The Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, has welcomed the announcement by the Treasurer to introduce an Australian Business Securitisation Fund and facilitate further discussion on the development of an Australian Business Growth Fund.
“Both initiatives reflect recommendations from our Affordable Capital for SME Growth inquiry earlier this year,” Ms Carnell said.
“The Australian Business Securitisation Fund will go a long way in meeting the financial needs of the Australian small business sector by stimulating greater competition in the lending market. Our 2017 report into barriers to investment identified a funding gap where SMEs did not have access to the finance they need to start or grow their businesses.
“More recent research by the Judo Capital/ East & Partners SME Banking Insights Annual Report found the funding gap is estimated to be in excess of $80 billion.
“The new pool of capital will help address this gap, as smaller banks and non-bank lenders will have access to more capital specifically for the sector. This will increase competition in the market and increase access to affordable capital for SMEs.”
Business software provider MYOB welcomed the announcement, saying meeting the capital requirements of SMEs is vital to building a strong economy.
“It is really positive to see the Federal Government focused on the needs of our nation’s smaller businesses,” said CEO Tim Reed. “Our research has found cashflow to be a major pressure point for SMEs, with 30 pr cent reporting this a top concern.
“Providing non-bank lending through innovative fintech companies opens up a whole new ecosystem of financial services. MYOB already provides small business loans through our online accounting software platforms and we look forward to continuing to work with the Treasurer and Minister for Small and Family Business to bring new services to market that will benefit the nation’s small businesses.
“Ensuring business owners have access to the capital they need to invest will help grow and strengthen the whole economy. It’s a great move.”
Beau Bertoli, Joint CEO of Prospa, online lender to small business, said, “Prospa strongly supports this measure to help small businesses gain access to funds at a cost and on terms that will help them to grow and to employ more Australians.
“This is a huge win for small business across the country…With the ability to borrow to fund their growth, small business has the opportunity to make an even larger contribution to Australia’s future economic growth and prosperity.
“High costs of capital for lenders like Prospa directly impacts interest rates and the availability of affordable finance for small business. There has been a clear market failure on the supply side, with a small securitisation market attempting to solve a very large funding need. This government intervention will deliver more affordable funding options to Australia’s small businesses at a time when their success is critical to Australia’s growth.”
Online lender Spotcap also praised the initiative. Managing Director, Lachlan Heussler, said, “Mr Frydenberg’s proposal meets a real financial need and is a win-win for both Australian small-business owners and for the alternative lending industry in Australia.
“Without sustainable lending and affordable finance options, SMEs will struggle to grow, innovate and create more jobs for our economy.
“Australia’s 2.2 million SMEs are the beating heart of our economy but are starved of working capital and under-served by traditional lenders who require security.
“By lowering borrowing costs, the proposed fund is a good step in increasing competition between the dominant, big lenders and online, unsecured lenders, such as Spotcap.”
Scottish Pacific CEO Peter Langham has welcomed the move and has signalled that the nation’s largest specialist SME working capital provider is keen to participate in development of the fund.
“The plan to inject $2 billion into the small business loan market…is an unprecedented effort to boost lending to cash-starved firms,” Langham said.
“The fund’s clincher is the idea of rated programs. It means instead of supporting irresponsible lending by new players and risking taxpayers’ money, the government will be improving the ability of good lenders to help even more business owners.
“This is one of the most measured, thought out and equitable initiatives I have seen from a government to support small-business owners.”