Financing SME Growth: The Role of the National Stock Exchange of Australia and Business Advisors

Lack of access to finance presents a major setback to the development of the Small and Medium Enterprise (SME) sector in Australia. Demand and supply of finance to the sector entails more complex issues than apply to large firms. SMEs have a pecking order of preference for finance; they prefer internal equity to debt and debt to external equity. Nonetheless, a significant number of growing SMEs require external equity. Using the grounded theory method, interviews with six owners and 13 accounting and legal advisors indicate entrenched lack of knowledge about initial public offering (IPO) and the National Stock Exchange of Australia (NSX) among SME owners and their advisors. The study finds that the NSX's poor performance is attributable to lack of visibility, low listings, lack of underwriters, thin trading, inefficient processes and poor location. The NSX is entrenched in a vicious cycle of poor performance that threatens its viability. It is unable to attract sufficient listings to generate the income required for effective operation. Greater exposure of small business advisors to the IPO process should increase demand for public equity through the NSX.