WHITE PAPER CALLS FOR SMALL BUSINESS FINANCE GUARANTEE
The Institute of Public Accountants (IPA) has renewed its call for a state-backed loan guarantee scheme for small business.
The recommendation is one of numerous key recommendations stemming from IPA’s Australian Small Business White Paper launched at a special event in Parliament House on Wednesday, 12 August.
“It was pleasing to see that such a scheme would be contemplated by the Opposition when it made its 2015 federal budget response in May but we want Australia to move forward on this initiative now,” said IPA chief executive officer, Andrew Conway (also co-author and chair of the research partnership).
“Australia is one of the only countries in the developed world without such a scheme.
“In our view, a loan guarantee scheme would help increase the availability of much-needed, affordable loan finance to the small business sector.
“According to research undertaken by the IPA Deakin University SME Research Partnership, on average, 28,000 Australian businesses per annum face a binding finance constraint, whilst 118,000 face some access to finance issues.
“A limited State-backed guarantee would encourage banks and other commercial lenders to increase loan finance available to small business at affordable rates. Access to responsible and affordable finance will help many small businesses reinvest in their businesses and help create new ideas, new capacity and new jobs.
“We appreciate that the scale of a potential program needs to be established in a detailed feasibility study as this determines the parameters of the initial and ongoing demands on the Government,” said Mr Conway.
The Australian Small Business White Paper, a first for Australia, also recommended that the Federal Government:
1. Pilot a general SME guarantee scheme exclusively for capital investment projects, with a maximum loan of A$100,000, a maximum term of five years, a guarantee level of 65 per cent and an interest premium of 3.5 percentage points over the retail bank loan rate; and
2. Pilot an exporting SME guarantee scheme exclusively for international market development projects, with a maximum loan of A$200,000, a maximum term of ten years, a guarantee level of 75 per cent and an interest premium of 2.5 percentage points over the retail bank loan rate.
More details of the Australian Small Business White Paper can be found at /whitepaper