Treasurer Josh Frydenberg has announced the government and major banks will be backing local business owners, with the establishment of an Australian Business Growth Fund.
The government, ANZ, CBA, NAB and Westpac will each commit $100 million to the fund, while HSBC will contribute $20 million.
The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell has welcomed the move, saying the fund helps to address the gap inhibiting small businesse growth.
“The Australian Business Growth Fund was a recommendation in our Affordable Capital for SME Growth report, which identified the need to address a critical funding gap for long-term capital to enable high growth potential SMEs to flourish.
“This fund will benefit high growth SMEs with annual turnovers of between $2 million and $50 million.
Similar funding models have been developed in the UK and Canada with great success.
The fund will be managed by the private sector. Investment into businesses will not exceed 40 per cent, allowing small business owners to retain the controlling interest in their business.
“We also support the government’s ongoing discussions with other financial institutions that are considering investing in the fund.
“This initiative comes at a time when many respected economists, including those at the RBA, are publicly recognising one of the biggest barriers to growth for SMEs is access to affordable capital and this has been a critical factor holding the economy back,” said Carnell.
“The Australian Business Growth Fund will significantly encourage business growth and promote economic expansion.”
Stephen Welton, CEO of the UK BGF, said the UK model has provided the support and access to capital that small businesses need to grow, generating wealth for the UK economy. He expects the Australian fund to have similar success
“Like the UK, Canada and many other economies, Australia relies heavily on the growth of its SMEs for job and wealth creation. The Australian BGF will address this, fundamentally enhancing growing companies’ access to capital and helping the businesses of tomorrow to reach their potential. These businesses cannot rely on bank debt alone.
“When we launched in Britain, many said it wouldn’t work – eight years later we’ve backed more than 300 businesses and invested over £2bn, becoming the world’s most active investor in growth businesses in the process,” Welton said.
“The UK’s BGF has proved that patient capital works and is key to unlocking long-term sustainable growth across the economy. We are thrilled with today’s news and look forward to supporting the Australian BGF through its inception, as well as further building the BGF network across the world.”
Dale Dixon, MYOB Head of Product said Australia’s two million small businesses are the undisputed backbone of the economy. He suggested the fund would assist in helping businesses achieve greater growth.
“Gaining access to finance – both short and long term – is critical to their success, yet more often than not out of reach.
“We’re pleased to see the Morrison Government’s ongoing commitment to meeting this challenge via the $540 million Small Business Growth Fund, and commitment to provide owners of growing businesses with options for long-term, equity capital to help scale up their business, create jobs, re-invest in technology and equipment – without giving up control.”