Got an Islamic Mortgage for Business? Ask These Questions Before You Buy EquipmentDecember 2, 2019 at 11:42 am
You can get an Islamic mortgage for a residential property. However, you can also get an Islamic loan and buy a business. Once you start getting involved in the real estate sector in North America, you’re bound to see a bunch of different possibilities.
One of them will be starting your own shop . One of the biggest decisions you’ll need to make is when to buy some equipment. Here’s a few questions you should ask yourself before you commit any big purchase like that.
Do You Need New Equipment?
You should compare the price of used equipment with newer models. If you’re just beginning as a start-up, you might want to cut a few corners. That’s where buying older gear might be good enough for the beginning phase.
It all requires the same kind of restraint and analysis you used when you got an Islamic mortgage. Avoiding RIBA was important so you could stay sharia compliant. Now that you’re starting your own enterprise, it’s just as critical to make sure you keep costs low at first.
If you decide to buy used stuff in the beginning, make sure that you can get spare parts and accessories for the models you choose.
Should You Lease or Rent?
Leasing equipment can be cheaper than buying it upfront. Still, you need to keep in mind that you don’t own what you purchase and you might not even be able to buy it until the end of the contract. When you look at the big picture, leasing can actually cost you more and not be as efficient as an Islamic loan.
Renting is another one of the options that you might want to take a look at. This is a good choice when you only need certain things for a particular project.
How Will You Pay?
Regardless of whether you lease, rent or own, one of the big considerations is how you will pay. It’s always a good idea to avoid any possibility of a cash crunch. That’s why you need to be very careful before you use any of your working capital to fund any equipment.
There is another consideration to funding through working capital. While your money is tied up in the equipment, you might miss out on business opportunities.
Lots of small businesses use external sources like banks and credit unions. They offer a wide variety of choices. You’ll need to make sure that you find a sharia compliant model. However, the big upside is you can pay the money back when you have enough cash on hand.
When you get either an Islamic mortgage or Islamic loan, you’re being socially responsible and doing the right thing. That applies to renting or buying equipment for your business too. You need to make sure anything you decide to use meets safety standards. Check your local, municipal , state or federal agency to find out what they are.