Australia’s farmers have welcomed the Morrison government’s proposal to help small businesses secure billions of dollars in finance through a special fund, and the small business sector is calling it a “game-changer.”
The Greens have also congratulated the Coalition for having a change of heart on the role for government in banking, saying they’re flattered the government has followed its lead on banking policy.
On Wednesday, the treasurer, Josh Frydenberg, said the Morrison government would create a special fund – the “Australian business securitisation fund” – to invest up to $2bn in the securitisation market, allowing smaller banks and non-bank lenders to on-lend to small businesses on more competitive terms than big banks.
Frydenberg said Australia’s small businesses often find it difficult obtaining finance other than on a secured basis – typically, against real estate – and even if they do access additional finance the funding costs can be higher than necessary.
He said his proposed fund would allow small business owners to access cheaper funding, and more easily, so they can more easily expand and contribute to economic growth.
He said the government was also considering creating a “business growth fund” to support startups, providing longer-term equity funding to small businesses.
“Many small businesses find it difficult to attract passive equity investment which enables them to grow without taking on additional debt or giving up control of their business,” Frydenberg said.
“With more than three million small businesses employing around seven million Australians, enhancing small business access to funding is part of the Coalition government’s plan for a stronger economy.”
The National Farmers’ Federation (NFF) has welcomed the government’s proposal, saying both funds could play a positive role supporting the growth of the farm sector.
“In our recent 2030 Roadmap, we set a target of achieving $100bn in farm gate output by 2030,” the NFF chief executive, Tony Mahar, said.
“A central building block of that growth will be finding innovative solutions to the sector’s $159.5bn capital shortfall.”
Peter Strong, the chief executive of the Council of Small Business Australia, said Frydenberg’s announcement had come at the perfect time.
He said the future growth of Australia’s small businesses was being threatened by the banks tightening access to credit in the wake of the banking royal commission, so the Morrison government had come up with the “perfect solution”.
“It’s a well-needed game-changer for financing of small businesses,” he said. “In more recent days securing access to affordable capital has become the number one challenge for small business owners in Australia.
“Small business owners often tell me that the only time they can get a loan is when they no longer need it,” he said.
“Others have told me that they have had to travel overseas to get finance and, using the same business plan as they used in Australia, they got their loan. This was a crazy and damaging situation.”
The Greens’s treasury spokesman, Peter Whish-Wilson, said the government’s proposal to establish a “people’s fund” for small business lending was the first step towards a People’s Bank – which the Greens have been pushing for.
“Once again, we are flattered that the government is following our lead on banking policy,” he said.
“Earlier this year we announced a detailed plan to re-establish a government-owned bank to provide more competition and to tackle the issue of profit gouging on interest rate margins.
“When we announced our plan, the then-treasurer, Scott Morrison, said he was ‘shocked’ at the suggestion that there would be a government-owned bank again.
“We are glad that the government has got past this knee-jerk reaction and sees the need for a greater role for government in banking,” he said.
Frydenberg said the Australian business securitisation fund would be administered by the Australian Office of Financial Management, consistent with their prior involvement in the Residential Mortgage-Backed Securities Market in 2008.
He said the government was consulting the Australian Prudential Regulation Authority, and a number of financial institutions, about its proposed business growth fund, which would provide longer-term equity funding to small businesses.
