the annual turnover of your business, more are the chances of you securing a high loan amount.
- Maximum finance amounts usually start from AED 350,000 and can go up to AED 30 million, based on the borrower’s eligibility.
- The minimum requirement for time in business ranges from 6 months to 4 years. On average, the business must be at least 1-2 years old to be eligible for most of these business loans.
- Both conventional and Islamic finance options are available, with reducing interest/profit rates varying from 6 percent to 14.5 percent per annum.
- The maximum loan repayment tenure ranges from 48 months to 60 months.
Emirates Money offers more loans in the commercial vehicle and equipment category, than any other provider in the UAE. It gives SMEs the option to choose from four types of business loans within this category – loans for financing equipment, loans for new and used cars, tailor-made loans for car rental companies and commercial vehicle loans.
What makes the Emirates Money offering unique are its relationships with vehicle distributors in the UAE, as well as its team of sales officers with a background in the commercial vehicle industry. While distributor relationships can help SMEs get the most lucrative deals on vehicle prices, trained advisers can evaluate customer requirements and advise them about the best options available.