Australia launches $365m fund to support SMEs

LPs include ANZ Bank, Commonwealth Bank of Australia, Westpac, and National Australia Bank (NAB), which have contributed a combined A$440 million, as well as HSBC and Macquarie Group. The government is putting in A$100 million. Local superannuation funds are expected to participate, according to a release.

The Business Growth Fund is said to be the first vehicle of its kind in Australia and has been partially modeled on a similar initiative in the UK that has invested A$2.7 billion since 2011. It will make sector-agnostic investments in a range of A$5-15 million, targeting companies with revenues of A$2-100 million. The plan is to take minority stakes of up to 40% and offer non-financial support including strategic advice and mentoring.

"There's no question that SMEs and fast-growing early-stage new business ventures are not only major employers today, but they will increasingly become more central to productivity gains and economic growth across Australia over the long-term," Yasser El-Ansary, CEO of the Australian Investment Council, said in a statement. "In 2018 alone, Australian private capital funds secured an impressive A$6.6 billion in new funding commitments, which brings the amount of committed capital available to be invested into high growth potential Australian businesses to around A$11 billion today."

It extends a string of related initiatives to support the local SME space, which NAB has estimated represents 57% of national GDP. Earlier this year, legislation was passed to establish a A$2 billion fund to boost lending to small businesses. This coincided with a tax cut for SMEs with revenue under A$5 million that has been exercised by some 700,000 companies to date and is expected to be fully rolled out by 2022. Meanwhile, efforts to reduce red tap have included a plan to streamline goods and services tax reporting requirements for 2.5 million SMEs.

PE activity in this space includes ROC Partners teaming up with the state government of New South Wales and pension fund First State Super to launch a A$150 million fund targeting SMEs with enterprise values of A$20-50 million. Last year, local SME lender Judo Capital raised A$140 million from a group of international investors in what was touted at the time as the second largest-ever capital raise by an Australian start-up. Meanwhile, PE and VC-backed SME lender Prospa raised A$146 million in a domestic IPO.

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• Topics
• Australasia
• Fundraising
• Growth
• Australia
• NAB
• HSBC
• Macquarie Group
• SME