Getting access to finance in order to start or grow a business is a still a big challenge according to a new report.
Small business owners and start-ups are still finding it difficult to access finance to start or grow their businesses, according to the Reserve Bank of Australia’s (RBA) latest bulletin, Access to Small Business Finance,” the Australian Small Business and Family Enterprise Ombudsman, Kate Carnell said.
“The report highlights the absence of entrepreneurial finance, with lenders wanting real estate – normally the family home – as security, or alternative lenders offering short term, high cost capital,” Carnell said.
“The report also provides information on initiatives that might improve access to finance for small businesses; a number of which are recommendations in our Affordable Capital for SME Growth inquiry report.
“In our report we recommend establishing a Business Growth Fund, focusing on long term funding solutions for small to medium enterprises (SME) that have the capability to grow. SMEs would be able to apply for between $250,000 and $5 million, with terms up to seven years, secured against the business.”
Carnell said this approach has been effective internationally and she believes it would be a game changer for Australia.
“Another of our recommendations, also referenced in the RBA’s report, is an Australian Government Guarantee scheme where member banks apply for a government guarantee to partially support a loan to SMEs with a strong business case, but insufficient real estate or business assets,” she said.
“There is a funding gap for small businesses seeking capital and there are significant barriers to accessing finance, all raised in the RBA report and our own.
“These issues stifle business growth, employment and investment.”