Prime Minister Scott Morrison has announced that, if re-elected, the government will create an Australian Business Growth Fund to help SMEs with annual turnovers between $2 million and $50 million get access to finance.
The $100 million growth fund is expected to assist 30 to 50 businesses each year.
Separately, Mr Morrison has also pledged to create 250,000 new small businesses over the next five years.
“Small business growth in Australia requires less red tape, not another taxpayer-subsidised, government-run scheme,” said Daniel Wild, director of research at think tank the Institute of Public Affairs.
“Red tape and a rigid industrial relations system are the key reasons why new business investment in Australia is just 11.5 per cent, which is lower than it was during the economically hostile Whitlam years.
“The best way to boost small business growth is to cut red tape and reduce government interference.
“Government-backed finance schemes have a history of failure, from Fannie Mae and Freddie Mac in the United States to Tricontinental in Victoria.”
Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell welcomed the announcement, noting that it was a recommendation in its recent Affordable Capital for SME Growth Inquiry.
“Our report identified the need to address a critical funding gap for long-term, patient capital to enable our up-and-coming, high-growth potential small to medium enterprises (SMEs) to flourish,” Ms Carnell said.
“We support government investment of $100 million into the Australian Business Growth Fund and a matching commitment by the Commonwealth Bank of Australia, National Australia Bank and HSBC Bank.
“However, we question the absence of commitment by Westpac, ANZ and Australia’s super funds.”
The business growth fund comes after the introduction of a $2 billion government securitisation fund that will provide additional funding to smaller banks and non-bank lenders to on-lend to small businesses on more competitive terms.
MYOB chief executive Tim Reed also backed the announcement and called for bi-partisan support for the fund.
“We welcome and hope to see bi-partisan commitment to the Australian Business Growth Fund announced today, which will provide the owners of growing businesses with a new option for long-term, equity capital to help them grow their businesses, create jobs, and re-invest in technology and equipment — without giving up control,” Mr Reed said.
Likewise, Xero managing director Trent Innes supported the plan on the back of in-house research showing that one in five small business owners said that access to capital was their greatest pain point.
“A quarter of small businesses say they lack confidence in their ability to invest in their business,” Mr Innes said.
“All champions of Australian small business will welcome the announcement today.
“At Xero, as a scale-up ourselves, and from our interaction with the small business community and their advisers, we know first-hand that points of transition and growth are pivotal moments.”
Jotham Lian is the news editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.