A public hearing on economic self-determination and opportunity for Aboriginal and Torres Strait Islanders will be held on Tuesday.
In a submission to the inquiry, non-profit Supply Nation said limited access to capital and regulatory complexities were barriers for Indigenous businesses.
"First Nations business must be allowed to compete as a business in the first instance and afforded the opportunity to operate as such in order to be able to function successfully and profitably," it said.
There was an unreal expectation on Indigenous businesses to contribute higher than average benefit to the community, the organisation said.
"This expectation happens regularly at the pre-procurement stage and can have a detrimental effect on the First Nations business to operate successfully and profitably as opposed to western businesses.
"Through placing undue and additional pressure on being competitive owing to the First Nation increased perceived obligation to spend more of its profits on First Nations community benefit as opposed to re-investing into the business."
A peak group called the Coalition of Peaks, which represents more than 80 Aboriginal and Torres Strait Islander community-controlled organisations, urged a different approach.
It wants the government to review all policies aimed at improving Indigenous economic development and consider a Productivity Commission evaluation of the Closing the Gap agreement.
It called on the government to fully fund the Indigenous community-controlled sector as a contributor to employment outcomes and economies in regional and remote areas.
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