growing Money and plant Saving money concept graph
Credit: growing Money and plant Saving money concept graph
Small businesses wanting to grow will soon have access to cash from taxpayers and the big four banks.
After months of negotiations, the banks have agreed to take part in a small business growth fund, with each tipping in $100 million. The Morrison government will also contribute $100 million.
The fund will provide small and medium-sized businesses with so-called “patient capital”, where investors don’t expect to turn a quick profit.
“The whole idea is if you’ve got a business that you may want to grow, expand, to innovate, to buy new equipment, but you don’t want to increase your debt profile,” Treasurer Josh Frydenberg said last week.
“This fund offers the opportunity to get a capital injection from equity, to get an opportunity to partner with the growth fund, who will take a minority stake in your business.”
The fund is expected to mature to $1 billion within five years and help between 30 and 50 businesses each year.
Shadow treasurer Jim Chalmers offered the plan in-principle support but took a swipe at the government over the process.
“If the government was serious about getting this right they would have allowed more than four days of consultation on the draft legislation,” Chalmers said. “The treasurer’s engagement with relevant stakeholders and businesses so far has been totally inadequate.”
Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, welcomed the initiative.
“This fund will benefit high growth SMEs with annual turnovers of between $2 million and $50 million,” Carbnell said. “Importantly the fund will be managed by private sector expertise and will invest between 10 per cent and 40 per cent in the chosen businesses, allowing the business owner to maintain their controlling interest, while giving them the funds they need to invest in growth.
“Similar models in the UK and Canada have proven successful, giving businesses the chance to thrive with much-needed access to affordable capital.
“We also support the government’s ongoing discussions with other financial institutions that are considering investing in the fund,” Carnell added. “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.
“The Australian Business Growth Fund will significantly encourage business growth and promote economic expansion.”