Funding for innovative companies might just be that bit harder.
Innovative companies are already battling a banking system that has an inability and/or unwillingness to provide funding to the small-to-medium business community. A World Economic Forum paper produced last year identified a "‘funding gap’ of more than $2 trillion exists for small businesses in emerging markets alone.” While 2 million small to medium enterprises in Australia can take loans from banks… generally speaking the banks will only lend if the entrepreneur's house is used as collateral.
Add to that the latest news from Australia's ASX. The ASX currently has proposed some changes to listing rules which would impact very small companies like tech innovators and mining companies. These include lifting the minimum net tangible asset test from $3m to $5m, and the market capitalisation test from $10m to $20m. Other measures include an increase in the required minimum free float of shares to 20%.The proposed changes are designed to better protect the mum and dad investor, and tighten the quality and integrity of listings on the ASX.
The hurdles to get to scale are getting higher in the innovation age… so who is left to help with investment?
Ideas boom tax incentives
The Australian government has announced a raft of incentives to help encourage private investment in innovative companies. Irrespective of the federal election outcome, the Senate gave bipartisan support to a Bill with measures that come into effect 1 July 2016. These include capital gains tax breaks, and a 20% tax offset for start-up investors. The tax offset is capped at $50,000 p.a of investment for mum and dad investors, but up to $200,000 for sophisticated investors. Keen investors in innovation that qualify as sophisticated investors are getting ready for the 1 July start date and creating their sophisticated investor certificates in advance.
To find out more about how to qualify as a sophisticated investor, and create your free sophisticated investor certificate – visit www.cygura.com.au.
