IPA keeps up fight for a loan guarantee scheme

“On average, 28,000 Australian businesses per annum face a binding finance constraint, whilst 118,000 face some access to finance issues,” said IPA chief executive officer, Andrew Conway.

“To help increase the availability of much-needed affordable loan finance to the small business sector, the Federal Government should introduce a state-backed loan guarantee scheme.

The IPA notes that Australia is one of the only countries in the developed world without such a scheme.

“A limited state-backed guarantee would encourage banks and other commercial lenders to increase loan finance available to small business," said Mr Conway.

“Evidence presented in the Australian Small Business White Paper suggests that by international standards, the cost of debt for Australian small businesses is high and risk-adjusted lending is not the norm in Australia," he said.

“There is a strong case for designing and implementing a loan guarantee program in Australia to help remedy the specific problems of smaller and younger start-ups unable to finance new investment opportunities through normal commercial channels," he said.

Further, Mr Conway believes access to responsible and affordable finance will help many small businesses reinvest in their businesses and help create new ideas, new capacity and new jobs.

“When appropriately designed and administered, loan guarantee programs can deliver value for taxpayers through their support of employment, growth, productivity, innovation and exporting,” said Mr Conway.