Government announces $2b injection for small business

Government announces $2b injection for small business

The Federal Government is offering a leg up to around three million small businesses in Australia through the creation of a $2 billion fund that will be channelled through loans to small banks and non-bank lenders.

The Australian Business Securitisation Fund is expected to improve competition in the business loan market, where borrowing rates are often much higher than for home loans.

In a joint announcement today, Treasurer Josh Frydenberg (pictured) and Minister for Small and Family Business Michaelia Cash said the measures would ensure small businesses would be able to fulfil their potential and continue to underpin economic growth and employment.

"Small businesses find it difficult to obtain finance other than on a secured basis typically, against real estate," Frydenberg and Cash said.

"Small businesses that have already obtained finance secured against real estate, but wish to continue to grow, also find it difficult to access additional funding.

"Even when small businesses can access finance, funding costs are higher than they need to be."

The fund will be administered by the Australian Office of Financial Management (AOFM), while the Government is also consulting with the Australian Prudential Regulation Authority (APRA) and "a number of financial institutions" to establish an Australian Business Growth Fund.

This second proposal takes leaf out of the UK's book with a similar fund that has invested around $2.7 billion in a range of sectors, and would provide longer term equity funding to small businesses.

"A similar fund has not emerged in Australia, in part, as a result of the unfavourable treatment of equity for regulatory capital purposes," Frydenberg and Cash said.

"Many small businesses find it difficult to attract passive equity investment which enables them to grow without taking on additional debt or giving up control of their business.

"APRA has indicated that it is willing to review these arrangements to assist in facilitating the establishment of the Australian Business Growth Fund. To fast track its establishment, the Government will host a meeting of key stakeholders in Canberra during the next sitting period."

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