Bert Van Manen (Forde, Liberal Party) Share this | Hansard source

It's always a pleasure to rise in this House and speak about the things that this government is doing for business across the country and, in particular, small to medium businesses. The Australian Business Growth Fund Bill 2019 seeks to establish the Australian Business Growth Fund. The purpose of this special fund is to help small and medium businesses to more readily access equity funding to raise capital, fund their growth and prosper in the long term.

I know from many discussions I've had with small-to-medium business enterprises across my electorate, and I have some 17,000, that access to capital at affordable interest rates or through other avenues is one of their greatest dilemmas. It is always far easier for the big end of town to raise capital reasonably cheaply from a range of sources. The provisions in this bill go a long way towards establishing another avenue for small-to-medium businesses to access equity funding rather than constantly having to put their house on the line and then, when their equity in their house runs out, running out of access to capital to continue to build and grow their business.

The provisions in this bill would authorise the Commonwealth to invest in the Australian Business Growth Fund to be established as a company under the Corporations Act. Essentially, this would allow the government to invest and purchase shares or debentures in the company. The government has previously committed $100 million to the Australian Business Growth Fund in addition to investment already committed by participating financial institutions. The investment capacity of the fund is currently at $540 million with the potential to grow to around $1 billion.

The case for establishing the Australian Business Growth Fund is clear. We know there is a gap in the Australian market for patient equity capital for small-to-medium enterprises that is not directly addressed by venture capital or private equity. We've also seen over time attempts at employee share ownership schemes, but they never seem to have gained the traction here that they have in many other countries around the world. Many SMEs find it difficult to raise capital for expansion or to fund innovation without taking on additional debt or giving up control of their business. That's where this equity funding, and equity funding more generally, is the best source of finance for many SMEs, because it provides a solid long-term foundation on which to grow their businesses.

In 2018, the Reserve Bank released a report highlighting the difficulties Australian SMEs face in trying to secure finance. The first is the well-known fact that banks are often reluctant to lend to small business, particularly start-ups, because of their perceived risk of default. Further, SMEs are often asked to put up real estate or other business assets as collateral to secure finance. Meanwhile, obtaining unsecured finance is normally difficult but also extraordinarily expensive in terms of the interest rates and fees they are likely to face.

(Quorum formed) One of the difficulties for small-to-medium enterprises in obtaining finance many times is the cost of that finance, particularly where it is unsecured. All these finance requirements are on top of strict prudential requirements associated with financial institutions lending to small businesses for equity investments.

As was mentioned by the member for Rankin in his contribution, small-to-medium enterprises are the backbone of our economy. They create jobs, drive innovation and boost competition across the Australian marketplace and overseas. When businesses are doing well, they'll generally employ more people. As a consequence, Australians right across the country are better off. We have over 2.2 million SMEs, which account for over 68 per cent of our private sector employment and over 35 per cent of our gross domestic product. A healthy small-business sector is a prerequisite for a growing economy creating better employment opportunities.

This government is committed to backing business and, by extension, hardworking Australians. We have been backing them in a range of areas: through giving them tax cuts, with the lowest business tax rate in 50 years; through red tape relief by simplifying business activity statements and with the Deregulation Taskforce; through the extension of the instant asset write-off to $30,000 for businesses with a turnover of less than $50 million; by improving access to finance, with the establishment of the $2 billion Australian Business Securitisation Fund so that small businesses can get the funding they need to grow and prosper; and by providing the ability for smaller banks to securitise their small-business loan book to free up capital.

As I mentioned earlier, my electorate has over 17,000 small-to-medium business enterprises. With the requirements around the Australian Business Growth Fund for long-term capital equity investments above $15 million, where these businesses have generated between $2 million and $100 million in turnover or annual revenue and three years of revenue growth and profitability, there are some 800 businesses across my electorate that may well benefit from the Australian Business Growth Fund. I've talked to a number of businesses recently who are looking to expand their operations. They've said to me, 'I'm not going to borrow any more money, and I'm looking for capital equity investment.' This bill presents the opportunity for these businesses to realise their growth potential without longer term access to equity funding across a range of industries each year, without being a burden on the assets they might already have secured for the loans they currently have.

The Australian Business Growth Fund will take a minority stake in businesses it invests in of between 10 and 40 per cent, to allow owners to retain control of their business while also allowing the fund to retain sufficient capital to encourage business growth. One of the advantages I see with this fund, with these equity injections, is that it may actually provide an opportunity for some of these SMEs to reduce the debt load on their businesses and make their businesses more profitable and more viable for the longer term.

Similar successful business growth funds have been established in the UK and Canada and have shown there is a demand for this type of finance and that patient capital investment can be profitable for investors. As such, the Australian Small Business and Family Enterprise Ombudsman supports the establishment of the Business Growth Fund for the private sector in Australia as was highlighted in its research paper in June 2018.

The Australian Business Growth Fund will operate commercially and independently from the government and participating financial institutions. The Commonwealth will make arrangements relating to the operations of the fund but will not retain any controlling interest and will hold less than 50 per cent of the shares. The Australian Business Growth Fund will be run by an independent board and management team, investment decisions will be made by professional managers and performance will be assessed on a fully commercial basis in accordance with private-sector funding models.

I commend the work and the effort of the hardworking small-to-medium business owners and operators around the country and I trust that this bill and this Australian Business Growth Fund will further help them by giving them an additional opportunity to continue to grow, develop their businesses and continue to create wealth for Australia, employing Australians right across our great country. I commend this bill in its original form to the House.

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