The Franchise Council of Australia is calling for the development of a small business assistance program that would allow emerging companies to use the Federal Government guarantee when seeking funding.
FCA executive director Steve Wright says a Government guarantee would boost funding opportunities for emerging companies, including franchises, as well as bolster entrepreneurship and jobs amid fragile economic times.
He points out that small business assistance programs work successfully overseas, especially in the United States – where delinquency rates are low and support has not lagged for the program, despite the country’s economic woes and fractious political climate.
Stressing the idea is in its infancy, Wright says he expects the idea will attract widespread support from small- and medium-sized enterprises.
“At the moment the economy and changing consumer habits are making it harder [for businesses] to simply maintain their current position, let alone grow,” Wright says.
“I doubt there would be any group right now that wouldn’t be in favour of targeted support for new business and new employment.”
Peter Strong, executive director of the Council of Small Business of Australia, says the concept is a good idea, but says it’s more pressing to ensure there is fairness in contract negotiations before boosting buying opportunities for franchises.
Wright says the program would be strictly targeted and insists it would not constitute a distortion of the market.
“If you prop up sectors with a direct injection, you’re creating a dependency and it’s a false foundation,” he says.
“We’d say, this is purely providing a guarantee in a situation where a new business venture can’t get that funding,” Wright says.
“If other criteria are met, then it may be that all that is required is a guarantee from the Government, which gives the lender confidence.”
Wright says despite the Government guaranteeing bank lending during the global financial crisis, Australian banks have been loath to lend to smaller franchises and retailers, noting that even larger franchises nominate funding availability as a key challenge.
“The pool for growth has effectively shrunk,” he says.
He adds that in the wake of further subsidies for car manufacturers, it’s appropriate the Government show support for Australia’s 700,000-strong franchise sector, which is a large part of small business.
Wright also reveals that the FCA is working on a retail forum to bring together business groups and retail groups to discuss leasing and broader issues identified in the Productivity Commission report into the sector.
The retail forum is proposed to be held in either Sydney or Canberra, in late February or early March.
Small Business Minister Mark Arbib was contacted for comment this morning but was unavailable.