The Morrison Government has announced a $2 billion fund to change small business access to funding, in a move welcomed by the Guild
“The Liberal National Government will significantly enhance access to funds for small business across the country through the introduction of a $2 billion Australian Business Securitisation Fund and encourage the establishment of an Australian Business Growth Fund to provide longer term equity funding,” said Treasurer Josh Frydenberg and Minister for Small and Family Business Michaelia Cash in a joint statement.
“Small businesses find it difficult to obtain finance other than on a secured basis – typically, against real estate. Small businesses that have already obtained finance secured against real estate, but wish to continue to grow, also find it difficult to access additional funding.
“Even when small businesses can access finance, funding costs are higher than they need to be.
“To overcome this and ensure that small businesses are able to fulfill their potential and continue to underpin economic growth and employment, the Australian Business Securitisation Fund will invest up to $2 billion in the securitisation market, providing significant additional funding to smaller banks and non-bank lenders to on-lend to small businesses on more competitive terms.
“The Australian Business Securitisation Fund will be administered by the Australian Office of Financial Management (AOFM), consistent with their prior involvement in the Residential Mortgage Backed Securities Market in 2008.
“The Government is also in consultation with APRA and a number of financial institutions in regard to the establishment of an Australian Business Growth Fund that would provide longer term equity funding to small businesses. Many small businesses find it difficult to attract passive equity investment which enables them to grow without taking on additional debt or giving up control of their business.”
A spokesperson for the Guild said: “Access to finance is a longstanding issue for small businesses including community pharmacies and measures to facilitate the establishment of small businesses, their growth and expansion are welcome.”
The Council of Small Business Organisations of Australia said that at a time when continued growth of Australian small businesses is being threatened by the banks tightening access to credit in the wake of the Hayne Royal Commission, the move is the “perfect solution.
“It’s a well needed game changer for financing of small businesses,” said Peter Strong, CEO of COSBOA.
“In more recent days securing access to affordable capital has become the Number 1 challenge for small business owners in Australia.
“The problem experienced by start-up businesses and established businesses alike is that our banks have relied solely on past earnings rather than taking future earnings potential into account.
“As a result, if the business owner doesn’t have a house (or other major asset) to put on the line as security then they are stuck—and Australia misses out on the employment that can be generated by the future growth of these businesses.”
He said small business owners often tell him that the only time they can get a loan is when they no longer need it.
“Others have told me that they have had to travel overseas to get finance and, using the same business plan as they used in Australia, they got their loan. This was a crazy and damaging situation.
“It is by no means ‘free money’ but small businesses that are sound and have good growth potential will finally have access to affordable finance.”