Accountants pivotal in minimising SME financing risk

A big four firm has highlighted the critical role accountants have in advising clients around accessing alternative sources of financing proposed by the small business ombudsman.

by | 23 Jul, 2018

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KPMG Australia partner for enterprise Dominic Pelligana told Public Accountant of the importance of accountants informing small businesses around accessing patient capital, in particular the proposed Capital Enhancement Fund (CEF) and the Business Growth Fund (BGF) as mentioned in the Australian Small Business and Family Enterprise Ombudsman’s Affordable capital for SME growth report.

He said SMEs are inherently risky but play such an important role in Australia’s society and economy, and are often risk takers, investing in new capabilities, technologies and business models.

“The CEF, which is to be created by the government, seeks to provide a new pool of capital to non-major banks to raise tier two or hybrid debt to encourage greater competition in the finance sector and encourage lending to SMEs,” Mr Pelligana said.

“We’ve seen something similar in the US implemented after the Global Financial Crisis, which increased funding by community banks to SMEs.

“The BGF, which is proposed to be created and operated commercially and independent of the government, seeks to provide funding to SMEs by way of debt and/or equity with cheque sizes between $250,000 to $5 million.”

Further, Mr Pelligana said accountants are often an SME’s most trusted adviser and, as such, will continue to play a pivotal role in providing practical and commercial insights into how these initiatives are refined and, more importantly, how they are communicated and taken up in the market.

“Accountants will need to understand the practical and commercial terms around these initiatives in order to properly advise businesses as to when and how to seek access to these funds,” he said.

“Debt will always need to be serviced and repaid and, similarly, equity may need to be bought back and/or dealt with as part of a business sale.”

Earlier this month, IPA chief executive Andrew Conway hailed the ASBFEO report for reinforcing many of the sentiments it has held in the past around small business financing.

“Australia must do everything in its power to support small business productivity and growth for the sake of our economy,” Mr Conway said.

“Facts borne from the ASBFEO report such as small businesses’ 57 per cent contribution to GDP and the employment of seven million people says it all.

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