There are many ways to fund a new business start-up, but microfinance is one of the lesser-known methods. In fact, you may not be aware of microfinance if you've only just begun researching small business financial planning.
So, should your Australian start-up use microfinance? And who can benefit the most from this form of lending? Let's begin with a brief explanation of how microfinance works.
What is microfinance?
Microfinance is a type of lending designed to help low-income people or disadvantaged groups access funding for essential goods and services.
These low or no-interest loans are often used for personal and household purposes, such as buying white goods, repairing a car or paying for medical treatment. Many individuals who are eligible for microfinance are excluded from traditional financial institutions and banking services.
Can microfinance help my Australian start-up?
Microfinance isn't just for personal use, however. Entrepreneurs who need loans to start their own small business can also benefit from micro loans.
This ensures that people with no credit history or a poor credit rating still have the opportunity to develop their innovative ideas into successful businesses, even when mainstream funding avenues are closed off.
What microfinance options are available in Australia?
Financial institutions, charities and government initiatives can provide microfinance.
Here is a brief list of microfinance providers, but for a more comprehensive explanation of your borrowing options, please contact WMC Accounting.
NAB Microenterprise Loan Program: The NAB scheme offers unsecured business loans of between $500 and $10,000, with interest-free periods and flexible repayment options.
Westpac and Thrive: Last year, these organisations launched a $2 million microfinance project to help refugees fund their entrepreneurial dreams.
Many Rivers: Established in 2007, Many Rivers offers microfinance support to help people start their own business in Australia. Sole business owners can access up to $5,000, while multi-owner businesses are eligible for loans as high as $10,000.
— RN Breakfast (@RNBreakfast) August 28, 2017
Does microfinance work?
NAB research into its Microenterprise Loan Program revealed that 59 per cent of borrowers had described traditional finance options as 'difficult to access'.
Furthermore, 90 per cent of people who opted for an NAB micro loan were still in operation, and 88 per cent were confident they would be running in a year's time.
As a growing number of people become aware of microfinance, the economic and community benefits are only likely to increase. So, should your Australian start-up use microfinance to help develop and grow a small business plan?
Talk to the WMC Accounting team to find out the best ways to finance your entrepreneurial endeavours.