(5 July 2018 – Australia) The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) has released a report from the Affordable Capital for SME Growth inquiry, which looked into international and national initiatives that sought to fill the funding gap for SMEs.
Eight directives were established to promote key initiatives for improving liquidity and cash flow. The report also seeks to increase small businesses understanding and awareness of alternative funding sources beyond the banks who represent three out of four primary lending relationships in the A$1 – 20 million annual turnover SME segment according to East & Partners SME Transaction Banking research.
Recommendations included a Business Growth Fund, capital enhancement fund, Government Guarantee Scheme, open banking reforms, APRA prudential measures, personal property security register, finance-ready SMEs and an SME guide to financial products. The business growth fund would be established by the private sector, representing a =n important long term funding source for quickly growing SMEs with secured credit facilities ranging from A$250,000 to A$5 million and tenors of one to seven years. The report also calls for the government to establish a Government Guarantee Scheme where member banks can draw on the guarantee as a form security. This will help SMEs with insufficient real estate to draw longer loan terms.
“In Australia, lenders consider SMEs high risk and offer capital with restrictive terms and conditions, at high interest rates and demand bricks and mortar as security – which is usually the family home. I regularly remind people that SMEs are the engine room of the economy, but the engine won’t work without petrol, which is seed capital and growth finance” said ASBFEO Ombudsman Kate Carnell.