Government recognises need for greater access to small business finance
The Australian government has recognised that access to business finance by growing businesses, is a major issue for Australian small and medium enterprises.
In research from Ernst & Young’s 2018 annual Growth Barometer report, almost a quarter (24 per cent) of Australian businesses consider reduced access to credit the greatest external risk to growth, (up from 6 per cent in 2017) and 48 per cent of Australian respondents noted that the greatest internal risk to growth is insufficient cash flow, compared to 34 per cent of respondents from the rest of the world.
It’s worth noting that three million small businesses employ around seven million Australians, so their viability and continued ability to grow, is crucial to the Australian economy.
The government’s realisation of the shortage in business finance being supplied to SME’s led to the launch in November 2018 of the Australian Business Securitisation Fund. This fund aims to provide “significant additional funding to smaller banks and non-bank lenders to on-lend to small businesses on more competitive terms”, as expressed by Treasurer, Josh Frydenberg
The government specifically notes that small businesses find it difficult to obtain finance other than on a secured basis – typically, against real estate. Small businesses that have already obtained finance secured against real estate, but wish to continue to grow, also find it difficult to access additional funding.
The Australian Business Securitisation Fund (ABSF) will invest up to $2 billion in warehousing and the securitisation market, and on 13 February 2019 the Government introduced legislation to implement the fund.
The Australian Business Securitisation Fund (ABSF) Act 2019 received royal assent on 5 April 2019.
Smaller and specialist lenders are expected to continue gaining market share as small businesses, increasingly turn to them as a result of traditional bank policies toward non-real estate backed lending, and following fallout from the financial services royal commission.
At the time of the government’s new initiative, 80% of respondents to a finder.com.au RBA survey felt believe that such businesses will have greater difficulty accessing credit as a result of the royal commission, while 25 per cent are even less optimistic, expecting the limited access to funds to result in more small businesses shutting up shop.
Funding Solutions APAC builds the bridge between smaller business finance funders able to help SME businesses, and the Australian SME businesses that need finance to grow.