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How Microfinance Loans Work

Microfinance Loans

Microfinance loans are low-interest and small impact loans given to cash-strapped applicants. It’s either for business startup purposes or dire financial needs. Loans like these are usually more lenient in repayment terms and interest. Institutions like The National Bank of Australia offer them especially for initiating a small business.

This Microfinance Loan discussion will cover these subtopics:

  1. A closer look at Microfinance Loans
  2. How to avail a Microfinance Loan?
  3. Requirements and Eligibility
  4. Terms and Conditions
  5. Types of Microfinance Loans
  6. Any other Microfinance loan options?

A closer look at Microfinance Loans

Microfinance Loans answer the needs of low-income Australians for small businesses and immediate needs. All of these are unsecured loans, which means there is no collateral or security involved. Loan amounts vary: For instance, The National Australia Bank loans out from $1,500 to $3,000 for immediate daily needs.

They also have bigger personal loans for up to $5,000. Small business loans are granted up to $10,000 maximum through its Microenterprise Program.

How to avail a Microfinance Loan?

You can apply online through the NAB website and by phone, or through any of their bank branch locations. A short screening process may take place to check for the most basic requirements and eligibility.

You can also avail of the loan through its affiliated financial institutions, such as Good Shepherd Microfinance and The Business Enterprise Center at Bendigo TAFE. Business loans through these partner organisations usually come with financial advisors, to help startup and existing businesses. NAB’s business loans have become indispensable after Covid 19 hit the Australian economy.

Good Shepherd has a NILS or No Interest Loan Scheme as well for low-income households. These household-dedicated loans are lower in totals and have no interest involved. More lenient terms and requirements are also used to help Australians with their current financial struggles.

Requirements and Eligibility

A Microfinance business loan has easier terms than regular loans. There are some other certain requirements added though to get approval:

  • Australian citizens and permanent residents
  • 18 years old and beyond
  • Has no running debts
  • Is not under hardship or bankruptcy
  • Not eligible or under any mainstream loans
  • Must have a consultation with any of NAB’s Microenterprise Loan partner organisations
  • Has agreed to work with the partner organisation for at least a year after the loan
  • The applicant has a basic business plan laid out for their business

In addition to the first 3 requirements above, NILS loan applicants must be:

  • From households with no more than $45,000 income
  • At least 3 months of residency at the address
  • With a healthcare or pension card

 

To get a Microfinance business loan, you would need to consult with one of their partner organisations. Details of your business loan will be checked and discussed. An application form will be filled out with all the required details.

Once NAB receives your application, a NAB manager will get in touch to assess the details and your capability for the repayment terms. After approval, you will receive your loan funds through a credit card.

Terms and Conditions

Applications for these loans are more lenient than regular loans. No credit check or collateral is required. A minimum income is only needed to make sure the minimal repayment terms are met. The majority will also be unsecured, based on trust and the minimal requirements met by applicants.

Basic NAB Microfinance Loan terms:

  • The loan is released through credit cards
  • $5,000 to $10,000 loans available
  • Fixed 9.99% interest rate
  • Higher loan amounts are also available with extra terms and conditions
  • 3-year repayment period
  • First 90 days repayment and interest-free period

Most business loans involve working with financial advisors, planners, and business experts who will provide guidance and advice in making decisions and business planning and strategies. They will continue to support applicants with their business for at least a year or until they have completed their loan repayments.

Types of Microfinance Loans

  • NILS Loans:
    Offers household loans of up to $1,500, with zero interest and a flat rate.
    Aside from a basic NILS loan, they also have partnership programs:

    • Launch Me – for small business, employment, and education purposes
    • Step Up Loan – Low-interest loans from $800 to $3000 with zero fees
    • Good Money – Retail partnerships with different loans and financial offers
    • Good Learning – Educational programs for those involved in the microfinance industry
  • Personal Loans:
    These are higher than the common NILS loans, with no application or exit fees.
  • NAB QuickBiz Loan:
    Flexible business loan with repayment durations of 12/24/36 months and monthly installments, at a 12.95% annual interest rate.
  • NAB Business Market Loans:
    Borrow money for your business with regular interest and repayment terms; They will depend on the amount and the repayment terms agreed upon.
  • NAB Business Options Loans:
    These types of business loans have the added option of using fixed and variable interest rates during the loan tenure.
  • NAB Bank Guarantee:
    Loan limits of up to $250,000 that also involve an initial term deposit.
  • NAB Agribusiness Loans:
    Business loans specific to Agricultural small businesses

Other Microfinance loan options

NAB also offers a few alternative loans and lending services. They carry different terms, and are more specific:

Business overdrafts: You can apply an overdraft for an existing business account, with a choice of either a secured (with deposit/collateral) or unsecured loans, from $5,000 and up. A QuickBiz Overdraft covers up to $50,000 of unsecured loans; The NAB Business Overdraft can cover up to $20,000.

Vehicle and equipment finance: Apply for a loan to get a new car, vehicle, or equipment for business use. Up to $150,000 in loan amounts is available with an annual interest rate of 3.95% payable up to 5 years.

Business Credit Cards: offer business-usage credit for use within the company with a range of options that suit small to medium-sized business needs.

Aside from NAB and their partners’ microfinance offers, there are also other microfinance loan offers from other financial institutions. Terms may slightly vary, depending on the amount. Usually, they are lenient as well with low fixed interest rates, long-term repayments, and have no credit checks or financial proof requirements.

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