Fatwa ID: 04039

Answered by: Mufti Mohammed Tosir Miah

Question:

SBA loan that helps businesses keep their workforce employed during the Coronavirus (COVID-19) crisis.

Loan Details and Forgiveness

The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.

Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels.  Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.
This loan has a maturity of 2 years and an interest rate of 1%.

In the name of Allah, the Most Gracious, the Most Merciful

Answer:

The general principle with all loans whether from banks or any other financial institutions is if one has to pay back the loan with interest then it will be impermissible.

If the loan is taken by the business to deal with the immediate cash flow problems and they will able to pay it back to the government without incurring the need to pay interest then it will be permissible.

Likewise, if the business took the loan and they met those conditions laid down by the government which resulted in the debt being waived, then that will also be considered to be permissible as well.

The Prophet of Allah said: “Whoever allows more time for a debtor who is in difficulty or waives the debt, Allah will shade him with His shade.”  (Sahih Muslim)

However, one should bear in mind that the conditions the government lay down has to be within the boundaries of the Shariah, as any conditions beyond the boundaries of the Shariah will be considered invalid, and one will not be allowed to circumvent a situation which is not allowed in the Shariah with the intention to receive a government waiver on the loan.  

Umar Radiallahu Anhu said: Any condition which is against Allah's Laws, is invalid." (Sahih Bukhari)

Only Allah Knows Best

Written by Mufti Mohammed Tosir Miah

Darul Ifta Birmingham