The Business Growth Fund has officially been established, with the big four banks all committing $100 million to help SMEs access finance.
The Australian Business Growth Fund (BGF) was officially launched by Treasury at the Australian Chamber of Commerce and Industry last night (27 November), with ANZ, CBA, NAB and Westpac all committing $100 million – matching the federal government’s pledge.
The funding will be provided over a five-year period.
HSBC has also said that it will contribute $20 million to the fund, which aims to “significantly enhance the ability of SMEs to access funding, filling a gap in the market that is preventing them from reaching their full potential”, according to the Treasury.
The government is aiming for the fund to grow to $1 billion as it matures.
Established Australian businesses will be eligible for long-term equity capital investments of between $5 million and $15 million, where they have generated annual revenue between $2 million and $100 million and can demonstrate three years of revenue growth and profitability.
The BGF’s investment stake will be between 10 and 40 per cent, allowing small-business owners to maintain control while also allowing the BGF to offer the kind of financial support to drive business growth.
The BGF also proposes to offer non-financial support, for example, through the provision of strategic advice, mentoring, talent management and network referrals for small and medium businesses to access.
A board and an independent management team will run the BGF commercially and be independent of both the government and the participating banks
Fund to ‘encourage business growth and promote economic expansion’
Speaking on Wednesday, Treasurer Josh Frydenberg commented: “This is a really important initiative by the Morrison government. $520 million is the initial amount that’s being contributed both from the federal government as well as from other banks.
“It’s going to be patient and passive capital that can be used to support small and medium-sized businesses across the country,” Mr Frydenberg said.
“[I]f you’re a business – a family-run business, for example – that has a turnover between $2 million and $100 million and you want to expand, and you want to grow, and you want to buy new machinery, and you don’t want to go and extend your debt levels, you actually want capital injection. You’d rather have equity than debt. This offers the opportunity to do that.”
Big four back BGF
Anthony Healy, NAB’s chief customer officer, business and private banking, noted that the bank had been leading the engagement and development of the growth fund in partnership with the government, and said NAB was pleased to support “a new way” for Australian small and medium businesses to access long-term equity capital.
“The Business Growth Fund will support economic growth and employment by giving small and medium businesses greater access to long-term equity capital that will help them grow, invest in new technology and create more jobs,” Mr Healy said.
“As part of NAB’s support for the Business Growth Fund, NAB has led and chaired the industry working group which has seen this opportunity progress,” he added.
The NAB CCO added that the success of similar growth funds in the UK and Canada provided the bank with “great confidence”, and he thanked the UK Business Growth Fund for its support and insights over the past 12 months.
Meanwhile, ANZ CEO Shayne Elliott commented: “ANZ is a strong supporter of small business in Australia. This fund will add to the options Australian businesses have to obtain the capital they need to grow and prosper for the good of the country.”
Likewise, Westpac acting chief executive, business division, Alastair Welsh said the bank was “proud to be part of this initiative driven by the Prime Minister and Federal Treasurer, aimed at stimulating economic growth and encouraging SMEs”.
He added: “Westpac has over 700,000 small-business customers, and we have deep relationships with them. We recognise that many find it difficult to attract equity investment that can help them grow without taking on additional debt or giving up control of their business.
“Westpac’s vision is to be one of the world’s great service companies, helping our customers, communities and people to prosper and grow. The BGF is another way we are supporting the Australian economy and small businesses.”
Speaking on behalf of Commonwealth Bank, Matt Comyn, CBA’s CEO, said: “Small businesses are the backbone of our economy. They employ more Australians than any other sector and they contribute immense value to communities right across the country.
“As Australia’s biggest bank, we are very aware of the challenges many small businesses face when trying to grow. We’re also very aware of the role we can play in helping address these challenges, which is why we expressed our interest in the Government’s plans from the outset.
“We are strong supporters of the Australian Business Growth Fund and believe it can make a real difference to the businesses it invests in...
”We look forward to playing our full part in the fund’s work.”
The Australian Small Business and Family Enterprise Ombudsman (ASBFEO), Kate Carnell, welcomed the launch of the fund, given that the fund was a recommendation of the ASBFEO’s Affordable Capital for SME Growth report.
She said high-growth small and medium-sized businesses would now “get the boost they need”.
“We welcome both the government investment in the fund, which has now been matched by the major banks,” she said.
“The Australian Business Growth Fund was a recommendation in our Affordable Capital for SME Growth report, which identified the need to address a critical funding gap for long-term capital to enable high growth potential SMEs to flourish.
“This fund will benefit high-growth SMEs with annual turnovers of between $2 million and $50 million.
“Importantly, the fund will be managed by private sector experts and will invest between 10 per cent and 40 per cent in the chosen businesses, allowing the business owner to maintain their controlling interest, while giving them the funds they need to invest in growth.”
Ms Carnell continued: “We also support the government’s ongoing discussions with other financial institutions that are considering investing in the fund.
“This initiative comes at a time when many respected economists, including those at the RBA, are publicly recognising one of the biggest barriers to growth for SMEs is access to affordable capital and this has been a critical factor holding the economy back.
“The Australian Business Growth Fund will significantly encourage business growth and promote economic expansion.”
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.
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