The latest government budget announced an investment of $100 million into a new Business Growth Fund. This funding is designed with small and medium-sized businesses (SMEs) in mind. It allows SMEs to get the investment they need to grow, whilst also allowing owners to keep control of their business.

Why has the fund been launched?

The fund was launched in recognition of the difficulty SMEs have had in obtaining business loans. This can restrict growth in the business. Banks can be reluctant to lend, and often ask to secure it against the house. 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 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 NZ SMEs. The banks will choose the SMEs for funding and the BGF will take a minority shareholding in each business. Minister for Small Business, Stuart Nash, told reporters, that the BGF will provide support to the SMEs, and will have “modest return expectations and no hard exit deadlines, allowing business owners to set their own growth targets.”

Will my business be eligible?

That’s not known yet. Unfortunately, bank partnerships have not yet been set up. Nor have criteria been set and it could take some months before the scheme is up and running.

What if my business needs funding now?

In the meantime, if you need funding to support your business growth, there are a few options. The Small Business Cashflow Scheme is an option for those SMEs struggling with a pandemic-associated loss of income. Other options are bank loans, private equity and angel investors, as well as 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