IPA heralds $2bn fund as win for SMEs

Yesterday, the government announced a $2 billion Australian Business Securitisation Fund as well as encouraged the establishment of an Australian Business Growth Fund.

The Australian Business Securitisation Fund will invest up to $2 billion in the securitisation market, providing additional funding to smaller banks and non-bank lenders to on-lend to small businesses on more competitive terms.

The securitisation fund will be administered by the Australian Office of Financial Management (AOFM), consistent with their prior involvement in the Residential Mortgage Backed Securities Market in 2008.

The government also said it is in consultation with APRA and a number of financial institutions in regard to the establishment of an Australian Business Growth Fund that would provide longer term equity funding to small businesses.

The growth fund is expected to follow the precedent of the UK’s Business Growth Fund, which was established in 2011 and invested around $2.7 billion into a range of sectors across the economy.

IPA chief executive Andrew Conway said both funds are arguably the biggest structural reforms to small business finance it has seen, and are reforms it has been actively lobbying for.

“We welcome and congratulate the Australian government for the creation of a $2 billion Australian Business Securitisation Fund, which will provide incentive and capacity to smaller banks and non-bank lenders to free capital up and lend to more small businesses. This will give those small businesses the confidence to grow and employ," Mr Conway said.

“The government has also clearly indicated it is progressing an Australian Growth Fund as mentioned in the Treasurer’s press release, again directly attributable to the work undertaken through the IPA Deakin SME Research Centre and the Small Business White Paper process."

In publishing the Small Business White Paper, Mr Conway said the IPA investigated enhancements to a Loan Guarantee Scheme, and also worked with the Australian Small Business and Family Enterprise Ombudsman through the Affordable Access to Capital Inquiry.

“This bolstered our calls for structural change modelled on the British Growth Fund (UK) wherein the banks are levied to create a corpus of funds to enhance access to finance for slightly higher risk SMEs and start-ups where the return on investment may be over a longer period," Mr Conway said.

“This could also be used as a vehicle to fuel a stronger securitisation market in Australia by enabling easier access to finance for small businesses."

Mr Conway said the policy changes will have long-term impacts on the viability of the small business community and are a direct result of the applied research undertaken through the IPA Deakin SME Research Centre.

"This model of applied research is clearly leading the world in delivering critical reform to the SME sector backed up with tangible policy announcements,” he said.