A$2 billion Aus Govt support for small business lending
(15 November 2018 - Australia) Treasurer Josh Frydenberg has announced the introduction of an Australian Business Securitisation Fund and facilitation of further discussion on the development of an Australian Business Growth Fund.
The Treasurer and the Minister for Small and Family Business, Michaelia Cash, announced that the Australian Business Securitisation Fund (ABSF) will significantly enhance the ability for small businesses to access funds by providing significant additional funding to smaller banks and non-bank lenders to on-lend to small businesses on more competitive terms.
“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. Even when small businesses can access finance, funding costs are higher than they need to be. To overcome this and ensure that small businesses are able to fulfil their potential and continue to underpin economic growth and employment, the Australian Business Securitisation Fund will invest up to A$2 billion in the securitisation market, providing significant additional funding to smaller banks and non-bank lenders to on-lend to small businesses on more competitive terms.” The government fund will buy packages of secured and unsecured SME loans issued by smaller banks and non-bank lenders such as fintechs, boosting funding to these non-big bank lenders to lend to small businesses and potentially lowering SME borrowing costs.
The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell welcomed the announcement, stating “Both initiatives reflect recommendations from our Affordable Capital for SME Growth inquiry earlier this year - “recommendation 1: a Business Growth Fund and recommendation 4: a Capital Enhancement Fund. The Australian Business Securitisation Fund will go a long way in meeting the financial needs of the Australian small business sector by stimulating greater competition in the lending market. Our 2017 report into barriers to investment identified a funding gap where small to medium enterprises (SMEs) did not have access to the finance they need to start or grow their businesses”
“More recent research by the Judo Capital/ East & Partners SME Banking Insights Annual Report found the funding gap is estimated to be in excess of $80 billion. The new pool of capital will help address this gap, as smaller banks and non-bank lenders will have access to more capital specifically for the sector. This will increase competition in the market and increase access to affordable capital for SMEs. While the Securitisation Fund will increase the pool of capital for medium-term lending, it does not address the need for long-term funding for high growth SMEs, which generate the highest growth in employment.”
“It is critical the planned discussions fast-track the establishment of the Australian Business Growth Fund to address this long-term funding gap. Equally, the Australian Prudential Regulation Authority must action capital relief for the securitisation capital and the growth fund. “We call on all lenders to follow the lead of the National Australia Bank, Commonwealth Bank of Australia and HSBC in supporting the establishment of the Australian Business Growth Fund.”