What if someone told you that you can get an interest-free business loan for your Australian business?
Yes, that sounds too good to be true, but several government agencies actually offer interest-free business loans. They could be interest-free or guaranteed, or with a low-interest rate, all these options are still good news, right?
So what do you need to qualify for these interest-free business loans? There are about 500 government programs that provide access to small business loans. To access these loans, you must first be able to locate a particular program that has a qualification criterion matching your business. You can get started using a search tool that’s provided on business.gov.au website.
The criterion for allocating loan is usually quite straightforward. Factors that will favor you include the revenues your business generates, the industry, the business location and the plans and goals you have for the business. You stand a higher chance of being awarded these loans if you organize all the information about your business and prepare the relevant documents that are needed for verification purposes. The information and forms are usually found on the websites of the specific government agencies offering the loans.
What’s the catch?
Many business people don’t believe that a lender can just decide to give an interest-free loan. Well, in the case of these government loans it’s actually true. By investing in businesses that will spur the growth of the economy, the government supports entrepreneurs in their contribution to economic growth.
The government also uses loans to boost the investment on certain sectors of the economy such as green energy, and sometimes also to compensate for damages that affect business people as a result of natural calamities like drought. Some startup companies might also qualify for some of these interest-free loans as the government uses these loans to encourage more entrepreneurship. Government agencies such as EFIC (Australia’s Export Credit Agency) will only give loans to exporters. The loans are guaranteed and one can also combine them with the R&D tax incentive to benefit you even further.
Why Do Loan Applications By Small Businesses Get Rejected?
Unfortunately, instead of the best businesses or businesses with the best business plans getting funding, those with the best collateral are the ones benefitting from loans. Younger business owners are in most cases locked out of eligibility for certain small business loans because they lack property or have insufficient equity in their property to give as security for the business loans they seek.
Many lenders are also impatient with small businesses or are unwilling or unable to invest time in understanding the nature of the businesses. Since there is the general assumption that serviceability of small business loans by start-up and small businesses is poor, or that the business is not profitable, some entrepreneurs who would benefit from certain loans get locked out.
Not all business entrepreneurs will have the opportunity of benefitting from interest-free or guaranteed small business loans by government agencies. Fortunately, there are multiple avenues for getting new business loans for your business today more than there was 10 years ago.