The Australian Business Growth Fund Announced

The Australian Business Growth Fund Announced

Being a small business means it is hard to get money from a bank, unless you take it on a secured basis, and usually against real estate and more commonly your own home.  This means that people are not able to get into running a small business without some sort of solid financial backing and the consequences of the business not being successful means that a family will lose their home.

Assuming this is not a problem, the next concern is that, if a small business has already borrowed money from a bank, it will be secured against the real estate and no bank will be able to lend money to help a small business grow without additional security, which is not optimal for the small business, employment opportunities for people and the Australian economy in general.

There is a new fund currently being established by the Federal government in consultation with large financial institutions that would provide longer term equity funding to small businesses.  This fund has one purpose and it is simply to provide longer term equity funding to small businesses.

Why do we have the Australian Business Growth Fund?

Small business can only start or grow its business via internal cashflow (not the easiest task) or borrowing from a bank (which is not easy without real estate security) and it has been nearly impossible for small business to attract equity funding enabling them to grow.  (The government’s decision to allow small proprietary companies to raise up to $5 million in a twelve month period via Crowd Sourced Funding Equity Raising will improve the position for companies which are eligible to utilise Crowd Sourced Funding Equity Raising).

The Australian Business Growth Fund is based on the current United Kingdom’s Business Growth Fund (www.bgf.co.uk) which has been operating since 2011 and invested approximately $3 billion into various small businesses based throughout the United Kingdom and the government is stepping in here because nothing similar has emerged in Australia unlike many other parts of the world.  This fund has not yet been created, but this is included as part of the Federal government’s $2 billion of funding provided to another fund to provide securitisation funding for smaller banks and non-bank lenders to start lending to small businesses.  There are plenty of details to be ironed out and regulatory matters to be dealt with but Canada has launched a similar fund earlier this year.

If you would like to discuss your vision for your company, please don’t hesitate to contact Tony or Josh for a discussion.