What Banks Look for in a Business Account Application in UAE: A Comprehensive Guide
Original Author: Wasiq
Navigating the world of business
banking can be a daunting task, especially when you're setting up a new
business account. Understanding what banks look for in a business account
application can significantly streamline the process and increase your chances
of approval. Here's a deep dive into the key factors banks consider when
evaluating your application.
1.
Financial Stability
Banks are keenly interested in the
financial health of your business. They want to ensure that your business is
financially stable and capable of managing an account responsibly. This
typically involves:
●
Proof
of Financial Stability: Banks may request financial
statements, including balance sheets and profit & loss statements, to
assess the business’s financial health. They look for a solid financial track
record, positive cash flow, and reasonable debt levels.
●
Valid
Source of Funds: Demonstrating where your funds
originate is crucial. Banks need to know that your capital comes from
legitimate sources, whether it's from personal savings, investor funding, or
loans. You may need to provide detailed documentation about the origins of your
initial deposit.
2.
Valid Documents
Documentation is a cornerstone of
the application process. Banks require specific documents to verify your
business and its operations, once this stage is 100% complete there is a very
low chance of rejection on your application. Commonly required documents
include:
●
Business
Registration Documents: Proof that your business is legally
registered and compliant with local regulations.
●
Tax
Identification Number (TIN) or Employer Identification Number (EIN):
This helps banks verify your business's identity and tax status.
●
Identification
Proofs: Personal identification documents
of the business owners or key stakeholders, such as passports or driver’s
licenses.
3.
A Healthy Bank Statement
Your personal and/or business bank
statements play a crucial role, not only does that give confidence to the
bank credit and compliance department that you’re a good businessman or a
wealthy person but also puts you on the positive side of the banker’s to fight
for your application as you will become a long term business partner to them.
Banks scrutinize these to understand your banking habits and financial
behavior:
●
Previous
Banking History: Banks review your past bank
statements for evidence of a healthy banking relationship. They look for
consistent deposits, minimal overdrafts, and overall good financial management.
●
Transaction
Patterns: A history of regular, predictable
transactions suggests stability and reliability, which are attractive to banks.
4.
Low-Risk Activities
Banks prefer to do business with
companies that engage in low-risk activities. Mainly these are the mainstream
businesses like general trading, services, foodstuff or raw material trading, etc. They assess your business model and the nature of your transactions to
gauge risk:
●
Nature
of Business: High-risk industries, such as
gambling or cryptocurrency trading, may face more scrutiny. Demonstrating that
your business operates in a low-risk industry can simplify the approval
process.
●
Compliance
and Regulations: Businesses that adhere to industry
regulations and have sound compliance practices are seen as less risky.
5.
Previous Banking History
Your previous banking relationships
matter. A history of maintaining accounts in good standing can positively
influence your application, it can simply be a personal or a company account
that you have been maintaining for a while, on the other hand, it can
also be previous credit history or owning a credit card and having good bank
score:
●
Credit
History: Your personal and business credit
scores are evaluated to assess your creditworthiness. A strong credit history
can enhance your chances of approval.
●
Previous
Bank Relationships: If you have a history of good
relationships with previous banks, this can work in your favor. Conversely, any
history of banking issues might raise red flags.
6.
Length of Business Operation
The longevity of your business can
be an important factor, as older businesses tend to be already profitable and
generating a good amount of revenue, here are some points to keep in mind:
●
Established
Track Record: Banks often prefer businesses that
have been operational for a longer period, as this demonstrates stability and
reliability. New businesses may face more scrutiny but can still be approved
with a strong application.
●
Business
Plan: A well-thought-out business plan
that outlines your business model, market strategy, and financial projections
can reassure banks of your long-term viability.
7. Government-Friendly Policies
Banks appreciate businesses that align with government regulations and policies, as the banks are an extended sector that directly affects the economy and the country’s GDP, it is fair to assume that the banks would favor a business inclined toward economic stability:
● Licenses and Permits: Ensuring that your business has all the necessary licenses and permits can help in the application process. Compliance with local, state, and federal regulations is critical.
● Tax Compliance: Being up-to-date with tax obligations and providing proof of tax compliance can be beneficial.
8. Low-Risk Nationality
In some cases, the nationality of
the business or its owners can influence the application process, some of these
points are solely to give customers the knowledge of being aware of the
procedures and banks have a different spectrum to consider a nationality low or
high risk:
●
International
Considerations: Banks may have specific
requirements or additional checks for businesses owned by non-residents or
those from high-risk countries. Understanding these requirements in advance can
help in preparing a comprehensive application.
Conclusion
Securing a business account involves
more than just filling out forms. It requires a clear demonstration of
financial stability, proper documentation, and low-risk operations. By
understanding what banks look for and preparing accordingly, you can enhance
your application and build a strong banking relationship. Whether you're a
seasoned entrepreneur or a startup founder, focusing on these key areas will
pave the way for a smoother and more successful business account application
process.
Feel free to share this guide with
fellow entrepreneurs and business owners to help them navigate the banking
landscape in the UAE.
For more insights and updates on
business banking in the UAE, reach out to the author of this Blog:
WASIQ SUHAIL
Contact: +971 55 394 2948
Email: abz.wasiq@gmail.com