Fund can benefit small business-dominated industry, NatRoad says
A $2 billion Australian Business Securitisation Fund designed to improve funding for Australian small businesses has gained the support of the National Road Transport Association (NatRoad), which it says should assist an industry characterised by “tight margins and fierce competition”.
The government rationale for the fund is that small businesses find it difficult to obtain finance other than on a secured basis, usually against real estate.
Further, “businesses that have already obtained finance secured against real estate, but wish to continue to grow, also find it difficult to access additional funding”, and funding costs “are higher than they need to be”.
The Australian Business Securitisation Fund will invest in the securitisation market – to smaller banks and non-bank lenders to on-lend to small businesses on more competitive terms.
From a road transport perspective, NatRoad CEO Warren Clark welcomes the announcement, which, in principle, should be of benefit to an industry comprising myriad small businesses.
“The road freight industry has a low market share concentration. The four largest companies account for around 15 per cent of industry revenue,” Clark says.
“The industry is characterised by tight margins and fierce competition. Access to finance can be difficult especially in an environment where the capital cost of heavy vehicles is increasing. Even when small businesses can access finance, funding costs are high.
“Government has announced a measure to address this issue. When you combine this measure with the current payment times inquiry, we see a pattern of assisting small business, which can only benefit all Australians.”
Read more about the payment times inquiry by the ASBFEO, here
As part of the announcement, the government says it is also consulting with the Australian Prudential Regulation Authority (APRA) and financial institutions with an aim of establishing an Australian Business Growth Fund to provide longer term equity funding to small businesses.
“Many small businesses find it difficult to attract passive equity investment, which enables them to grow without taking on additional debt or giving up control of their business,” it says.