Why the Australian Business Growth Fund doesn’t go far enough

By Lui Pangiarella. Published at May 30, 2019, in Start Your Engines

The newly elected Morrison government’s promised Australian Business Growth Fund needs to be expanded to include acquisitions writes Second Squared founder Lui Pangiarella.

In 2019, the Morrison government announced a plan for an Australian Business Growth Fund (ABGF) to provide equity for SMEs, which would follow the models of similar funds in the UK & USA.

This comes on the heels of the establishment of the Australian Business Securitisation Fund (ABSF), which received Royal Assent in April 2019 and is designed to enable better competition and supply of debt funding to small businesses, following the lead of similar funds established around the world, including the UK and USA. Done correctly, it means less SMEs can expand without being forced to give up control of their business.

Australian SMEs struggle to get debt funding when they don’t have access to real estate collateral, partly due to the criteria imposed by major lenders in Australia and partly due to the capital adequacy regulations imposed by government regulators. The ABSF won’t fix this issue, but it will help.

There’s also not the same market in Australia that matches the supply of capital with the demand. Patient, non-controlling capital that backs in owners to drive the business forward is just hard to come by in our country.

In Australian SMEs are lacking the capital they need to succeed. While the ABGF (and ABSF) aren’t the panacea that will solve all the problems that stop business growth in Australia, they’re a start.

But there are three areas the proposals must address.

Funding of acquisitions. In the SME space, Australian banks are notoriously loathe to fund acquisitions. This means there’s a massive gap in the market – and with an aging population and a huge number of businesses on the precipice of needing to transition to a new generation of leadership, funding acquisitions is a must if we want to keep our economy thriving.

Uncertainty. The ABGF has only been promised by the Morrison government without a lot of detail, and Australian business needs to ensure that they hold the government to account in following through. Australian business deserves to be fully supported by the newly elected government.

It doesn’t go far enough. Small business is the lifeblood of the Australian economy and needs all the support it can get. The industry suffers from red tape, lack of entrepreneurial talent and inflexible industrial relations systems. Both major political parties have talked about these issues, but their policies don’t go far enough to address them. Accelerating the timing and funds dedicated to the ABGF and ABSF will go some way to helping.

As part of my work, I deal with talented entrepreneurs looking to find SMEs that they can acquire and grow. One of the problems they face is finding the necessary capital and finance to deliver on these opportunities. Without those opportunities, Australia is missing out on the talent and growth it needs to continue to expand its economy.

The ABGF and ABSF are a start. But they need to be guaranteed, they need to be expanded and more needs to be done to enable and support a vibrant SME sector in Australia.

About Lui Pangiarella

Lui is an experienced facilitator and executive coach particularly in the areas of organisational performance, strategy, culture and leadership development.

View Our Investment Portfolios

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

Publishers Notice

The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.

Australian ASX Small Cap stocks | Why Finfeed.com is Australia’s leading small cap publication

Founded seven years ago, Finfeed.com is Australia’s leading and longest standing website for investor and finance news, education and expert opinion.

Published by StocksDigital, Finfeed was created to report daily on the comings and goings of ASX listed stocks in the small cap market.

As the first digital publication dedicated specifically to this space, Finfeed soon became the most trusted publication in the market, quickly garnering over two million page views – a number that continues to rise.

Finfeed.com provides its readers with informative articles that tackle the latest in market moving #ASX small cap news, plus exclusive content you won’t find anywhere else. It is aimed at those with an interest in investing, market education, company performance, start-ups and much more.

Finfeed.com is the only media organisation operating under the strength of a Financial Services License and is backed by leading journalists and analysts all with brands of their own.

The website aims to inform, educate and entertain with content that drills down into the heart of financial matters.

Finfeed is a leading source of investor and market information, with everything investors need to know about how to invest written in a way that anyone can understand. 

Over the years, the website has expanded beyond exclusively reporting on small caps, to profile Australia’s leading ASX listed small, mid and large caps as well as some of the country’s most successful CEOs and business leaders to find out what makes them tick.

Every day you will find fresh content covering:

Fast Facts

Over 4,000 articles published

Over 2.3 Million Page Views and counting

Over 10,000 followers on social media

Subscriber list growing by 2% monthly

Thanks for subscribing!