Business loans for Centrelink recipients

Find out if you're eligible and compare your Centrelink business loan options below.

Bria Horne
22 Jan 2020

Expert overview: The 3 most important things about getting a business loan on Centrelink

• Your options are more limited if you receive Centrelink benefits, but there are still a number of business loan options to consider.
• The NEIS, which provides New Business Assistance, was specifically designed for Centrelink recipients who want to start and work full-time in their own business.
• The key to being approved for a business loan is to carefully review the eligibility criteria and provide a clear, detailed explanation of how you meet the requirements.

What business loan options are available for Centrelink recipients?

One of the more likely sources of business financing is a private lender. It can be difficult to find a business loan without an established business history, especially if you're on Centrelink, but one of these lenders below might be a good option.

These two Australian lenders can offer business loans even if you don't have an established business and even if you're on Centrelink. There are also options if you already have an established business.

• The lenders below will consider your application based on the strength of your ideas, experience and personal drive.
• These lenders can provide financing even if you're on Centrelink.

Learn more about Government-backed business loans in response to Coronavirus

What about the New Enterprise Incentive Scheme (NEIS)?

The NEIS is another possible option.

• If you're currently participating in jobactive as a volunteer and enter the NEIS assistance program before the end of your period of service, you might be able to secure a place in the NEIS.

This program is for people on Centrelink who want to start and work full-time in their own new business. NEIS counts as a Centrelink-approved activity for up to 13 weeks from commencement. The business is required to be upstanding, lawful and preferably a not-for-profit.

This scheme gives outstanding applicants a range of free ongoing business support and mentoring services in addition to an allowance to help with successful establishment. There are 6,300 places available each year and competition is fierce.

What fees and charges should I expect?

The costs of business loans come in two forms.

• Interest rates. These are set as a percentage and indicate how much extra you have to repay over what you borrowed. Borrow $100 at a 20% interest rate and you'll pay back $120 all up.
• Fees. Different lenders have different fee structures. Watch out for account set-up fees when you sign up, ongoing monthly fees, exit fees if you cancel the account and early or late repayment fees if you deviate from the arranged payment schedule. These are some of the main fees to look out for, but there may be others. Lenders are required to make all fees clear and comprehensible.

Am I eligible for a business loan and the NEIS?

Your eligibility for business loans depends on the provider. For many business loans you'll need to have been established for a certain amount of time and will need to have an annual turnover above a certain amount.

In the case of peer-to-peer lenders like Bigstone and Thincats you're generally eligible, but may find it very difficult to convince potential investors to get on board if you have a rocky financial history or former unsuccessful businesses. You'll generally have a better chance of successfully getting a business loan if:

• Your business has been continually operating for a long time
• Your business has demonstrated earning capability
• You and your business are currently debt-free and have a strong credit history

There are often requirements around minimum monthly or annual turnover, and not all available repayment plans may be right for your needs, which can rule out other options.

NEIS eligibility criteria

In response to the impact of COVID-19, the Australian Government announced expanded eligibility criteria for the NEIS that now includes:

• From 15 October 2020, people can access NEIS and start their own business if they are working 25 hours per week or less.
• From 7 December 2020, existing micro-business owners impacted by COVID-19 can access NEIS if they need help to keep their business running or refocus their operations to meet new areas of demand.

Selection criteria is still fairly strict. To qualify for the application alone you must:

• Be 18 or older, on an eligible Centrelink scheme and fully eligible for jobactive or disability employment services
• Be participating in jobactive as a volunteer and commence in NEIS Assistance before the end of your service period
• Not convert to an Age Pension before or during NEIS
• Be available to participate in NEIS training and work full-time in the proposed NEIS business
• Not currently be going through bankruptcy
• Not have received NEIS assistance in the last three years or have ever received it for a similar business activity

And your business must:

• Not be already operating on a commercial basis
• Be independent when established
• Be legal, upstanding and capable of withstanding public scrutiny
• Have been assessed as commercially viable
• Not be based on the takeover or purchase of an existing business
• Not directly compete with an established business unless your business will do it differently or if you can prove there's unsatisfied demand in the area
• Be operated and located entirely within Australia
• Be structured so you'll always have a controlling interest over it
• Not be a for-profit organisation unless approved by the Department of Employment

If you're interested in NEIS, a good first step is to register for jobactive, if you haven't already. You'll need to do this anyway if you want to get into the program. You can learn more about it here.

What should I consider before applying?

Before applying for a business loan, you need to make sure you're ready and able to start the repayment plan. Remember, you'll need to pay back more than you've borrowed, so you need a plan that can make it happen.

• Don't expect it to be easy and be prepared for higher rates. Providers and investors may be more hesitant to lend to someone on Centrelink, but you may be able to counterbalance this to a certain extent with an outstanding business idea or by convincingly demonstrating the profitability of your new business.
• Know how you'll spend the money in as much detail as possible. Your lender will want to know the money is being spent wisely and it can expect a return on investment.
• Consider setting up a calendar around your repayment schedule and work to that. Keeping up with repayments is essential to keeping costs down because missing repayments can harm your credit rating and incur extra fees.
• Money might be even tighter after you've taken out a business loan. All proceeds of that loan are expected to be used for business purposes only and the extra cost of repayments can make things tough unless you're sure your business can turn a profit.

FAQs about Centrelink business loans

How much can I borrow with a business loan on Centrelink?

It depends on the lender and how confident it is in your ability to repay the loan. MiFinance offers business loans up to only $1,000 while MaxFunding can lend up to $500,000. Decide exactly how much you'll need, as accurately as possible, then find lenders that offer this amount in their standard range.

How long is the typical repayment period?

The loan term can vary between providers and types of loan. For small, short term loans like those from MiFinance it's only a few weeks, but for bigger loans it's typically between six months and five years.

Will my repayments change or will they stay the same?

Fixed repayments mean the size of each will be the same and will stay consistent over the course of the loan, while variable rates can change. Both are available with business loans.

What happens if my application gets rejected?

The first thing you may want to do is ask your lender why your application was declined, as this can help you out with future attempts. It might not give a reply, but often will.

This can help highlight weaknesses in your business plan or application you might have missed. Remember, needs and circumstances change, so recheck the options if it's been some time since you last compared them.

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