A topic which I have become increasingly curious about recently regards Islamic Banking Laws. Now, all I know is that risk is shared and there is no interest allowed.
In credit card factoring, or business cash advance, we pay business owners money in advance, which they expect to be getting in credit card receipts over the upcoming months.
For example, in a restaurant finacing case, let’s say our customer is a restaurant owner. He wants to buy new kitchen equipment for his restaurant. He comes to us, and we give him $30,000. In the coming months, when customers pay at his restaraunt using credit cards, the money comes to us, instead of to our client. We do end up getting back more money than we originally paid out, but it is not interest – we simply advanced him the money at a discount. The benefits to our client is that even if he has bad credit or no credit, we can still work with him and we can get him the cash he needs quickly.
Is this Sharia compliant? (Is it compliant with Islamic banking laws?) I am very curious: why, or why not?
Thanks to everyone who helps with this.