[Disputes continue over business growth fund]

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[disputes-continue-over-business-growth-fund]

Disputes continue over business growth fundSkip to sections navigationSkip to contentSkip to footerSmall and medium businesses still face uncertainties about the government’s proposed business growth fund as investor groups push for access to investment deals first.A senate standing committee on economics held a hearing on Thursday afternoon about the proposed fund, which the big banks have committed funding towards in order to provide an alternative form of funding for small businesses.Small business ombudsman Kate Carnell has long argued for a business growth fund following the model already launched in the UK. Credit: AAPGroups representing private investors are pushing for an amendment to the fund proposal that would mean instead of simply advancing capital to businesses, the fund would underwrite, or guarantee, a portion of capital to a business and then make an investment offer to the broader community to give them the opportunity to buy in.Under the amended model, the growth fund would be able to invest to bridge the gap in required funding once the appetite from mum and dad investors, private equity funds and venture capitalists had been tested.”The fund would conduct due diligence and determine which businesses are investable. The fund would guarantee a certain amount of equity subject to making an offer to all legally eligible Australian investors, so they have the opportunity to buy in,” chief executive of fundraising platform OnMarket Bookbuilds, Ben Bucknell said.OnMarket’s proposed amendment to the scheme has been backed by the Australian Shareholders Association, which wrote in a submission to the senate committee that it did not want the fund to lead to the “disenfranchisement of retail investors” who might want to buy in to a small business but would be excluded from opportunities as the growth fund matured.Australian Small Business and Family Enterprise Ombudsman Kate Carnell said suggestions the growth fund be amended to an underwriting model appeared to show “serious self-interest”.She said the reason the growth fund had not been set up to offer investment opportunities to private firms first was that it was aimed at businesses that were often overlooked by venture capitalists and other investors.”You need the growth fund to have a really clear view that they’re not planning to stay in the business in the long term or take any controlling interest,” she said.The fund’s current model aims to expand so-called “patient capital” opportunities by offering businesses funding without the need to give over a long-term equity stake to the fund.The business growth fund will include an initial $100 million investment from the federal government with the big four banks also pledging $100 million each giving it a half billion dollar war chest.Loading”The focus is seriously just on helping an SME grow to a point where they don’t need the equity investment,” Ms Carnell said.Other investment platforms have said they are not as concerned about the potential for the fund to cut out existing investors.Birchal co-founder Matt Vitale said  in the UK, about the same amount of investment has been made through its business growth fund as through crowdfunding since 2011.”We don’t see an Australian growth fund as a threat, but a potential key partner in our mission to improve access to funding for Australian businesses,” he said.The growth fund bill is sitting before the senate and the senate committee is due to report on February 21.Follow MySmallBusiness on Twitter, Facebook and LinkedIn.Most Viewed in BusinessLoading

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