Investment Readiness of Small & Medium Enterprises in Australia

A number of observers, both political and financial, are strongly persuaded that the difficulties linked to financing SMEs (small and medium-sized enterprises) in Australia have been solved at the end of the 20-th century. It is widely recognized that the supply of capital is adequate and that risk capital is sufficient in the modern world. The business improved business climate is believed to be accountable for such positive changes in the way SME’s operate. Another possible reason is that the amount of capital has grown, similarly to the rivalry on the supply side. However, many observers argue that there is a significant gap in the financing of growth or innovative companies, which also require additional skills and know-how in addition to the traditional capital. The difficulties increase if the organizational operations are founded on intangibles or developing technology. This paper, evaluates the factors that determine the ‘investment readiness’ of growth SMEs, analyzing the methods that could be undertaken to overcome the problems faced by these companies in acquiring investment capital for development.

In 1990s, many of surveys in Australia centered upon realizing and depicting the most common types of financial limits to SME development. These studies attempted to identify the most typical constraints and analyze the extent of such limitations. Even though many still debate on the validity and usefulness of those surveys, the research undertaken in field of SME’s development in Australia provided a few core conclusions:

• The scope of the problem has lessened during the 1990s with the enhanced business climate in Australia.

• There is a better supply of finances and capital sources leading to stronger competition in the market.

• The debt financing market is believed to function properly receiving an adequate supply of capital. 

•  Most observers agree that mezzanine capital has been almost absent, even though companies would prefer loans with interest rates connected to business results, as long as the organization is not required to part with pressure (Investment Readiness 2001).

The above conclusions clearly show that the situation with getting investment capital for SME’s in Australia has really changed for the better during the past years. However, the problem of insufficient capital supply and problems associated with obtaining and equity financial for SME’s is still there. The following sections attempt to explain this dilemma by illustrating that many Australian growth small and medium enterprises are not ‘investment ready’. Hence, these companies fail to get proper interest from investors who can finance their operations.

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