Unsecured Business Loans
Unsecured loans are popular with businesses looking to raise money. The borrower receives a lump sum of cash, from their bank or other lender, and they repay it over a number of months or a few years. The money is put to work in the business and if all goes well, it should help generate revenues and profit that enable repayment of the loan plus any associated costs.
What is an unsecured business loan?
An unsecured business loan is where a business borrows money without providing security. This security is usually in the form of an asset, such as a building or valuable piece of equipment, which the business owns. This asset becomes a form of guarantee to the lender. Should the business be unable to repay the loan, the lender is given the right to take control of the asset and use it to recover some or all of the debt - typically by selling it.
An unsecured business loan is not linked to an asset in this way, which means the lender is taking a greater risk. If the business can't afford to repay the debt it will be more difficult for the lender to get the money back.
In recent years, it's become common for company directors to sign personal guarantees when taking out an unsecured loan. This gives the lender more confidence they have some recourse should the business become unable to make repayments.
Reasons for taking an unsecured business loan
One of the main reasons why businesses borrow is to fund growth plans. This growth requires investment in advance - it could mean opening a new office, hiring new staff or purchasing new equipment. Many businesses don't have the working capital needed for such investment, meaning they need to find a way to raise the funds. An unsecured loan is a common choice.
As part of the growth plans the business owner will usually have prepared a business plan. This sets out how they intend to spend the capital they have borrowed and includes a budget for repayments.
If a business wants to borrow because it faces cashflow difficulties in its daily operations, it's unlikely to be approved for an unsecured loan. Before they agree to make a loan, potential lenders will perform a series of checks on the business and business owners, in order to assess the credit risk. This includes looking at the firm's credit history, its credit rating, and reviewing information supplied by the business such as financial accounts, budgets and cash flow projections. These checks help the lender to quantify the financial health of the business.
For businesses facing short-term cash flow problems, other forms of funding could be more accessible, such as invoice finance or merchant cash advances.
Benefits of an unsecured business loan
Ideal for smaller amounts - Unsecured loans are typically for smaller amounts, usually less than around £15,000.
Quicker to arrange - Because the amounts are smaller and there are no assets involved, the legal and financial application processes are faster. It's often possible to arrange an unsecured loan in just a few days.
Good for businesses with trading history - Finance providers look more favourably on businesses and owners who can demonstrate a history of growth over a number of years. Such businesses will have a better credit score, because they have managed their finances well.
Assets not put at risk - An unsecured loan leaves control of all the assets with the business.
Alternatives to an unsecured loan
While they can be a convenient way to raise money for your business, an unsecured loan is not always the most cost-effective solution, as the fees tend to be higher to reflect the risk to the lender. These loans can also be hard for startup businesses to access, because they lack the trading history needed to demonstrate creditworthiness.
Alternatives to unsecured loans include:
- Equity finance, such as funding from an angel investor or venture capitalists.
- A private loan, from friends or family.
- A secured loan.
- An overdraft facility with your bank.
- A mortgage on property.
- A startup loan, designed for very new businesses.
- Peer-to-peer crowdfunding.
The range of funding options continues to increase, with a growing number of fintechs bringing innovation to the business finance market.
Funding for growing businesses from Qardus
We help business owners get access to growth finance. The funding we provide is of between £50k and £200k on terms of between 6 and 36 months.
You can use this finance for a variety of business purposes, such as purchasing new equipment or other assets, hiring and training new employees, investing in improved processes or boosting your inventory. Our funding allows business owners to invest for growth. Because we want to see businesses do well, we work with firms that have a proven product and a strong management team.
Our clients are drawn from across the UK, operating in different industries. What they have in common, in addition to their growth ambitions, is a commitment to the wider community, good governance and strong ethical principles.
The funding we provide is certified Sharia-compliant, meaning it's operated in line with Islamic finance principles. This does not mean it's only available to Muslim-owned businesses. Many of our clients are outside the Muslim community but they share our values, and operate in industries we are open to supporting.
If your business is looking for growth funding that's fast, affordable and ethical, get in touch with us today.
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Waqf is an ongoing, sustainable, charitable donation and has been used throughout Islamic history to benefit and support communities, and aid community development. Islamically, waqf is a mechanism through which the condition of society can be improved. Waqf refers to an endowment made to a charitable, educational or religious cause.
It is a voluntary action that the whole community can benefit from, for example, the building of a university, research centre or hospital.
WAQF - WHAT DOES IT MEAN?
The Arabic meaning of waqf means 'restriction'. This is based on the principle that all property essentially belongs to Allah. So, whilst a Muslim may donate to a charity for community development, the donation is not owned by the Muslim but by Allah.
For example, if you donate some land or an asset for the purpose of community development, then the community will reap the benefits. The donation releases an ongoing community benefit that supports future generations. A famous example of waqf is the Al Azhar Mosque and University in Cairo, Egypt. This University was founded as waqf in 1908, with funds donated by wealthy Egyptians.
HOW DOES WAQF WORK?
Waqf involves donating a fixed asset which in turn provides a financial return.
Waqf is based on the principle that you can donate an asset that can then continue to provide a charitable service for the foreseeable future. The waqf project goes on to support others in the community through various activities and services.
This is how waqf works:
- Individual donates an asset to a waqf project.
- The donations are collated and invested in a Sharia compliant way.
- Any profits and returns on the investments are used to support charitable organizations such as education, relief of poverty, providing healthcare services and emergency solutions.
- Some profits are reinvested in a Sharia compliant manner.
The outcome is that your donation should keep going for a number of years, benefiting humans for generations. The incentive for Muslims wanting to donate to a waqf is that the donation is considered to be an ongoing charitable endowment that benefits others for many years.
History Of Waqf
Although waqf is not explicitly prescribed in the Quran like charity is, it is considered to be comparable to sadaqah. Waqf investments are deemed to be a crucial part of Islam as the Prophet (SAW) stated that:
"When a person dies, all their deeds end except three: a continuing charity, beneficial knowledge, and a child who prays for them"
Waqf investments have an important continuing charity element.
Waqf As A Social Finance Institution
Many Muslim majority countries in the world are still developing and income-poor. There is a lack of availability of private sector investment businesses and options. Waqf can be considered a social finance institution that can fill the gaps in development spending. Waqf provides an avenue for the effective utilisation of perpetual social savings.
With transnational waqf investments and support programmes, there is potential for philanthropic Muslims to support the development of communities across the world.
When viewed through an Islamic redistribution framework, it is clear that waqf harnesses selfless charitable giving in a way that is effective and impactful. Targeting social segments within society and aiming for long term improvement brings benefits to donors and society as a whole.
Donating assets for permanent societal benefit facilitates flexibility and stabilisation for deprived and needy communities. Waqf essentially transforms social capital into social infrastructure, complementing zakat and sadaqah donations.
Sourcing Sharia compliant waqf investments and donations online can be difficult, so you must ensure that you undertake the due diligence required.
An Islamic crowdfunding platform has launched in the UK, providing Shariah-compliant finance to small- and medium-sized enterprises (SMEs).
Salaam Gateway reported that Qardus, which is an appointed representative of Financial Conduct Authority-regulated ShareIn, provides unsecured loans of up to £100,000 in the form of a commodity murabahah, an Islamic financing structure in which the seller and buyer agree to the cost and mark-up of an asset.
The platform, which is open to both Muslim and non-Muslim investors in the UK and Europe, has a minimum investment of £100 and offers target returns of 10 per cent per annum.
Capital at Risk. Returns are not guaranteed
July 13 2020, read the full article at P2P Finance News: https://www.p2pfinancenews.co.uk/2020/07/13/islamic-p2p-lending-platform-launches-in-the-uk/
Cryptocurrency, as it is known today, started with Bitcoin as the first decentralised cryptocurrency in the modern world. The first Bitcoin transaction took place as far back as 2009 and ever since Bitcoin has grown into a global phenomenon bypassing traditional finance systems and banks. Islamic cryptocurrency, also known widely as Islamic coin, began to emerge in the late 2010s as the demand for Sharia-compliant digital assets grew.
Islamic coin is Sharia-compliant cryptocurrency that adheres to Islamic finance rules relating to financial transactions and exchange. This article will examine the benefits of Islamic coins and their relevance in the modern world of finance.
Cryptocurrency And Islamic Finance
Over the years Islamic finance and the world of cryptocurrency exchange and platforms have become increasingly interconnected. Islamic coin merges the traditional with the modern, uniting decentralised currencies with Sharia principles.
Not only does the Islamic coin stand as a testament to the thriving impact of Islamic finance on the modern world, but it also offers Muslims an alternative and innovative way of managing their money.
Two notable initiatives relating to Islamic coin are the First Islamic Crypto Exchange (FICE) and project Onegram. Project Onegram is a project that aims to create an Islamic cryptocurrency coin that is backed by gold reserves. Users of the coin are able to store their coins in a digital wallet and transact securely.
FICE is an Islamic initiative aiming to provide an Islamic digital platform for cryptocurrency transactions that are fully compliant with Islamic finance rules.
The main features of FICE are:
- it employs ethical screening
- it incorporates community governance within its structure and operations
- it offers Sharia-compliant trading
FICE and Onegram are both efforts to bridge the gap between Islamic finance and blockchain technology. The aim is to offer Sharia compliant solutions to Muslim investors in the realm of digital and decentralised finance.
Main Features Of Islamic Cryptocurrency
There are some key features that differentiate Islamic coin from other cryptocurrencies:
- Asset backing - Islamic coin is based on a system of asset backing. This not only provides intrinsic value but also stability in line with Sharia rules. Often the digital coin is pegged to assets that are tangible such as gold, real estate, silver, and commodities.
- Transparency: Islamic coin transactions must be transparent if they are to comply with Islamic finance rules. This means any trade, investment, platform being used, sales, prices, return, market, service, and exchange involved must be halal and transparent.
- Sharia law: Islamic coin must be Sharia compliant. This means the coin itself cannot be involved in any form of interest, uncertainty, or speculation.
- Governance: the governance relating to Islamic coins is usually decentralised. This is looked upon favourably by Islamic finance as it means there is more scope for the community to be actively engaged in the governance structures and processes.
- Regulation: Islamic coins, whether in the UK or abroad, must comply with regulatory frameworks that govern digital assets and finance. Digital assets are seen as a valuable commodity and many countries already have robust regulatory frameworks in place.
WHAT IS AN ISLAMIC COIN?
Islamic coins are essentially a form of cryptocurrency that is Sharia compliant. Muslims have an incentive to partake in Islamic coin trades and investment as they can be reassured that the coin is fully halal.
Of course, this means the coin must be certified as Sharia-compliant by experts with knowledge of Sharia law and rules.
For example, Islamic coin cannot be aligned or involved with any industry or market that is prohibited in Islam such as the gambling or alcohol industry. There is also a requirement that Islamic coin investment considers social benefit and social purpose as per Islamic finance rules. The ethics of the management and investment of Islamic coin are also important for adherence with Islamic finance.
WHAT ARE THE BENEFITS OF ISLAMIC COIN?
Islamic coin offers many benefits to its users:
- It is Sharia-compliant and aligns with Islamic principles
- It is transparent
- It is stable
- It facilitates the creation of strategic partnerships and ethical investment
- It provides innovative financial solutions
- It supports marginalised communities
- It uses ethical investment criteria
- It facilitates and enables financial inclusion
- It enables cross-border transactions
- It operates on a profit and loss sharing arrangement
- The HAQQ platform screens for Sharia compliancy
Islamic coins offer many benefits to Muslim participants and investors looking for halal ways to invest and trade. As the cryptocurrency financial ecosystem continues to evolve, Islamic coin will play a key role in shaping the future of Islamic cryptocurrency and digital assets.
WHAT IS THE DIFFERENCE BETWEEN ISLAMIC COIN AND BITCOIN?
When considering cryptocurrency, the question always arises about the difference between Bitcoin and Islamic coin. The main difference is that Islamic coin adheres to Islamic finance principles. The very existence of Islamic coin is to ensure that Sharia rules are complied with and there is no such obligation on Bitcoin.
Whilst both coins operate on decentralised platforms, Islamic coin should incorporate more transparent structures of governance leading to greater accountability and proof of adherence.
In addition, another key difference is that Islamic coin needs to follow ethical investment screening and criteria in order to the compliant with Islamic finance. Islamic coins operate on the HAQQ blockchain.
Whilst there are similarities in the nature of both Bitcoin and Islamic coin, the main difference is that Islamic coin adheres to a different set of values and principles. Users of Islamic coin will therefore seek assurance of compliance with Islamic rules relating to finances.
WHAT IS THE FUTURE OF ISLAMIC COIN?
More and more Muslims are looking to invest in and trade in Islamic coin. The Sharia Authority which was formed for the purpose of making decisions on the validity of cryptocurrency has stated that Islamic coin is a financial asset that can be traded whether that is by sale and purchase, or traded for goods and services.
Islamic coin holds great potential in the crypto world. As the crypto ecosystem and infrastructure continue to evolve there are some trends that suggest Islamic coin will see great growth in the coming years:
- Global financial inclusion: Islamic coin is playing a central role in making sure underserved Muslim-majority regions are able to partake in digital currencies. The demand is already there and is growing.
- Islamic finance growth: as the Sharia compliant finance industry grows so too does the demand for the accompanying digital ecosystem.
- Evolving markets: as the dynamics of markets in the world continue to grow and develop, Islamic coin is predicted to grow alongside them. Collaboration and innovations are already being seen across many different regions.
- Adoption: increased adoption of Islamic coins will lead to greater liquidity, market development, and acceptance.
WHAT ARE OTHER HALAL COINS TO INVEST IN?
Whilst the list of halal cryptocurrencies is growing, it is important to note that cryptocurrencies as digital assets are not deemed to be automatically compliant. They need to be screened by experts against Sharia principles. Some coins that have been deemed to be halal include:
- ZRX
- ELF
- Aion
- Alchemy Pay
- ASTA
- BEAM
- Cardano ADA
- Chainlink
There are many other coins that are deemed to be Sharia-compliant, but in each case you must do your own research and satisfy yourself.
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