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A Credit Policy sets the ground rules for how UAE businesses extend credit to their customers. It outlines who can get credit, how much they can borrow, and what happens if they don't pay on time. Think of it as your company's rulebook for managing financial risk while staying compliant with Central Bank regulations and federal credit laws.

Good credit policies protect businesses by establishing clear payment terms, credit limits, and collection procedures. They help maintain healthy cash flow and strong customer relationships by preventing payment disputes. In the UAE's business landscape, these policies must align with Islamic banking principles and local commercial regulations, especially when dealing with post-dated cheques and payment guarantees.

Use a Credit Policy when your business starts offering payment terms or financing to customers in the UAE. This becomes essential as your customer base grows and you need consistent rules for managing credit applications, setting borrowing limits, and handling collections. It's particularly important when dealing with post-dated cheques, which are common in UAE business transactions.

The right time to implement a Credit Policy is before credit problems arise - typically when monthly credit sales exceed AED 100,000 or you have more than 20 credit customers. Many UAE businesses create these policies when expanding into new markets, taking on larger clients, or when seeking trade finance from banks, as lenders often require formal credit management procedures.

• Credit Note Policy: Focuses specifically on managing refunds and adjustments to customer invoices, essential for UAE businesses dealing with VAT compliance and trade corrections. This variation includes detailed procedures for issuing credit notes, approval workflows, and documentation requirements aligned with Federal Tax Authority guidelines.
• Trade Credit Policy: Sets terms for B2B credit arrangements, including payment schedules, credit limits, and security requirements like post-dated cheques.
• Consumer Credit Policy: Outlines retail financing terms following UAE Central Bank consumer protection regulations and Islamic financing principles.
• International Trade Credit Policy: Addresses cross-border transactions with specific provisions for Letters of Credit, export financing, and compliance with UAE Free Zone regulations.

• Finance Directors: Create and oversee Credit Policy implementation, setting risk tolerance levels and credit terms aligned with company goals and UAE banking regulations.
• Credit Managers: Handle day-to-day policy enforcement, customer credit assessments, and collection procedures while ensuring compliance with UAE commercial laws.
• Sales Teams: Work within policy guidelines when negotiating payment terms with customers and submitting credit applications for approval.
• Legal Counsel: Review policy content to ensure alignment with UAE Central Bank regulations, Federal Laws, and Islamic banking principles.
• Customers: Must comply with credit terms, provide required documentation, and maintain payment schedules as outlined in the policy.

• Business Profile: Gather data on monthly credit sales volume, typical customer payment patterns, and industry-specific credit risks in UAE markets.
• Legal Requirements: Review Central Bank guidelines, UAE Commercial Transactions Law, and relevant Free Zone regulations affecting credit terms.
• Risk Assessment: Define credit limit tiers, required guarantees (like post-dated cheques), and evaluation criteria for different customer categories.
• Internal Processes: Map out approval workflows, documentation requirements, and collection procedures aligned with company resources.
• Technology Integration: Consider how the policy will work with existing accounting systems and UAE e-commerce platforms.

• Policy Scope: Clear definition of credit products, customer categories, and territorial application within UAE jurisdictions.
• Credit Assessment Criteria: Detailed evaluation parameters, required documentation, and compliance with UAE Central Bank guidelines.
• Payment Terms: Specific conditions for post-dated cheques, electronic payments, and Islamic financing principles.
• Security Requirements: Forms of acceptable guarantees under UAE Commercial Law, including personal guarantees and bank guarantees.
• Default Procedures: Legal collection steps aligned with UAE Civil Code and local enforcement mechanisms.
• Data Protection: Compliance statements regarding customer information handling under UAE Privacy Laws.

A Credit Policy differs significantly from a Credit Agreement in both scope and purpose. While both documents deal with credit relationships, they serve distinct functions in UAE business operations.

• Purpose and Scope: Credit Policies provide company-wide guidelines for managing all credit relationships, while Credit Agreements are specific contracts between lender and borrower for individual transactions.
• Legal Status: Credit Agreements are legally binding contracts enforceable under UAE Commercial Law, whereas Credit Policies are internal governance documents that guide decision-making.
• Content Focus: Credit Policies outline evaluation criteria, risk management procedures, and collection protocols, while Credit Agreements specify exact loan terms, payment schedules, and default consequences.
• Implementation: Credit Policies inform how Credit Agreements are structured, essentially serving as the framework under which individual credit arrangements are created.