Commercial Mortgages Everything You Need

Commercial Mortgages 101: Everything You Need to Know to Create a Winning Loan Request Package

With real estate prices at their lowest in years and the economy poised for a rebound, it’s an opportune time to invest in commercial real estate. But credit and financing issues can still pose challenges that prospective borrowers must overcome in order to get the money and mortgage terms they need. Commercial Mortgages 101 is a step-by-step guide for both real estate investors and mortgage brokers, offering insight, practical tools and a thorough overview of commercial mortgage underwriting

List Price: $ 21.95

Price: $ 11.31

Commercial Mortgages 101: Everything You Need to Know to Create a Winning Loan Request Package

With real estate prices at their lowest in years and the economy poised for a rebound, it’s an opportune time to invest in commercial real estate. But credit and financing issues can still pose challenges that prospective borrowers must overcome in order to get the money and mortgage terms they need. Commercial Mortgages 101 is a step-by-step guide for both real estate investors and mortgage brokers, offering insight, practical tools and a thorough overview of commercial mortgage underwriting a

List Price: $ 21.95

Price: $ 21.95

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Modes Of Financing By Islamic

by RON SOMBILON MEDIA, ART and PHOTOGRAPHY

Modes of Financing by Islamic Banks

Mode of Financing by Islamic Banks

The selection of mode in Islamic financing depends upon the nature, purpose and size of the transactions involved, essentially these are:

a) Selling on profit: This mode implies the purchase of goods by banks and their sale to clients at appropriate mark-up in price on deferred payment basis, without levy of mark-up on mark-up; it encompasses the purchase of a property by banks from their clients with a buy-back agreement.

b) Shared-risk financing and sharing of profit and loss: This mode implies the sharing profit and the risk of loss among the investors, i.e. the bank on the one hand and the client on the other hand.

c) Renting of assets (leasing)

d) Benevolent Loans

The modes which are closest to the spirit of Islamic finance are Musharakah (shared risk partnership or joint venture) with Mudarabah (profit-and-loss-sharing, also a form of partnership). However, some practical difficulties which had sometimes hindered their application and adoption led Shari?ah scholars to allow the use of other modes such as ijarah (leasing), and murabaha (cost plus mark-up). These latter modes are comparatively easy to understand and apply, however the mark-up in murabaha and lease rental in ijara suffer from having a resemblance to some of the conventional banking interest-bearing products. Shari?ah advisors have expressed a desire to encourage the use of products based on the concepts of musharakah and mudarabah as early as possible.

Debt Type Instruments include:

Murabaha (cost-plus profit mark-up)

In its simplest form, murabaha, is a trading mode and refers to a purchase and resale transaction involving an asset whereby the cost of the purchase and profit margin (mark-up) on the resale is known and the mark-up agreed by the parties involved. Another general and regular kind of sale is musawamah, in which the price of goods to be traded is negotiated between seller and buyer. Musawamah is usually used where the seller is not in a position to ascertain precisely the costs of commodities offered for sale or does not want to disclose the cost price; all other conditions relevant to murabaha are valid for musawamah as well.

Under murabaha, the Islamic bank purchases, in its own name, goods from a third party (the supplier/seller) that are required by their clients, and then re-sells the goods to their clients, on spot or deferred payment, with an pre-determined mark-up.

The difference between the bank?s purchase cost and its sale price forms the profit available to the Islamic bank on this transaction. The ownership of the goods being sold to a client at a mark-up price on deferred payment terms remains with the bank.

Salam (advance payment for goods)

Salam is a trading mode allows a buyer to make payment in advance for goods to be delivered on a specified future date at an agreed price. Salam is also defined as a forward purchase of specified goods for assets or a full forward payment (i.e. a forward contract). In normal circumstances, a sale cannot be affected unless the goods / assets are in existence at the time of the bargain. However, this type of sale is an exception, provided the goods / assets are defined and the date of delivery is fixed. The objects of the sale must be tangible goods/ assets that can be defined as to quantity, quality and workmanship

Istisna?a (contract to manufacture)

Istisna?a is a trading mode where specific goods or an asset is made against a purchase order for delivery at a specified future date. An order to manufacture goods or assets requires various expenses including expenditures on raw materials, utilities, labour, and direct and indirect over-heads; these types of expenses may not be suited to murabaha financing which is primarily focused on the trade in commodities.

As a mode of finance, Islamic banks frequently use istisna’a to finance construction projects that may also involve the manufacturing of industrial equipment and various capital goods. Under this mode, the client will request and the bank will agree to construct and to sell the project to be constructed at the bank?s selling price (cost plus profit margin) on deferred payment terms and thereafter the bank will request another party (a contractor) to construct the project and the bank will purchase the project to be constructed at the bank?s purchase price (cost price/facility amount).

Tawarruq (Reverse Murabaha)