Ombudsman Kate Carnell has welcomed plans to bridge the ‘funding gap’ faced by many small to medium enterprises (SME).
She was referring to the Australian Treasurer’s announcement to do two things. First, it will introduce an Australian Business Securitisation Fund. Second, it will facilitate further discussion on the development of an Australian Business Growth Fund.
Meeting SMEs’ needs
Ms Carnell said, “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 SMEs did not have access to the finance they need to start or grow their businesses.”
Ms Carnell says recent data show the true depth of this funding gap.
“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,” she said.
“The new pool of capital will help address this gap. 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.”
Fast-tracking the fund
But while Ms Carnell welcomed the securitisation fund, she also struck a note of caution.
“The securitisation fund will increase the pool of capital for medium-term lending,” she said. “But it does not address the need for long-term funding for high-growth SMEs.
“It’s 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.”