A $100 million investment by the Government in a new Business Growth Fund will allow small to medium-sized businesses (SMEs) to take advantage of the potential to grow, while still giving owners control.
This was announced in the latest budget: read here.
Why has this fund been launched?
It’s always been hard for SMEs to get business loans, which can hold them back from growing into larger operations. If you have ever tried to get a loan for a small business, you’ll know the banks can be reluctant – they’ll often ask for the loan to be secured against your home. This pushes many small business owners to use mortgage debt to fund growth, which skews our household debt and business investment data.
For businesses that are able to secure other types of investment, the investors will usually require a significant stake in the business. This can take the majority shareholding out of the hands of the original owner, and sometimes out of New Zealand.
How will it work?
The Business Growth Fund (BGF) will partner with retail banks to lend money to Kiwi SMEs. The banks will choose the SMEs for funding and the BGF will take a minority shareholding in each business. The BGF will provide support to the SMEs, Minister for Small Business Stuart Nash told reporters, and will have “modest return expectations and no hard exit deadlines, allowing business owners to set their own growth targets.”
Will your business be eligible?
Unfortunately, we won’t know the details on the Business Growth Fund for some time – it could take many months before it is up and running. Bank partnerships have not been established and criteria have not been set. We’ll be keeping a close eye on how it’s tracking and keep you up to date.
Looking for funding now?
If your SME needs funding for growth, there are a few other options in the meantime. Applications are still open for the Small Business Cashflow Scheme, which is an option for SMEs struggling with a pandemic-associated loss of income. There are also bank loans, private equity and angel investors, not to mention tax pooling for those big tax bills.
If you aren’t sure what to do next, we’ll be more than happy to extend our help through a free discovery call. Just book one below at the time that’s most convenient for you. If you’re looking for a Business Advisor and Chartered Accountant in Auckland to help you with your financial decisions – we’re here for you!
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