Australian Business Growth Fund

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What is the Australian Business Growth Fund?

The Australian Business Growth Fund is a funding source for small business of long-term equity funding backed by the Federal Government.

 

Background

The fund was officially launched by Treasury at the Australian Chamber of Commerce and Industry on 27 November, with ANZ, CBA, NAB and Westpac all committing $100 million – matching the federal government’s pledge. This funding will be provided over a five-year period.

HSBC has also said that it will contribute $20 million to the fund, which aims to “significantly enhance the ability of SMEs to access funding, filling a gap in the market that is preventing them from reaching their full potential”, according to the Treasury.

The government is aiming for the fund to grow to $1 billion as it matures.

 

Objectives

The main reasons for the funding are:

  • Security – businesses find it difficult to obtain finance other than on a secured basis – typically, against real estate.
  • Additional Funding – small businesses that have already obtained finance secured against real estate, but wish to continue to grow, also find it difficult to access additional funding.
  • Funding Costs – even when small businesses can access finance, funding costs are higher than they need to be
  • Control – Many small businesses find it difficult to attract passive equity investment which enables them to grow without taking on additional debt or giving up control of their business.

The Australian Business Growth Fund has the objectives to increase the availability of patient equity capital for local SMEs, to increase the level of investment in these companies, facilitate interstate and overseas trade and commerce, and support job creation and economic growth as part of the COVID-19 recovery.

Legislation allowing the government to invest $100 million in Commonwealth funding to the ABGF was passed by Parliament last year in an omnibus bill of COVID-19 economic recovery policies.

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Australian Business Growth Fund

Growth

The $540 million Australian Business Growth Fund is about to turn on the taps, with its first investment of “patient capital” expected to be made by the end of the financial year.

First announced by the Coalition as part of the 2019 election campaign, the Australian Business Growth Fund  will make long-term equity capital investments of between $4 million and $15 million into established Australian businesses.

These businesses will have annual turnover between $10 million and $100 million, with three years of proven revenue growth and profitability, taking into account the impact of the COVID-19 pandemic.

The fund, which will operate commercially and independent from the government, will take minority economic interest of between 10 per cent and 40 per cent in the companies it invests in.

The government has stumped up $100 million of Commonwealth money to the fund, along with the big four banks, HSBC and Macquarie have also contributed $20 million each, bringing the fund’s initial size to $540 million.

The government has a longer-term goal to grow the fund to $1 billion.

 

Structure

Australian banks and superannuation funds will inject equity capital into the Australian Business Growth Fund which in turn invests in Australian small businesses.

Australian Business Growth Fund

 

Similar Models

The Australian Business Growth Fund is expected to follow similar international precedents.

By way of example, since its establishment in 2011, the United Kingdom’s Business Growth Fund has invested some $2.7 billion in a range of sectors across the economy.

A similar fund has not emerged in Australia, in part, as a result of the unfavourable treatment of equity for regulatory capital purposes.

While the exact detail has not been announced, Bulletpoint has provided an indication below.

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Australian Business Growth Fund

 

Investment Background

Australian Business Growth Fund views investments as partnerships. As a minority equity investor, the teams that this funidng invests in and the relationships they build with them are fundamental to the fund’s collective success.

When the fund invests, they take a long-term view and treat the relationship seriously from day one. The Australian Business Growth Fund are diligent and methodical, but strive to be pragmatic and collaborative to keep companies focused on their operations.

Australian businesses will be eligible to apply for long-term equity capital investments between $5 million and $15 million, where they have generated annual revenue between $2 million and $100 million and can demonstrate three years of revenue growth and profitability, allowing for the impact of COVID-19 on recent business performance.

 

Investment Criteria

Established Australian businesses will be eligible for long-term equity capital investments of between $5 million and $15 million, where they have generated annual revenue between $10 million and $100 million and can demonstrate three years of revenue growth and profitability.

The Business Growth Fund’s investment stake will be between 10 and 40 per cent, allowing small-business owners to maintain control while also allowing the Business Growth Fund to offer the kind of financial support to drive business growth. The Business Growth Fund also proposes to offer non-financial support, for example, through the provision of strategic advice, mentoring, talent management and network referrals for small and medium businesses to access.

The fund targets growing companies across industries based on the following criteria:

  • Revenue – $10 to $100 Million
  • Equity – 10% to 40%
  • Management – Entrepreneurial focus
  • Investment – $5 to $15 Million
  • Location – Based in Australia
  • Growth – Significant expansion opportunity
  • Leverage – Less than 50%
  • Business type – Post start-ups and proven business models

 

Timing

Applications are now open.

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Australian Business Growth Fund

 

Benefits

The benefits of this funding are:

  • Structure – the fund structure allows them to take a long-term and patient approach with their investments. They can provide follow-on capital as needed and seek to exit at the right time for all shareholders.
  • Control –  the fund focuses exclusively on minority positions, and their approach provides entrepreneurs with a collaborative, value-added partner – not a controlling shareholder.
  • Network – With support from Australia’s leading financial institutions, The fund offers access to a powerful knowledge network, mentorship from our talent network, and a unique opportunity to collaborate with like-minded entrepreneurs within the fund’s portfolio.
  • Responsiveness – The investment team moves quickly to provide a clear indication of their interest in pursuing a potential investment. Their term sheets provide clarity on value, terms, and timing.

 

Application Form

In order to obtain funding, you will need to be able to answer the questions like:

  1. What is your name and contact details?
  2. What is the company name?
  3. Where are you located?
  4. How old is the company?
  5. What industry sector is the business in?
  6. Tell us a bit about the business and why you’re looking for funding?
  7. What is the company turnover?
  8. What is the company profit?
  9. What is the expected growth rate over the next 3 years?
  10. How much are you looking to raise?
  11. What has been the source of funding to date?
 

Key Documents

 

Australian Business Growth Fund Bill 2019

The Australian Business Growth Fund Bill 2019 (Bill) gives effect to the Government’s commitment to increase the availability of patient capital
for small and medium enterprises by authorising the contribution of $100 million to invest in an Australian Business Growth Fund.

  • Date of effect: This Bill commences on the day after the Royal Assent.
  • Proposal announced: The Government announced its proposal to invest in an Australian Business Growth Fund on 4 November 2019.
  • Financial impact: The establishment of an Australian Business Growth Fund is estimated to have the following financial impact:
  • The Australian Business Growth Fund Bill 2019 (Bill)

 

Recipients

Kikada Lane Dental is a new dental practice based in Sydney, Australia. Founded in 2019, the company has expanded to include 13 locations across New South Wales, Queensland, Victoria and South Australia. – a noteworthy result given it was achieved in the middle of a pandemic!

Kikada Lane Dental run a unique aggregated clinic model. They faced a similar challenge to most small to medium enterprises. Their needs were too small for a typical private equity fund. And they needed a different type of growth partner. Enter the Australian Business Growth Fund™, with a $10 million investment.

Source

Based in NSW’s Hunter Region, 3ME Technology is an Australian-grown high-tech business, with more than 15 years’ experience in developing electric vehicle (EV) systems and safe, high-performance lithium-ion batteries. 3ME Technology’s BLADEVOLT battery system has been retrofitted into a typically diesel-powered 20-tonne loader. The Australian-made capability is now extending into the electrification of defence vehicles. 3ME Technology is also working with partners to launch its battery systems into space.

The Australian Business Growth Fund (ABGF) and 3ME Technology’s story begins. Small to medium enterprises (SMEs) are the backbone of the Australian economy. Their resolve has been tested more than most as they face the challenges of surviving a global pandemic.

Source

Melbourne-based DIY Blinds, founded by former superannuation professionals Evan Montero and Liam Dobson in 2015, allows homeowners to virtually design and purchase premium blinds, shutters, and curtains without ever stepping foot into a physical showroom.

Forward-thinking home improvement startup DIY Blinds has received a $15 million investment from the Australian Business Growth Fund, after winning over the public-private partnership with its plan to reboot the window furnishing sector.

Source

Latest News

Derwent Industries, a manufacturer of specialty pipes, clamps, and fittings for infrastructure projects, receives $15 million that will allow the company to upgrade robotics capabilities and retool its Wodonga facility, leading to an 18% boost in headcount and expansion to Brisbane and Perth.

The Australian Business Growth Fund has invested in Derwent Industries, which is uniquely placed to service local buyers in the water, mining, and rail sectors who require supply chain certainty. Its focus on ‘just in time’ manufacturing means it can be more responsive to the needs of buyers and minimise risk and time delays in major infrastructure projects.

Source

 

DIY Blinds has received a $15 million investment from the Australian Business Growth Fund, after winning over the public-private partnership with its plan to reboot the window furnishing sector.

Melbourne-based DIY Blinds, founded by former superannuation professionals Evan Montero and Liam Dobson in 2015, allows homeowners to virtually design and purchase premium blinds, shutters, and curtains without ever stepping foot into a physical showroom.

Montero and Dobson has partnered with the Australian Business Growth Fund (ABGF). The ABGF is a partnership between the federal government and Australia’s six largest banks. The company eschews traditional marketing, turning to partnerships with figures like Keep It Cleaner co-founder Steph Claire Smith.

Source

The $540 million Australian Business Growth Fund is now open for investments.

Source

The $540 million Australian Business Growth Fund is about to turn on the taps, with its first investment of “patient capital” expected to be made by the end of the financial year.

First announced by the Coalition as part of the 2019 election campaign, the Australian Business Growth Fund (ABGF) will make long-term equity capital investments of between $4 million and $15 million into established Australian businesses.

These businesses will have annual turnover between $5 million and $100 million, with three years of proven revenue growth and profitability, taking into account the impact of the COVID-19 pandemic.

Source

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