The Australian Business Growth Fund (ABGF) has found its legs in the form of draft legislation and is slated to be up and walking at some stage next year as the major banks line up behind the initiative.
But anyone looking to have their voice heard about the draft bill better hurry — consultations will be closed at the end of the week.
In a decision SmartCompany understands was made by the government, Treasury has flagged a November 8 cut-off date for submissions — a four-day timeframe that has raised eyebrows among those hoping to make submissions.
Stakeholders now face the prospect of rushing to get submissions ready before the new legislation makes its way into Parliament, where it will face its final round of scrutiny before becoming law.
Announced last year as one of a string of small business commitments the Morrison government took to the May election, the ABGF has been pitched as a way for a small number of high-potential SMEs and startups to access capital.
Modelled on similar schemes in the UK and Canada, the idea is the fund will be seeded by the government and will then be built to about $500 million, initially through partnerships with financial institutions such as the major banks and super funds.
The government is expected to introduce additional legislation related to the growth fund before it becomes operational, with one bill, the one currently before consultation, opening the gates for the Frydenberg to invest $100 million of public money in the venture.
The short consultation is regarded as appropriate by the government as negotiations with the big banks about investment in the funding vehicle continue.
The ABGF draft legislation leaves the door open as to how the fund would actually be set up, but makes it clear the body will operate independently from government, albeit with participation from the relevant minister.
A customary three-year review of the legislation has also been built-in, supported by an annual reporting framework which will be prepared by the public service.
National Australia Bank signed on as a founding partner earlier this year, while Commonwealth Bank, Westpac and HSBC Australia have also signed on as initial members.
ANZ Bank initially snubbed its nose at the scheme, but a spokesperson for the bank on Monday confirmed it would contribute to the kitty as a founding member.
None of the banks would confirm when asked how much they will invest, which the government hopes will mature to $1 billion in the coming years.
Negotiations between the government and large superannuation funds are ongoing heading into Christmas, with no figures on how much will be invested finalised yet.
Expected to provide long-term equity investments, the growth fund is not aimed at early-stage startups, requiring an annual turnover of between $2 million and $50 million to be eligible, while 30–50 ‘high-growth-potential’ companies will benefit from the fund each year, in line with international equivalents.
The scheme was adopted as a recommendation from the Australian Small Business and Family Enterprise Ombudsman, which, alongside the Reserve Bank, has argued there aren’t enough avenues to capital available for high potential companies in Australia.
Speaking to SmartCompany, deputy small business ombudsman Craig Latham said it was encouraging the fund would appear in the form of legislation before year-end.
“This is a potential game-changer for small businesses seeking finance,” Latham says.
“We’re enthusiastically embracing it and encouraging all the super funds and banks to do the same.”
While there were initial concerns the Australian Prudential Regulatory Authority would need to provide approval for the fund by adjusting lending rules, an industry consultation group worked through the kinks in recent months.
Access to finance woes continue
Latham says access to capital for SMEs was still a prevalent issue facing Australia’s small business community.
“Businesses are still telling us there’s difficulty accessing finance,” Latham says.
“A lot of it has to do with the need for security, principally a house or property.”
Entrepreneurs SmartCompany has spoken with recently have complained about a lack of access to finance in Australia, particularly in the wake of the banking royal commission.
Further, the Council of Financial Regulators (CFR) said tighter lending standards for small business had been a significant focus for the body recently in a report released in October.
“Lending to small businesses has hardly grown over the past year, compared with a 5% increase in lending to large businesses,” the CFR report said.
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