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(AAP)

Small and medium-sized businesses may soon be able to borrow money on cheaper terms under a $2 billion federal-government fund.

Small-business owners with smaller financial assets, such as young people and newly arrived migrants, could benefit from the fund.

It comes as the Coalition Government also considers setting up a separate fund to help small businesses grow.

 

By
Evan Young
Presented by
Shah Paung
Published on
Thursday, November 15, 2018 - 11:45
File size
9.01 MB
Duration
4 min 55 sec

Treasurer Josh Frydenberg says small and medium-sized businesses will soon find it easier to borrow money, thanks to a new taxpayer-backed fund.

Two billion dollars will be available to small banks and non-bank lenders in the coming years to increase competition in a market currently dominated by the big banks.

Mr Frydenberg says the so-called Australian Business Securitisation Fund, which he expects to be operational by the end of 2019, will help fix an imbalance in the loans market.

"Non-bank lenders or small banks are unable to access funding on competitive terms. Existing securitisation markets are not sufficiently developed as to allow these lenders to repackage their loans to investors."

The Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, has welcomed the announcement.

Ms Carnell says small-business owners often find it difficult to gain financing without offering security such as real estate.

She says small-business owners who do not own their own homes, such as young people and newly arrived migrants, stand to benefit from the plan.

"Now there's a very large number of Australians that either don’t own a home or, alternatively, their equity in their home is reasonably low. And that's getting worse right now, because property values are decreasing in a number of capital cities."

The Opposition says it is open-minded about the plan.

Its Treasury spokesman, Chris Bowen, says he wants more details before he declares his support.

"There seems to be a lot more detail to come. It's a little bit of a scant announcement so far. So we will work through all the details. But, of course, anything which sensibly provides access to small business for finance, with all the appropriate checks and balances* in place, would be something that, of course, we would be very sympathetic to."

The Federal Government says it is also consulting with several financial institutions to create a separate fund, a so-called Australian Business Growth Fund, which would  offer money to invest in small business, rather than offer loans.

It would rely on private financing, rather than Commonwealth money.

Mr Frydenberg says similar schemes in Canada and Britain have been very successful.

"As a result of the new fund, we will see small businesses have more options to fund their growth strategies. In the United Kingdom, over $2.7 billion has been invested in the last seven years through a business-growth fund, with small business across multiple sectors becoming the beneficiaries."

Mr Frydenberg will meet with major banks, the superannuation sector and regulators to discuss the proposal later this month.

Council of Small Business chief executive Peter Strong says such a proposal is overdue.

"This is great news, something we've wanted for a long time. And just to show you how well we need it: I walk my dog down (to) the local park, and there's a fellow down there who runs a production company. (It) turns over about $25 million a year. He couldn't get a loan in Australia. He flew to England with the same business plan, and he got a loan."

Kate Carnell, the Small Business and Family Enterprise Ombudsman, is urging all lenders to support the proposal.