Kate Carnell, the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), urged senators to pass the Australian Business Growth Fund Bill on Wednesday.
Ms. Carnell explained that the bill would significantly encourage growth and promote economic expansion for small and medium-sized businesses around the country.
“We strongly support the investment by the Commonwealth in the Australian Business Growth Fund to provide much-needed patient capital to SMEs seeking to realise their high-growth potential,” she said.
“This investment is critical to the success of the fund. Previous attempts leaving it to industry to establish the business growth fund, resulted in no action.”
The fund hopes to address lack of access to funding and equity investment to small and medium sized enterprises (SMEs), which are often overlooked by venture capitalists and investors.
In 2018, the Inquiry into Affordable Capital for SME Growth, led by Ms. Carnell, revealed a serious nationwide funding gap for smaller businesses. It was found that lenders see SMEs as high-risk investments and place restrictive terms on them.
The current conditions imposed by lenders and investors on small businesses, including high interest rates, security demands, and near-immediate return on investment, mean that small businesses often have a difficult time raising capital.
RBA Governor Philip Lowe said that the fund would “help address the critical funding gap” and “enable our up-and-coming, high growth potential SMEs to flourish,” giving them the confidence to expand, invest, and innovate.
Australian businesses with an annual turnover between $2 million and $100 million will benefit the most, and be eligible for long-term investments of $5 million to $15 million.
Both Ms. Carnell and Mr. Lowe referenced similar international economic models to support the passing of the bill in Australia, with the UK and Canada Business Growth Funds having substantial influence in developing the current model.
In Australia, the Business Growth Fund (BGF) was launched by the Chamber of Commerce and Industry in November 2019 as an initiative between the Federal Government, national banks and superannuation funds including ANZ, CBA, NAB, Westpac and HSBC.
So far, more than $500 million has been pledged to the fund, with hopes that this amount could reach $1 billion.