$540m business growth fund

The federal government and six major banks have established a fund that will invest equity capital in Australian small-to-medium businesses.

The Business Growth Fund, announced by Treasurer Josh Frydenberg today, aims to ensure SMEs have access to equity finance as the nation moves into the recovery phase of the COVID-19 pandemic.

The federal government will invest $100 million in the BGF while major banks ANZ Banking Group, Commonwealth Bank of Australia, National Australia Bank and Westpac Banking Corporation have each committed $100 million.

HSBC and Macquarie Bank will invest $20 million each.

The BGF will begin with a $540 million investment capacity, with plans to grow the fund to $1 billion before it matures. It will operate commercially and will be managed by the private sector.

The fund, to be chaired by former Tasmanian Premier Will Hodgman, will allow businesses with annual revenue of between $2 million and $100 million to apply for long-term equity capital investment of between $5 million and $15 million.

Businesses must meet a number of guidelines including proving that they are growing and profitable.

There will, however, be allowances in place for the impact of COVID-19 on recent business performance.

The fund was recommended in the Australian Small Business and Family Enterprise Ombudsman’s ‘Affordable Capital for SME Growth’ report.

Ombudsman Kate Carnell said the BGF was fantastic news for SMEs with high growth potential.

“The fund will fill the critical gap… for patient capital to enable our up-and-coming SMEs to succeed,” she said.

The BGF will soon begin engaging with SMEs seeking equity investment.