Fatwa #340787 December 2015Denmark
Business/merchant cash advances for future receivables are not permissible
Question
I want to know if it is legal to work for a company that connects business owners with lending institutions for small business loans. The lenders offer what is called a business cash advance, or a purchase of future receivables based on the businesses recent income. For instance:
Loan amount: $100,000Total Payback: $125,000
This payback amount does not grow as with traditional interest financing. It remains the same. The lender purchases $125,000 worth of the businesses future income for a discounted lump sum of $$100,000.
Jazakhallah khair for your response.
Answer
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh
Your question is unclear. Kindly advise your specific job profile in order for us to advise further. Business/merchant cash advances for future receivables are not permissible since that is tantamount to the sale and discounting of future business debts which are impermissible.
And Allah Ta’āla Knows Best
Ismail Desai,
Darul Iftaa
Checked and Approved,
Mufti Ebrahim Desai.