In a joint statement, Treasurer Josh Frydenberg and Minister for Employment, Skills, Small and Family Business Michaelia Cash opened a consultation on the exposure draft legislation concerning the establishment of the Australian Business Growth Fund (BGF).
The draft bill — titled the Australian Business Growth Fund Act 2019 — outlines plans for the Commonwealth to commit $100 million to the establishment of the BGF, which will, through partnership with other financial institutions, provide equity funding to SMEs.
The government is aiming for the fund to grow to $1 billion as it matures.
In the joint statement, the Treasurer noted the particular difficulties faced by SMEs in accessing business finance that doesn’t require them to use their family home as security.
This could potentially be a barrier for those small business owners who don’t own their own home, or have exhausted the use of their personal real estate as collateral.
The establishment of the BGF, therefore, aims to “significantly enhance the ability of SMEs to access funding, filling a gap in the market that is preventing them from reaching their full potential”, according to the Treasury.
The draft bill provides an outline on how the Commonwealth will participate in the establishment of the BGF, in accordance with the objective of providing Australian SMEs with greater access to capital, without the reliance on debt funding.
Further details on the operation of the fund itself are to be released at a later date.
It allows for the Commonwealth to “make arrangements relating to the operations of the fund”, but bars the government from controlling the fund itself, or for the fund to become a Commonwealth company.
Furthermore, the legislation requires an annual report to be prepared outlining the operation of the fund, with a formal review on the effectiveness of the fund to be conducted within three years of operations.
Consultations on the draft legislation is only for this week, and will be accepted until this Friday, 8 November 2019, with final legislation expected to be introduced in Parliament before the end of the year.
The BGF is one of the various pre-election commitments made by the Morrison government that focuses on the growth of the SME sector, and will complement other government initiatives with the same goal, according to Mr Frydenberg.
Such initiatives include the introduction of a $2 billion Australian Business Securitisation Fund to improve SME access to funds on competitive terms, the extension of the instant asset write-off to $30,000 for SMEs, and tax relief for businesses with a turnover of up to $50 million.
More details and information on how to submit feedback on the Business Growth Fund proposal can be found on the Treasury website.