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14 November 2018

Funding to unlock investment barrier for small businesses

The Australian Small Business and Family Enterprise Ombudsman, Kate Carnell welcomes 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 - 'Recommendation 1: a Business Growth Fund' and 'Recommendation 4: a Capital Enhancement Fund',” 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 small to medium enterprises (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.

“While the Securitisation Fund will increase the pool of capital for medium-term lending, it does not address the need for long-term funding for high growth SMEs, which generate the highest growth in employment.

“It is critical the planned discussions fast-track the establishment of the Australian Business Growth Fund to address this long-term funding gap. Equally, the Australian Prudential Regulation Authority must action capital relief for the securitisation capital and the growth fund.

“We call on all lenders to follow the lead of the National Australia Bank, Commonwealth Bank of Australia and HSBC in supporting the establishment of the Australian Business Growth Fund.”