In 2019, the Morrison government announced a plan for an Australian Business Growth Fund (ABGF) to provide equity for SMEs, which would follow the models of similar funds in the UK & USA.
This comes on the heels of the establishment of the Australian Business Securitisation Fund (ABSF), which received Royal Assent in April 2019 and is designed to enable better competition and supply of debt funding to small businesses, following the lead of similar funds established around the world, including the UK and USA. Done correctly, it means fewer SMEs can expand without being forced to give up control of their business.
Australian SMEs struggle to get debt funding when they don’t have access to real estate collateral, partly due to the criteria imposed by major lenders in Australia and partly due to the capital adequacy regulations imposed by government regulators. The ABSF won’t fix this issue, but it will help.
There’s also not the same market in Australia that matches the supply of capital with the demand. Patient, non-controlling capital that backs in owners to drive the business forward is just hard to come by in our country.
In Australian SMEs are lacking the capital they need to succeed. While the ABGF (and ABSF) aren’t the panacea that will solve all the problems that stop business growth in Australia, they’re a start.
But there are three areas the proposals must address.
As part of my work, I deal with talented entrepreneurs looking to find SMEs that they can acquire and grow. One of the problems they face is finding the necessary capital and finance to deliver on these opportunities. Without those opportunities, Australia is missing out on the talent and growth it needs to continue to expand its economy.
The ABGF and ABSF are a start. But they need to be guaranteed, they need to be expanded and more needs to be done to enable and support a vibrant SME sector in Australia.
Lui Pangiarella, Founder, Second Squared