Are you a Centrelink customer looking to launch your own business? Frustrated by getting knocked back by banks because you have poor credit or because you’re receiving benefits? A micro loan might be the solution you’re looking for. The person-to-person nature of these financial solutions means micro loans for Centrelink customers are feasible where more mainstream loans might not be.
What is a micro loan?
Micro loans are person-to-person (P2P) investments typically used to fund a small business. Microlending is often used to fund entrepreneurs in developing countries where other loans are difficult to come by. However, they are also useful for small-business owners in developed countries who have poor credit history or are otherwise unable to get approved for finance with a bank or credit union. This is what makes them suitable for entrepreneurs who are on Centrelink.
How does a micro loan work?
People seeking a micro loan can reach investors via websites such as SocietyOne, MoneyPlace, Harmoney, and Wisr, which act as administrators for microlending arrangements. By doing this, you could get your business needs funded by either a single lender or a group of investors (each lending a portion of your total micro loan). You then pay back the loan to your investor(s) over time with interest, just like a regular loan.
Features and Benefits of Micro Loans
The main benefit of a micro loan is that you can potentially access a lender (or multiple lenders) regardless of your financial circumstances (e.g. bad credit, no credit history, or receiving Centrelink). The downside to this is that micro loans typically come with higher interest rates to account for the high risk that lenders are taking on board.
Microlending also comes with these advantages:
- Quick and simple application process
- Fewer complications and documentation
- Technology makes it possible to access investors all over the world.
Why a Small Business Might Need a Micro Loan
Aside from launching in the first place, an existing small-business owner may need finance at various stages while running and growing their business. Microlending can help you overcome these obstacles if enough lenders trust you and are willing to invest in your business development.
Some scenarios where your small business might need additional financing via a micro loan include:
- Expanding or renovating your premises
- Growing your online presence (e.g. website, eCommerce, social media, email marketing)
- Investing in new equipment
- Hiring new staff and expanding your team
- Diversifying your business with a new product or service.
How to Apply for a Micro Loan
Seeking a micro loan is similar in some ways to using a crowdfunding platform like Kickstarter. You apply for the loan through a site like SocietyOne or MoneyPlace, and they will attempt to match you with investors who will lend you the money you need. You may need to describe your business and explain how the money will be used in order to persuade potential lenders.
A micro loan isn’t always the most suitable option. If you need quick money for a small business upgrade, you may want to instead consider a cash loan of up to $1,000 with Cigno.