| 25/05/2022

Business, GrowthThere’s $100 million in capital funding for the new Business Growth Fund for SME businesses needing money to grow.  The Government will buy minority stakes in small businesses that want to expand, investing alongside banks.

Banks will refer businesses “where equity finance would be more appropriate than debt finance”, Minister for Small Business, Stuart Nash, said.

Nash, pointing out that private equity funds don’t typically invest in SME businesses but push for control, aggressive growth, and short-term results, described the Business Growth Fund having “more modest return expectations and no hard exit deadlines allowing business owners to set their own growth targets and identify the most appropriate time and path to exit.”

The Government has discussed the fund with the Reserve Bank and private banks but has not yet selected banking sector investment partners.

The Minister indicated this investment model has been tried successfully in the UK, Canada, Ireland, and Australia.

We don’t have details yet, but we can perhaps draw on examples from the last two years’ COVID-related business relief schemes.  We expect eligibility criteria for the fund to require evidence of business viability and a New Zealand base, backed up by solid financial data and business plans outlining the kind of growth an applicant has in mind, such as expansion into new locations, new markets, or new products.