Govt moves to free-up lending for SMEs

SMEs are set to have better access to finance, with the Australian government making two key moves this month to free-up lending to small business operators.

Firstly, Treasurer Josh Frydenberg says he will instruct the corporate watchdog ASIC to tell banks to waive responsible lending standards for small businesses.

Mr Frydenberg says while small businesses are exempt from responsible lending standards, many have been inadvertently caught in the tightening of those standards in the wake of the Hayne Royal Commission.

“There’s a real grey area as to what is a small business loan and a personal loan,” Mr Frydenberg told Fairfax.

“Small businesses are exempt from responsible lending standards; however, they are being inadvertently caught in the tightening of those standards post the Hayne royal commission as many use the family home to secure finance.”

Australian Business Growth Fund

Mr Frydenberg also recently released exposure draft legislation to allow the government to invest in an Australian Business Growth Fund (BGF).

The government is committing $100 million to establish the BGF and partnering with financial institutions to provide equity funding to SMEs.

The aim is for the fund to mature to $1 billion to help SMEs get access to the finance they need.

Why the need for the BGF?

Australia currently lacks a patient capital market for small and medium enterprises, the exposure draft’s explanatory materials states. Patient capital can provide entrepreneurs with the finance needed to expand without relinquishing control of their business.

“The government will help small businesses grow by co-investing with other financial institutions to establish a BGF that will provide equity finance to small businesses across a range of industries and locations,” the explanatory materials state.

Mr Frydenberg adds that many SMEs find it difficult to obtain finance other than on a secured basis – typically, against the family home.

They also find it difficult to access additional funding once they have pledged all of their real estate as collateral.

“With better access to more competitive finance, SME’s will be able to grow, fulfil their potential and continue to underpin Australian economic growth and employment,” Mr Frydenberg’s statement said.

Legislation to establish the BGF will be introduced to parliament before the end of 2019.

Does your business struggle to access finance?

If you’re a small business owner wanting access to finance, you don’t have to sit and wait for the government’s initiatives to take effect.

Instead, get in touch with us. We’re happy to talk through your current situation and help you explore your options.

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