Unleashing capital for First Nations businesses

ANZ and Fortescue’s long-time collaboration with First Nations equipment suppliers has delivered an asset financing model that is providing greater equity to those businesses.

“ANZ is a leader in this space, having founded the Asset Finance Guarantee with Fortescue in 2017. Since then, it has loaned more than $150 million to start-ups and existing First Nations businesses.”

Since its inception eight years ago, ANZ has loaned more than $150 million to start-up and existing First Nations businesses, with lending guaranteed by large ANZ customers.

ANZ is a leader in this space, having founded the Asset Finance Guarantee with Fortescue in 2017. Since then, it has loaned more than $150 million to start-ups and existing First Nations businesses with other companies joining the program.

ANZ’s Head of First Nations Strategy (Australia) Shelley Cable says the Guarantee program has meant ANZ has been able to lend to First Nations businesses at pace and at scale.

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The benefits for First Nations communities can be significant.

Those working directly in the program say that broader sectors - such as Government, Natural Resources, Diversified Industries and Construction - interested in setting, meeting or exceeding First Nations procurement targets can secure the same benefits by understanding its design and establishing guarantees of their own.

Collective efforts from the 00s beginning to pay off

In the early 2000s, many Australian companies started putting more structures in place to enable greater opportunities for First Nations communities.

Paul Richards, ANZ’s Global Head of Resources, Energy & Infrastructure, told bluenotes “First Nations communities are critical stakeholders for the sector on issues relating to Native Title, cultural heritage, ESG, local knowledge and employment.”

“In the conversations I’ve had with our Institutional customers, there is a sincere, longstanding commitment to increase First Nations procurement as part of their business strategies,” Richards says.

First Nations procurement targets, supplier developer capability programs and preferred supplier agreements for First Nations businesses became standard in the industry.

This was further supported by the establishment of the Australian Indigenous Minority Supplier Council (now Supply Nation) in 2009. Its membership base includes some of Australia’s largest businesses.

According to Matt Teasdale, ANZ Asset Finance State Manager, these structures were good at getting First Nations businesses ‘into the fold’ with some of our largest companies, but it left them struggling to build equity.

“In the industry for example, there is a very strong cultural desire to work with First Nations businesses,” Teasdale told bluenotes. 

This experience was felt firsthand at Fortescue. According to Martin Drage, Group Manager - Aboriginal Business Development, First Nations businesses have continually experienced barriers getting into market, even with awarded contracts, with capital at the top of the list.

“Capital is precious and a really important part of any business providing that support,” Drage said.

Under a standard business loan structure, Teasdale added, the risk appetite was low, pushing up the interest rate at the expense of equity and growth.

“We could see this was often resulting in First Nations businesses winning lucrative contracts, only to allocate much of the capital on renting equipment,” he says.

Supply Nation data has revealed that for every $A1 invested in a First Nations business, there is a return of $A4.41 in First Nations communities.

“The evidence is clear,” said Teasdale. “The benefits for First Nations communities become exponential the harder capital is working for the businesses they own.”

Unlocking value with Fortescue’s support

Fortescue’s balance sheet was leveraged to guarantee the loan in its initial phases. The business loan would still go through all the regular approvals process for a standard business loan, but the risk profile was much lower.

“The beauty of the solution is we have such great insight into the strength of the First Nations business through our relationship with Fortescue,” Teasdale said. “It’s about unlocking value that we all know is there.”

In the last financial year Fortescue guaranteed, and ANZ provided $56m of loans for First Nations partners. In that time, seventeen First Nations contractors with Fortescue have purchased more than 200 mobile assets.

First Nations businesses are growing thanks to the Asset finance guarantee

ANZ Asset Finance Manager Robert Berden, based in Perth, works firsthand with Fortescue’s First Nations suppliers.

He stresses the goal is to get the First Nations business to the point where they no longer need the guarantee.

“It’s really pleasing to see that happening,” Berden says. “My message to corporates from other industries would be to develop their First Nation business programs, to directly help the communities that these businesses operate in.”

Christina Tonkin is ANZ Institutional Managing Director of Corporate Finance