A $2 billion securitisation fund, designed to improve access to finance for Australia’s SME sector, has passed both houses of Parliament.
The Australian Business Securitisation Fund (ABSF) Bill 2019 has officially passed both he House of Representatives and the Senate.
The securitisation fund provides additional funding to smaller banks and non-bank lenders to on-lend to small businesses on more competitive terms.
The ABSF will be administered by the Australian Office of Financial Management (AOFM), which was previously involved in the residential mortgage-backed securities market in 2008.
The funding difficulties faced by small businesses was highlighted by a recent survey of 1,750 business owners nationwide, commissioned by SME lender Judo Capital and conducted by East & Partners.
The study revealed that the gap in SME funding, which has emerged from an inability to access finance that they would otherwise utilise, has surpassed $83 billion.
The Judo research found that the average SME applied for $800,000 in new borrowings in the last year, with those that successfully obtained finance securing $600,000 in new credit, while the average unsuccessful credit application was $1.1 million.
According to respondents, the main reason SMEs were prevented from accessing credit in the last year was as a result of collateral requirements (34 per cent), slow turnaround times (16 per cent), inappropriate terms/structure (11 per cent), interest rate (8 per cent) and an unsatisfactory credit rating (4 per cent).
Conversely, SMEs that accessed the full amount of new capital they sought cited credit approval speed (63 per cent), ring fencing of security needed away from personal assets (58 per cent), actual availability of the full debt sum being sought (50 per cent) and mitigating terms and conditions (42 per cent) as the most important factors in completing the deal.
The Coalition government’s Treasury Laws Amendment (Increasing the Instant Asset Write-Off for Small Business Entities) Bill 2019 also passed both the upper and lower houses of Parliament last week.
The bill was designed to increase the instant asset write-off threshold from $25,000 to $30,000 and broaden the eligibility criteria to SMEs with an annual turnover of up to $50 million, up from $10 million.
[Related: Parliament approves $30k SME asset write-off]