Islamic Financing/Ijara Mortgages and Business Borrowing: Here’s What To Avoid.

Islamic Financing/Ijara Mortgages and Business Borrowing: Here’s What To Avoid.

By now the chances are that you understand a bit about how islamic financing and an Ijara mortgage works. You know that we create a trust together so that you stay free from riba and usery. However, there are some areas when you’re putting together a business where traditional banking and Islamic financing need to cooperate.

Borrowing or getting a loan for your business is one of these areas. We’ve put together a few useful tips on what you should avoid when you’re borrowing money for commercial purposes, whether that’s through Islamic financing or a more traditional loan. Check these boxes off to avoid any issues.

  • Don’t wait too long before you explore your options. Many small businesses start out with an ijara mortgage but they often finance their expansion plans from their own cash flow. It’s important to remember here that paying for any kind of investments from this revenue stream puts undue  financial pressure on your growing business. There’s an easy solution that comes from traditional accounting. Make month-to-month outflows and inflows projections and you’ll have a series of cash flow projections that will help.
  • Another issue that some sharia compliant businesses have is not borrowing enough. Of course with Islamic financing, there’s no need to run afoul of Sharia compliance. While it’s a good idea to be careful about debt and how much you take on, not having enough money can leave you facing cash crunches. There will always be unexpected expenses when it comes to business. Developing a cash flow projection for each project is the best solution.
  •  Letting financial chores slide is another problem. Small business owners are always busy and their time is always at a premium. However, if you let your record keeping routines and other financial chores slide, you’re looking for trouble as a business owner. It’s important to have year-end financial statements and an Ijara mortgage for a complete enterprise. One good suggestion here is to spend the extra money on hiring an accountant.

 When you’re looking for Islamic financing, we can help. The Ijara Community Development Corporation (IjaraCDC) is a company that can help you structure your Ijara mortgage so it is sharia compliant using our IjaraTM      method. Our mission is to be a support when you’re putting together a business or buying a home.

We can help you by replacing an existing mortgage with alternative Islamic finance choices through a variety of providers. Educating and enlightening Muslims and other interested people is a priority for us.

That’s why our last tip on what you should avoid for business borrowing has to do with relying on just one lender. It’s never a good idea when you’re trying to finance an Ijara mortgage to get just one quote. Think of it this way. You are always looking to have a diverse group of customers and supplier base.

That’s why you should ask yourself why this business model shouldn’t apply to Ijara financing. Getting more than one quote on these services helps.