UK gets its first Islamic crowdfunder for business financing

The success of your business depends on you maintaining a healthy cashflow. You want to have money available in order to pay your bills and your staff on a weekly or monthly basis, along with having capacity for growth.

It doesn't matter how great your product or your marketing might be. The foundation of success for businesses, and the reason why some don't make it, is cashflow. The moment you don't have the money in the bank to pay your staff, suppliers or tax bills, you could be in big trouble. Cashflow planning helps you to see this coming, giving you time to take action.

Cashflow planning is essential

It's much more comfortable when you have consistent, positive cashflow. There are no moments of panic when you fret over how you'll pay a particular commitment. You have more time to plan ahead, to have an eye on the future rather than worrying about today.

Consistent, positive cashflow doesn't just happen. Being profitable doesn't guarantee that your business will always have the cash to meet your commitments. Income from sales doesn't always flow in fast enough to cover payments you need to make. Achieving a steady cashflow requires planning. It starts by making a cashflow forecast.

Prepare a cashflow forecast

A cashflow forecast is a plan of the money your business expects to receive and to pay out in the near future. It helps you to predict how much money will be in your bank account at any point in time. A cashflow forecast is usually broken down into months or weeks to make it easier to plan.

To construct your cashflow forecast you'll want to use a spreadsheet or a cashflow planning tool. Your accounting system can provide useful information about your past cashflow but it's not so helpful for predicting the future, because it's based on transactions that have already occurred.The benefits of preparing and maintaining a cashflow forecast include:

• You have better control over your business finances.
• It helps you to make realistic decisions about spending.
• You can plan for the future more easily.

Your cashflow forecast is just that - a forecast. The reality will turn out differently, although a well-prepared forecast won't be that far off what actually happens.

Use a forecast to make better business growth decisions

Growing a successful business requires you to make choices. If your business model is sound it's likely your business will expand naturally, at least in its early days. However, it won't be too long before the rate of growth levels off, as you've satisfied the initial levels of demand. Maintaining growth, or restarting it, requires decisions and actions that will bring in more customers and extend your opportunities to earn more revenue.

Your cashflow forecast will help you to assess the impact of these decisions. It allows you to model what's likely to happen in the future, as you incur more costs with the objective of growing sales.The forecast will help you determine the costs and benefits of actions such as:

• Launching a new marketing campaign.
• Taking on a new member of staff.
• Selling a new product.
• Purchasing new equipment.
• Expanding into a new geographical area.
• Raising additional working capital.

Forecasting requires making some estimates about likely future income based on your choices.

How to build a cashflow forecast

Whatever tool you use to build your forecast, it will have three basic sections. These are:

• Incoming cash
• Outgoing cash
• The net balance

Step 1 - Incoming cash

This section is a list of your different sources of income. Depending on how you sell, you may want to break this down into different categories based on the type of income, such as cash sales, credit sales, credit card settlement and the like.

Not all incoming cash is from sales. You may also receive cash from loans, equity investments, tax refunds and other sources.

Once you've completed this section, you should have a clear idea of how much money you expect to receive on a weekly or monthly basis, over the period of the forecast. Typically, a cashflow forecast will look six months to a year ahead, and longer for bigger projects.

Step 2- Outgoing cash

In the same way, list all the payments made from your business. Be sure to include every form of payment, and take care to include irregular or annual payments. To help you check that you've not missed something, take a look at your accounts for the previous year to see what payments were made.

Payments you're likely to have in this section include:

• Stock purchases
• Payroll
• Tax payments
• Loan repayments
• Asset purchases
• Expense reimbursements

Once you've completed this section you should have a total for the cash outgoings on a weekly or monthly basis.

Step 3 - Net balance

The net balance is the difference between the total incoming cash and the total outgoing cash. If you add your opening bank balance, the cashflow forecast will now give you an estimate of how much money you will have in your bank account on any particular day.

In a strong, healthy business the net balance should be positive. If it's not, the forecast will help you to identify the reason. It may be that you're investing in business growth, which will bring in more future sales income but involves advance costs. The forecast will help you identify whether you need to source short or medium-term funding from elsewhere, and the scale of that funding.

Common problems with cashflow forecasts

Errors occur in cashflow forecasts because the process involves making estimates and it often relies on data that's input into a spreadsheet manually, rather than taken directly from your accounting system.

Problems to look out for in your cashflow forecast include:

• Overlooking VAT on sales, purchases and tax payments.
• Inaccurate information about future receipts and payments.
• Big differences between actual and estimated sales.

It takes time to build and refine an accurate cashflow forecast. Don't be surprised that you need to alter yours often, adding in unexpected receipts and payments.

Keep your forecast up to date

Because your cashflow forecast is based on estimates and assumptions, it will very quickly differ from what actually happens. This means you should update it regularly and often. A well-run business will maintain their cashflow forecast several times a week, perhaps even daily, to keep it as accurate as possible.

Cashflow planning is a vital business activity that you can't afford to overlook or put off. If you're planning to grow your business successfully, the time you put into cashflow forecasting is a wise investment.

Ethical business funding from Qardus

We support growing businesses by providing growth finance of between £50k to £200k on terms of between 6 and 36 months. This finance is helping UK-based small and medium-sized companies to expand their operations and their market share.

We fund businesses that have demonstrated their capability with a proven product and management team. Our clients are drawn from many different industries, but our ethical position means we cannot work with companies involved with products considered detrimental to the welfare of society, such as gambling, alcohol and tobacco. This is because we operate based on Islamic community principles. Our funding process is certified as Sharia-compliant.

We work with businesses and their owners both inside and outside the Muslim community. Any business that operates in line with our ethical values is welcome to apply for funding.

If your business is looking for growth funding that's fast, affordable and ethical, get in touch with us today.

If your business is to grow, you need to invest in it. Whether the business is a start up, just getting going, or an established firm looking to expand, it needs cash to pay for recruitment, infrastructure, marketing, stock or whatever it is that you need for growth.

Choosing the way to fund your business growth can make a huge difference to your firm's future. While raising finance has one objective - to give you more working capital to invest in growth - the method you choose can have significant implications.

There are different routes for raising this finance. You can put money into the business yourself, take out a bank loan, receive capital from an external investor or take one of several other options. Factors that influence your choice include why you want the finance, the amount involved, your attitude to risk and business ownership, the assets available and your plan for repaying the funds.

How much and for how long

Before entering into a funding arrangement, it's important to be very clear on how much money the business needs and the plan for repaying it. You're investing in future growth, meaning potentially more sales and more profit, but how long will it take for these to come through? Preparing a detailed budget and cashflow gives you clearer visibility of how long it will be before you can repay. While you can't predict the outcome of your business growth activities, you can, using some reasonable assumptions, form a good idea of what's likely to happen.

Armed with this information, you're now in a better position to choose the right funding option for your business.

Debt finance

Raising money for your business can involve borrowing money from your family, a bank or other financial institution. Borrowing, or debt finance, can take the form of a loan, a credit card, invoice finance or some alternative mechanism, such as peer-to-peer borrowing. You're committing to make repayments over a period of time, usually paying interest on the amount borrowed.

Debt finance is either secured or unsecured. A secured debt is where the amount borrowed is linked with an asset, such as a building, and the lender has rights over that asset should you default on making the agreed repayments. You're giving the lender some security that they'll get their money back should your business become unable to repay.
An unsecured debt is not linked to an asset, making it harder for the lender to recover their money. As a result, the interest payments on an unsecured arrangement are often higher and the amount you can borrow is lower. Many financial institutions ask that a director signs a personal guarantee, making them personally responsible for ensuring that the debt is settled.

One risk of debt finance is that the business can become trapped in a debt cycle. You're continually borrowing and paying interest, which eats away at profits. Debt finance can be hugely useful, but its use should be planned and managed.

Equity finance

Equity finance means exchanging part of your business in return for a cash investment. This can be a popular approach for a startup company, particularly where high growth is anticipated, but it needs substantial investment to get going. Venture capitalists and angel investors are always looking out for investment opportunities like this - a business they can buy into that will give them a high return, years in the future.

Because equity capital means giving up ownership of part of your business, it can also mean handing over an element of control. The extent of this should be agreed in advance, in order to set clear expectations. Some investors are comfortable with leaving the founder to manage the business while others want some input into strategic decisions. This can be useful where the investment comes from someone with solid commercial knowledge and experience that they are able to share. Some angel investors want to provide mentorship as part of their investment.

Business angels and others willing to make an investment in equity will want some assurance as to how they will get their money back, and more besides. This could be in the form of dividends or as proceeds from the sale of the business.

The benefits of equity investments include access to larger sums of capital, and potentially, access to the expertise of their investor and their network of contacts. The downside can be loss of total control.

Asset finance

Your choice of funding is broader when your business has assets, such as property, equipment or non-tangible items such as intellectual property. An asset has intrinsic value and this value can be released by taking out finance that's secured on the asset. An example of this is a sale and leaseback arrangement, where the business effectively sells the asset, say a major piece of equipment, and then leases it back from the new owner. This ensures that you can still use the asset, but you also get a lump sum payment from the sale.

A related approach to raising money is invoice finance, also known as invoice factoring. This is often used to improve cash flow in a business that raises invoices on credit terms. The company gets paid almost as soon as it's raised an invoice, even though the customer may take 30 days or even longer to settle the bill. As with most such asset finance arrangements, the interest rate on the money borrowed will affect its cost and the impact on the bottom line.

Business finance can also be raised against the value of an asset in the possession of the business owner, typically a private property.

Crowdfunding finance

The sharing of the risks and rewards of doing business has been at the heart of commercial funding for hundreds of years. That's the principle behind the stock market. Today, crowdfunding is a popular solution to the problem of finding investment for your business growth plans. It comes in various forms, allowing you to raise either debt or equity finance. There are a number of crowdfunding platforms online, each of which offers a different approach to both risk and reward for their members.

The Qardus option for business funding

We provide finance to small and medium-sized enterprises with growth potential that the business owners want to unlock. The funding available is from £50k to £200k with terms of between 6 and 36 months.

Our funding process is rooted in Islamic community principles and is certified as Sharia-compliant. As a result, we don't charge interest and we don't work in business sectors considered damaging to society, such as alcohol, tobacco or gambling.

Because of our principles, our funding solution is an attractive option for Muslim business owners, but we also provide funding to business owners outside the Muslim community.

We offer fast, flexible and affordable business growth funding that's firmly grounded in ethical principles.

When it comes to business practices and growth, the world is moving towards more ethics based industries. This shift towards ethical business reflects the growing recognition and awareness of the wider impact of business on our economy, our health and addressing inequalities in the world. When businesses link in with the principles of Islamic finance, there is a perfect synergy of value and values.

Ethical businesses and markets grew by almost 35% in 2021-2022. The ethical finance market grew by 50.1% during the pandemic.

There are many different reasons for the growth in ethical business and banking industries. One of the main drivers is consumer consciousness. Consumers are seeking services and products that align with their own personal values and are drawn to companies that can demonstrate their ethical standing. Research shows that 84% of consumers consider the ethics of a business before spending. 63% of customers want to see ethical business practices.

Other reasons include:

• Environmental concerns and climate change awareness
• Social media influence and the spread of information
• Employee and stakeholder expectation
• Regulatory pressures
• Investor preferences
• Global inter-connectedness
• Long-term sustainability

The question arises, does ethical business conduct, especially within an Islamic finance framework, lead to success and growth in business? The answer is a definite yes.

The International Federation of Accountants has found that the business landscape is continuing to see growth and change. The pandemic and global recession have led to changes in the ethics of businesses and how they operate. This is driven by the increase in Muslim spending, investing and operations, but also due to the demand for ethical business principles following a very unstable financial period.

Islamic finance is based on ethics, so the alignment of ethical business growth and Islamic finance goes hand in hand.

Reports by TheCityUK have identified that the global banking assets within the Islamic finance sector totalled $2.8 trillion in 2022. This figure increased by 50% in the years between 2026 and 2022. In addition, by 2021 the UK Islamic bank's assets were in the region of $77.5 billion. The global sukuk insurance industry was worth $196.5 billion by 2021 and continues to see growth despite the pandemic.

Within Europe, excluding Turkey, the UK made up 85% of the European Islamic banking assets. the UK has always been ahead of the game when it comes to using Islamic finance to promote research into sustainable development options and ethical finance options. London continues to be one of the leading financial centres in the world.

This blog will examine the pivotal role of ethical business growth and Islamic finance, and how Sharia principles play a pivotal role in steering businesses towards long-term success.

Ethical Business

Ethical business practices themselves can be a huge catalyst for sustainable development and business growth. When combined with an Islamic finance funding model of management, that growth can be long-term and successful.

Islamic finance is rooted in ethics and Sharia principles that focus on the greater good of society over exploitation.

Aligning business operations with ethics ensures that businesses are able to create an environment where long-term success can be achieved.

Ethics And Islamic Finance

Both Islamic finance and ethics are inextricably linked. The foundational principles of Sharia rules relating to financial transactions guide how deals should be conducted. The emphasis is firmly placed on social justice, ethics, fairness, and equity.

One of the main principles of Islamic finance is the absolute prohibition on interest. This is a fundamental principle of the Islamic finance market. For the traditional corporate world, a move away from interest based lending and transactions seems at odds with their profits based perspective. Actually, the opposite is true.

Charging interest is seen is Islam as creating an extremely exploitative market and cannot lead to stable economics and transactions. Recent fluctuations in global interest rates demonstrate how variable and unpredictable interest based lending can be. Islam considers the charging and payment of interest to be an unethical and prohibited practice.

According to the Fitch Ratings, in 2023 the assets within UK Islamic funds were approximately $280.6 million, a growth of 2.9% from the previous year.

Profits With Purpose

Islamic finance champions the idea that you can achieve profits with purpose. Ethical practices might be the driving force behind the stability, but they can also lead to sustainable practices that can weather turbulent markets and governmental changes.

S&P Global Ratings believes that the Islamic finance market will continue to grow by as much as 10%. This is based on evidence that despite the global pandemic, the market grew 10.6% despite the double blow of the oil prices drop and the pandemic.

Navigating Ethical Business Practices

Navigating ethical business requires a considered approach. It is not enough to simply state that your business is ethical, but to be able to demonstrate that it practices what it preaches.

Taking a professional and intentional approach to ethics within business is fundamental. Businesses need to have an understanding of their impact objectives and sustainability.

Here are some steps businesses should take:

• Develop strong leadership
• Lead by example
• Understand ethics
• Curate your business practices
• Understand the environmental, societal, political and individual impacts your business has
• Review your investment strategy
• Train, teach and communicate with staff
• Embed ethics in decision making

Beyond Profit Margins

Islamic finance focuses on business potential beyond monetary profits. It places emphasis on social justice, sustainability, and community wellbeing. These demands are also now coming from consumers who want to see ethical business practices from the companies they spend with.

The perception amongst consumers is that companies should prove they are ethical and sustainable.

Remember, 40% of consumers now choose brands that have environmental sustainability within their practices and values (DigitallyAlex.com). Over 60% of consumers want an ethical service, and 34% will stop using a product or service if unethical practices within the business are uncovered.

The relationship between consumers and businesses has been evolving rapidly over the last few decades. The recent Marigold Report in 2023 found that 60% of consumers make less impulsive spending choices, and the ethics of a business feed into their decisions.

Conscious Capitalism

Younger generations including Millennials and Gen Z have increased spending power. As consumers, they are very conscious and globally aware of social justice issues. These groups are leading the demand from consumers for more ethical and conscious capitalism.

In 2022, 53% of young consumers said they were willing to spend more to pay for ethical products. Over 63% of consumers aged between 25-35 stated that they would like to have the ethical values of products listed on them.

50% of Gen Z and Millennials want to buy from more ethical brands, and over 54% will avoid brands they do not think are ethically minded.

These statistics all highlight the role of responsible and ethical business practices in driving success and retaining customers.

Ethical Funding And Islamic Finance

For businesses looking to operate within Islamic finance frameworks, they will find that these funding options are no longer exclusive to Muslim regions such as the Middle East and Saudi Arabia. The Islamic finance industry in the West continues to grow year on year.

In the UK alone, the Islamic finance FinTech industry was ranked the 5th in the world in the Global Islamic Fintech Index in 2021. The UK continues to invest in Islamic finance infrastructure and services in the UK continue to expand.

For businesses to truly see ethical growth and sustainability, they need to look beyond the traditional financial services on the market. More and more businesses are looking at Islamic finance lending and funding options to incentivise growth.

Whilst the Gulf region still accounts for the largest share of Islamic finance assets (over 45%, with the Middle East and South Asia at 25.9%), the Islamic finance industry in the West is growing at a fast pace.

As concepts relating to corporate social responsibility increase, and consumers move away from capitalist, wealth hoarding enterprises, it is clear that Islamic finance offerings will increase with the demand.

From Values To Value

Transitioning from business models that are not ethics based to those where ethics are at the forefront of operations may seem daunting.

However, as long as a considered and intentional approach is taken, businesses will find that ethical business practices not only lead to innovation but better results. Businesses can leverage ethical practices to enhance their own market standing and position.

Ethical businesses see better results overall according to an Institute of Business Ethics report. This includes ethical finance, ethical practices, and ethical business objectives.

Ethical businesses attract diverse clientele and foster prosperity which is long-term. Often, customers wanting a more ethical approach are also those with more money to spend. The partnership of business and ethics leads to growth and customer retention.

In 2022, Deloitte found that 48% of spending adults wanted to see more ethical and sustainable business practices. Over 76% of businesses in the UK now mark ethics as a high priority for their organisation. The business landscape is evaluating, navigating and changing as they understand customer choice and preference.

Ethics And Integrity

What Islamic finance aims to do is foster long term business growth in a sustainable and stable manner. The ethical framework is one which many businesses now rely on and promote.

In the dynamic and fast-paced world of Islamic finance, investing and operating ethically has been yielding great dividends for business. From 2017-2-21, assets under Islamic finance funds globally saw an average annual increase of 13%.

For any business, whether large or SME, the market currently offers dynamic and flexible Islamic finance options to scale growth.