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IPA chief executive officer Andrew Conway observed that Australia is one of the only countries in the developed world without such a scheme.
“A loan guarantee scheme would help increase the availability of much-needed, affordable loan finance to the small business sector,” Mr Conway said.
According to research undertaken by the IPA Deakin University SME Research Partnership, on average, 28,000 Australian businesses per annum face a binding finance constraint, whilst 118,000 face some access to finance issues.
A limited state-backed guarantee would encourage banks and other commercial lenders to increase loan finance available to small business, Mr Conway argued.
“Access to responsible and affordable finance will help many small businesses reinvest in their businesses and help create new ideas, new capacity and new jobs.
“We appreciate that the scale of a potential program needs to be established in a detailed feasibility study as this determines the scale of the initial and ongoing demands on the treasury,” he said.
The IPA’s recommendation for the small business loan guarantee scheme forms part of its pre-Budget submission for 2015/2016.