Here is a joint Blog from COSBOA’s Chairman and CEO.
Bill Shorten in his 2015 budget response proposed, as part of his policies for small business, a $500 million Smart Investment Fund scheme for Start Up Businesses.
To quote Mr Shorten “Our Smart Investment Fund, will partner with venture capitalists and fund managers to invest in early-stage and high-potential companies.”
And he added “Labor will work with the banks and finance industry to establish a partial guarantee scheme, Start-up Finance, to help more Australians convert their great ideas into good businesses. We will enable entrepreneurs to access the capital they need to start and grow their enterprises.”
We are pleased with this announcement, as these types of scheme operate in many countries including Malaysia, USA, UK and Canada and are recognition of the fact that an economy built on the foundation of a vibrant small business is a good economy destined for growth and prosperity.
In Australia, we know from work COSBOA has completed in partnership with the Australian Bankers’ Association that there are some 300,000 incorporated small businesses that want to grow but struggle to get the finance.
They struggle due to the unnecessary red tape imposed on banks by APRA and an ingrained fear of small business start-ups by text book bound economists who write financial policy.
Micro Businesses, invariably started in the garage or spare room at home, are also suppressed. Financiers will not look at them because they are not big enough to incorporate and often don’t have the assets to get expansion funding, forcing them to fund their start up growth out of their modest lifestyle. Many innovative ideas are lost and the potential to grow through the ‘business growth cycle’ are stifled.
What Bill Shorten has shown is a willingness to embrace reality and use text books and theories to inform decisions, not decide them. Whilst the ‘devil is in the detail’ the direction is positive and worthy of praise.
Business advisers, including COSBOA’s member associations such as those involved in brokering loans from CAFBA and those involved in brokering the sales and purchase of businesses through AIBB, would be able to assist businesses start and grow and give timely advice on preparing themselves for long term sale to a larger company.
Business finance brokers are experts at leveraging loans, developing business plans that attract finance and advising business people on the best way to grow and prosper. Experts on selling and buying businesses will also advise business people on what makes a business attractive and profitable. The announcement by Labor provides extra tools to enable advisers to assist business people and if implemented will keep the wheels of commerce turning for years to come.
This announcement would also be welcomed by venture capitalists, banks and other financiers. Venture capitalist in particular like to work with the clever people who have intellectual property to sell or an invention to commercialise and this would provide another option for funding business start ups.
Another strength of this proposal is that the government agency or institution involved in deciding who is eligible would of course ask to see a business plan before they provided finance. This forces the budding entrepreneur to sit down, probably with experts such as brokers, accountants and commercial lawyers, to develop a coherent plan. The plan would highlight the strengths and weaknesses of what they have to offer as well as develop a long term strategy with key milestones, contingency plans and support mechanisms, all essential for success in the short and long term.
No government is going to provide finance to businesses that are unprofessional, lacking substance or a decent plan. There are Senate Committees that would ask plenty of questions about this type of scheme and as long as the administration and accountability is in place the Senators should take a ‘big picture’ view and have no fear.
It is refreshing to see Bill Shorten and Labor embrace the small business community; and given the increased focus from the government on our sector it augers well for the future of the economy.
It seems that finally there is a realisation from the major parties that if you look after small business than you are looking after all business. This is in stark difference from the last few decades where the mantra has been “if you look after big business, small business will be fine”, that mantra has always been compromised by the needs of the duopoly retailers, big unions and the mining magnates; it has been shown to be false and damaging to long term productivity and has created a large wealth gap in our society. Middle Australia which is small business has been left behind.
Focusing on small business people is sensible, intelligent, fair and a recipe for a strong progressive middle class and a more egalitarian society.
Paul Nielsen Chairman COSBOA
Peter Strong CEO COSBOA