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Perth entrepreneurs left frustrated by Indigenous business agency

by October 15, 2016 General

A Federal Government agency set up to help Indigenous businesses grow has come under fire from the sector it was meant to support.

Key points:

  • Perth businesses reaching out to Indigenous Business Australia for assistance say proposals rejected
  • IBA cites viability concerns, suggests passing application to microfinance agency
  • Statement says IBA moving to regional and remote focus

Two West Australian companies say their plans to expand in Australia and overseas are in jeopardy because Indigenous Business Australia (IBA) will not provide them with financial support.

Two years ago entrepreneur Dwayne Rowland took a gamble and quit his job at BHP Billiton to start an export business in Perth.

That decision has begun to pay off, with his company IN-Balance signing a deal to supply fuel conditioner to China’s largest energy company, CNPC.

IN-Balance employs five women to bottle and package the fuel conditioner, which is manufactured by Perth-based industrial cleaning supplier ChoiceChem.

After two trial shipments of 7,500 bottles each, the Chinese group plans to stock the product in 1,400 petrol stations.

In order to meet the new orders, Mr Rowland estimated he would need 50 workers and upgraded equipment, because the existing system of manual bottling would have been too slow.

“To go to 1,400 stations, we would be looking somewhere between 250,000 and 500,000 bottles a month,” he said.

But the extra equipment and labour required more capital, which Mr Rowland struggled to find.

He said IN-Balance did not meet lending criteria for the major banks.

“Like most Indigenous businesses, we have limited access to assets,” he said.

“The banks don’t care about forecasts, they don’t care about potential. They care about bricks and mortar to be able to borrow against.”

In 2014, Mr Rowland approached IBA, which offers grants and loans to entrepreneurs.

But when he presented his business plan — including a proposed buy-out of ChoiceChem — he said the agency told him he was “dreaming”.

He went back to IBA with international distribution agreements in the United States, Singapore and China, but was told IN-Balance was not “commercially viable” and IBA “didn’t do international”.

IBA ‘refocusing’ to help entrepreneurs

IBA was set up in 2001 to replace the Aboriginal and Torres Strait Islander Commercial Development Corporation (CDC).

It aims to improve access to financial opportunities for Indigenous Australians by providing home and business loans, as well as managing a national investment portfolio.

Under its business assistance program, IBA offers capacity and skills assessment, access to business resources and market intelligence, in addition to loans.

Since July, IBA has been funded through a $23.1 million grant from the Department of Prime Minister and Cabinet.

In 2013–14 the agency provided loans and grants worth $27.6 million, but in 2014-15 the total amount fell to $18.3 million.

In that year, IBA provided 49 business loans, with an average size of almost $375,000.

Just over half of those loans were to new clients, with 43 per cent to businesses already supported by IBA.

IBA declined an interview request from the ABC, but in a statement the agency said it was “refocusing” in the wake of the federal election to better assist Indigenous entrepreneurs and start-ups, and it planned to “increase its regional and remote footprint”.

Frustrated business owners want change

Media production company The Digital Factory had also failed to secure support from IBA.

Founder Todd Russell designed the first nationally accredited cultural awareness training video for business and government workers.

He applied for a $250,000 grant to launch and market the online education tool, but did not hear back from the agency for months, until he got a phone call asking whether he would be “happy to pass [the] application over to Many Rivers Finance”.

The microfinance group offers loans of up to $5,000 for sole business owners.

“That’s basically what I gathered from the website, but at this point no-one has contacted me from that office,” Mr Russell said.

He said the agency needed to be a conduit between business and government, but believed the current system was not working.

“If they can’t help business, if they can’t get you funding and they pretty much can’t even help you with loan applications or grant applications, what is IBA?” he said.

“What is their function?”