The government's plan to help small businesses access longer-term equity funding has taken its first step, with Treasurer Josh Frydenberg hoping to loosen rules at the Australian Prudential Regulation Authority.
Mr Frydenberg sat down with Reserve Bank governor Philip Lowe and deputy chair of APRA John Lonsdale, as well as senior representatives from the country's banks on Thursday to discuss the development of an Australian Business Growth Fund.
The fund would see banks take a stake in a business, enabling it to grow without taking on debt or giving up control.
Similar funds are already in place in the United Kingdom and Canada.
But the establishment would require APRA to loosen the current arrangements governing the treatment of equity for bank regulatory capital purposes.
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"One of the real challenges being faced by small and medium-sized enterprises is access to finance," Mr Frydenberg told the meeting.
"This is where we can learn from the experience of other economies, particularly the United Kingdom and Canada, where they have employed a business growth fund to great effect - providing businesses with the option of providing an equity stake, a passive equity stake to a lender as opposed to seeking more debt.
"Today's discussion, the development of the Business Growth Fund, will be good for Australian small business."
