Federal Treasurer Josh Frydenberg. Picture: AAP/Joel Carrett
Federal Treasurer Josh Frydenberg. Picture: AAP/Joel Carrett

The $2b plan to boost small business

MUM and dads will no longer have to risk their home to secure a business loan under $2 billion Morrison Government fund aimed at creating more small businesses and new jobs.

Treasurer Josh Frydenberg will on Wednesday reveal the Government will back-in small business through two new funds that will free-up cash for smaller lenders, which will not require the family home as collateral, giving Australians confidence to be their own boss.

The Government will all but go guarantor for non-banking lenders and smaller banks.

In another example of the Government pivoting to small business after dumping corporate tax cuts for big business, the plan puts further distance between Prime Minister Scott Morrison and Bill Shorten on small business policy.

The two-pronged plan will inject more competition in banking sector, take the risk out of starting a new business and make it easier to get a cheaper loan, through:

A new $2 billion Australian Business Securitisation Fund, which will buy business loan debt from smaller lenders, freeing them up to provide more longer-term capital for small businesses. It will be administered by the Australian Office of Financial Management, which stepped in to help free-up capital for home loans after the Global Financial Crisis. And;

An Australian Business Growth Fund, which make it easier for small businesses to grow by allowing banks to take a stake in a business, which will allow firms to invest more. The Government will seek to fast track the growth fund by meeting with key stakeholders by the end of the month.

The plan does not mean the Government will directly lend to small business and it is structured so non-risky loans are secured.

Mr Frydenberg said funding costs were too high for small businesses trying to have a go.

"To overcome this and ensure that small businesses are able to fill their potential and continue to underpin economic growth and employment...(the $2 billion fund will provide) significant additional funding to small banks and non-bank lenders to on-lend to small businesses on more competitive terms,'' Mr Frydenberg said.

"With more than three million small businesses employing around seven million Australians, enhancing small business access to funding is part of the Coalition's plan for a stronger economy."

He said the Government would work with regulatory agencies to make it easier for business to attract more equity.

"The Australian Growth Fund is expected to follow similar international precedents. Since its establishment in 2011, the UK's Business Growth Fund has invested some $2.7 billion in a range of sectors in the community."




What's the problem and how is the Government trying to fix it?

■ Small businesses pay more for their finance. Often a collateral of real estate is required, usually the family home

■ The Government will establish a $2 billion Australian Business Securitisation Fund


How will the $2 billion fund work?

■ It frees up smaller lenders to loan to small business owners, by the Government buying the debt. It will inject more cash into the lending market at better rates - up to 4 per cent cheaper


Will the Government be lending to small businesses?

■ Not directly. The fund will provide a new source of funding to smaller banks and
non-bank lenders

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