The Australian government has launched an A$520-million ($352 million) growth fund that will provide longer term equity funding to small businesses in the country, according to the Department of Treasury.
The fund, dubbed Business Growth Fund, has received a government commitment of A$100 million ($68 million). Australia’s four biggest banks – Commonwealth, Westpac, NAB, and ANZ – have also committed to match the government’s commitment towards the fund. Another A$20 million ($13.5 million) will be put up by HSBC.
The fund, first announced last year, will invest between A$5 million and A$15 million into businesses that have generated annual revenues of between A$2 million and A$100 million and show three years of revenue growth and profitability.
In exchange, the fund will take between 10 and 40 per cent stake in the business.
“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,” the Department of Treasury said on its website.
The fund will be provided over a five-year period and the government aims to grow it to A$1 billion as it matures. Australia has more than three million businesses employing around seven million Australians.
The Australian Business Growth Fund follows similar international precedents. The United Kingdom’s Business Growth Fund, which was established in 2011, has invested about $1.8 billion ($680 million) in a range of sectors across the economy.
The Australian fund will be managed commercially by a board and an independent management team. It will also not only offer direct cash injections but will provide strategic advice, network referrals, and other non-financial support. Based on the proposed structure of the fund, superannuation funds are also expected to invest in the new vehicle aside from the major banks.
The funding vehicle for Australian businesses was recommended by the Australian Small Business and Family Enterprise Ombudsman, which notes that high potential companies in the country do not have enough access to grow their businesses.