Federal Government pledges $2 billion to SMEs in early 2019 – An election campaign carrot, but okay
Following the NSW State Government’s underwhelming plan to cut back marginally on stamp duty charges, announced by Premier Gladys Berejiklian, the Federal Government has this week pledged to help SMEs with obtaining funding. The promise, delivered on 13 November 2018 by the Treasurer, the Honourable Josh Frydenberg, comes in the wake of the Royal Commission into the banking sector and with a federal election looming ominously upon the horizon for mid-2019.
SMEs account for 30% of Australian’s GDP and employ 40% of our workforce, and they are without a doubt the absolute backbone of this nation. They will stand to benefit from this reform, particularly with the big four banks now tightening up with new lending practices imposed by APRA. The Federal Government’s $2 billion investment plan will comprise both secured and unsecured loans at very affordable interest rates, where currently SME owners typically must put up personal or real property as security for small business loans.
However, the proverbial elephant in the room is – how will SMEs be able to obtain this finance? The Australian Office of Financial Management, a department of the Federal Treasury, will be responsible for managing the Government’s foray into the securitisation market. Small business owners concerned that obtaining such finance will require them to jump through hoop after hoop will find that, with the new-found Commonwealth backing, smaller banks will now be able to offer lower rates of interest than they otherwise would.
The legislation is tipped to be tabled in Parliament in early 2019 and bipartisan support is expected. However, given the impending election, we may find the Opposition or cross-benchers using this reform as a bargaining chip during political horse-trading. The instant asset write-off of up to $20,000, another of the measures offered by the current Government, has already been taken up by as many as 300,000 SMEs and more measures are expected to be announced shortly.