The new Business Growth Fund – could you benefit?

The Government is investing $100 million into a new Business Growth Fund, it announced in the latest Budget. This funding is designed to help small- to medium-sized businesses (SMEs) get the investment they need to grow while allowing owners to keep control.

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 of 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.

Give us a call and we can talk you through the various options. We’re here to help.