UAE free zone companies engaged in import/export can access a full range of trade finance products from UAE and international banks. Here is a guide to the main trade finance instruments available to free zone companies.
Letter of Credit (LC)
A Letter of Credit is the most widely used trade finance instrument for international transactions. The buyer’s bank (issuing bank) guarantees payment to the seller’s bank (advising/confirming bank) upon presentation of specified shipping documents. UAE banks offering LCs to free zone companies: Emirates NBD Trade Finance, First Abu Dhabi Bank Trade Finance, HSBC UAE, Standard Chartered UAE, Citi UAE. JAFZA and DMCC companies have the strongest LC access — these are the most bank-familiar free zones. Minimum LC facility: typically USD 50,000. Annual facility fee: AED 5,000–15,000 depending on the bank and facility size.
Documentary Collection (DC)
Documentary collection is a simpler and cheaper alternative to an LC. The exporter’s bank sends shipping documents to the buyer’s bank with instructions to release them against payment (Documents against Payment, D/P) or acceptance of a time draft (Documents against Acceptance, D/A). DC is less secure than an LC but cheaper — suitable for established trading relationships where payment risk is lower.
Supply Chain Finance
UAE banks offer invoice discounting and receivables finance programs where free zone companies can sell outstanding invoices at a discount to receive immediate cash. Major UAE banks (FAB, ENBD, Mashreq) offer supply chain finance for companies with AED 2M+ annual turnover. Discount rates: 8–12% per annum depending on buyer credit quality.
Commodity Finance
DMCC members have access to specialised commodity trade finance from banks experienced in metal, energy, and agricultural commodity lending: HSBC Commodity Finance, Standard Chartered Commodity Finance, ING (UAE branch), and Citi Trade Finance. Commodity finance typically requires commodity-specific collateral (warehouse receipts, title documents) and established trading history.