SA taxpayer-backed loan for Australian Fashion Labels to grow
TAXPAYERS will partly guarantee a bank loan to an Adelaide fashion company that has plans to create jobs and grow its global empire.
AN Adelaide fashion house will open a high-end shop on North Tce and hire at least 50 more people, armed with a unique bank loan to fund its expansion.
The loan has only been possible because of a new taxpayer-funded guarantee initiated in South Australia as a national first.
The company, Australian Fashion Labels, has already grown from 20 employees two years ago to 130 and another 20 are now being recruited.
With the $19 million loan, Dean and Melanie Flintoft will open a flagship retail store in downtown Los Angeles, fund the purchase and upgrading of a North Tce property and launch a menswear range.
“We’re hiring people at an average of one a week,” Mr Flintoft said.
“When we started our business nine years ago, we sold everything we owned and put it into the business. From the first range Melanie designed, the business took off. It’s doubled or tripled every year since then.”
From that first line, Finders Keepers, the company now has five womenswear labels, is stocked in more than 3000 outlets globally, has its own online and retail store BNKR in Rundle Mall and turns over $50 million to $100 million.
“Growing like that, our business has been really hungry for cash,” Mr Flintoft said.
However, because they have ploughed profits back into the business, they did not have enough assets to satisfy a new bank loan.
“We went to quite a few banks,” Mr Flintoft said.
Then they heard about the partial-guarantee scheme being established by the State Government, which will cover $3.5 million of their loan from Bendigo and Adelaide Bank.
The North Tce property, near the intersection of Pulteney St, received development approval yesterday and Ms Flintoft said they hoped to have the store open by Christmas.
It will probably stock their top range Ty-lr label which has garments in the $100-$500 level, including many manufactured in Australia.
The loan scheme was the only concrete and costed initiative announced by Premier Jay Weatherill last August when he listed his Ten Economic Priorities.
“The $50 million available in financial guarantees from the State Government will allow up to
$250 million to be leveraged in bank funding, to secure and accelerate new job creation,” Mr Weatherill said.
SA is the only state to offer the guarantee but similar schemes operate in the UK, New Zealand and Canada.
Treasurer Tom Koutsantonis said Australian Fashion Labels was an ideal pilot for the loan scheme.
The Government’s Ten Priorities flowed from a program instigated by then governor Kevin Scarce called Shaping the Future of SA.
Professional services firm KPMG was a foundation partner in the program and managing partner in SA, Con Tragakis, welcomed the first loan being allocated.
“It’s important to realise this is different from government giving out a grant,” Mr Tragakis said.
“Once a grant is given, the money from taxpayers has gone forever.
“With a guarantee, that money is not spent but can be used again (if not called on).”
The loan scheme was not intended to prop up failing companies but rather turbocharge really successful ones.
Bendigo and Adelaide Bank director Jim Hazel said Australian Fashion Labels would have qualified for a smaller loan but the guarantee gave them the edge to get the full amount they wanted.
“It also doesn’t have the government deciding which industry and companies to support, it lets the market decide,” he said.
“Who would have picked a fashion business as one which could expand and employ more people.”
Mr Hazel said it was “highly unlikely” the taxpayer funds would ever be called on because the bank expected the company to fully meet its loan payback commitments.
Australian Fashion Labels will pay a fee to Government for the life of the guarantee.