Getting ready access to additional funding without having to put the family home on the line as security is a notorious issue for small business owners, but the Federal Government has just announced a plan that aims to ease the credit squeeze.
Announced earlier today, the Morrison government’s plan to introduce a $2 billion Australian Business Securitisation Fund is being lauded as a positive step towards giving small businesses greater access to affordable capital.
The Treasurer and Minister for Small and Family Business announced the tax payer backed fund as a way to overcome the problem faced by many small businesses when applying for loans, as banks tend to only loan to the self-employed when their personal home is used as collateral.
In creating the fund, the government plans to purchase secured and unsecured SME loan packages from smaller banks and non-bank lenders such as those in the fintech sector.
In doing so, the government will effectively boost funding for these lenders, improving their ability to loan to small businesses and potentially lowering costs at the same time.
Australian Small Business and Family Enterprise Ombudsman Kate Carnell welcomed the announcement alongside its pledge to facilitate discussions on the development of an Australian Business Growth Fund.
“Both initiatives reflect recommendations from our Affordable Capital for SME Growth inquiry earlier this year,” said Carnell.
“The Australian Business Securitisation Fund will go a long way in meeting the financial needs of the Australian small business sector by stimulating greater competition in the lending market.”
Carnell also highlighted research by Judo Capital/East & Partners SME Banking Insights Annual Report, which found the total funding gap for small to medium enterprises in Australia is estimated at over $80 billion.
“The new pool of capital will help address this gap, as smaller banks and non-bank lenders will have access to more capital specifically for the sector,” said Carnell.
“This will increase competition in the market and increase access to affordable capital for SMEs.”
MYOB CEO Tim Reed cited the online accounting software provider’s in-house research in welcoming the news.
“It is really positive to see the Federal government focused on the needs of our nation’s smaller businesses,” said Reed.
“Our research has found cash flow to be a major pressure point for SMEs, with 30 percent reporting this a top concern.
“Providing non-bank lending through innovative fintech companies opens up a whole new ecosystem of financial services.”
MYOB currently provides small business loans, powered by OnDeck*, through its online accounting software platforms and Reed says the company looks forward to “continuing to work with the Treasurer and Minister for Small and Family Business to bring new services to market that will benefit the nation’s small businesses”.
“Ensuring business owners have access to the capital they need to invest will help grow and strengthen the whole economy. It’s a great move.”
Nevertheless, Carnell said there is more work to be done in providing long-term funding for high-growth SMEs, which she said generate “the highest growth in employment”.
“It is critical the planned discussions fast-track the establishment of the Australian Business Growth Fund to address this long-term funding gap,” said Carnell.
“Equally, the Australian Prudential Regulation Authority must action capital relief for the securitisation capital and the growth fund.
“We call on all lenders to follow the lead of the National Australia Bank, Commonwealth Bank of Australia and HSBC in supporting the establishment of the Australian Business Growth Fund.”
Considering a loan? MYOB Loans are short-term loans of just six to 24 months, borrowing between $10,000 and $250,000. Apply today and you could receive funding with nothing to pay until January 2019**
*Loans are issued by On Deck Capital Australia Pty Ltd ABN 28 603 753 215. Loans subject to lender approval.
**Exclusive deferred payment offer is only available to MYOB customers taking their first loan between 30 October 2018 and 30 December 2018. terms of the offer are: loan repayments begin the week commencing Wednesday 2 January 2019; if you choose to accept the offer, the total loan repayment term will be extended by the period of time equal to your loan repayment deferral. Not valid in conjunction with any other offer.
MYOB holds a 30 percent stake in OnDeck Australia and has a referral agreement under which it earns a commission on loans referred to OnDeck Australia.