// Time to scale up? The federal government and all the big four banks have kicked in $100M each to seed a $520M fund for fast growing SMEs…
After months of negotiation, Federal Treasurer Josh Frydenberg confirmed Wednesday that ANZ, CBA, NAB and Westpac will each commit $100 million to the newly created Australian Business Growth Fund, while HSBC will contribute $20 million. The federal government has pledged $100 million.
Based on a similar fund in the UK, set up in 2011, the $520M Aussie version will look to provide long term equity funding to fast growing, established small businesses. The United Kingdom’s Business Growth Fund has already invested $2.7 billion in a range of sectors across the economy.
The Small Print
The Aussie Fund will look to grow to $1B over the next few years, and assist 30 to 50 businesses a year, investing between $5M and $15M into each business for between 10% and 40% equity.
The businesses need to have a trading record of at least three years profitability and revenue growth, and between $2M and $100M in revenue.
So it’s unlikely to be relevant for your average WA startup at an early stage, but a company looking to scale up, with a decent track record, could fit the bill.
“We welcome both the government investment in the fund, which has now been matched by the major banks,” said Kate Carnell, the Australian Small Business and Family Enterprise Ombudsman (ASBFEO).
“The Australian Business Growth Fund was a recommendation in our Affordable Capital for SME Growth report, which identified the need to address a critical funding gap for long-term capital to enable high growth potential SMEs to flourish.
“This fund will benefit high growth SMEs with annual turnovers of between $2 million and $50 million.
“Importantly the fund will be managed by private sector expertise and will invest between 10% and 40% in the chosen businesses, allowing the business owner to maintain their controlling interest, while giving them the funds they need to invest in growth.
“Similar models in the UK and Canada have proven successful, giving businesses the chance to thrive with much-needed access to affordable capital.
“We also support the government’s ongoing discussions with other financial institutions that are considering investing in the fund.
“This initiative comes at a time when many respected economists, including those at the RBA, are publicly recognising one of the biggest barriers to growth for SMEs is access to affordable capital and this has been a critical factor holding the economy back.
“The Australian Business Growth Fund will significantly encourage business growth and promote economic expansion.”
For more information on the new Fund, visit their website.