Botswana Small Business Loans: A Look at 6 Short-Term Loan Options

small business

For businesses in Botswana, small business loans can sometimes make the difference between having to shut down and going on to grow and thrive.

Businesses of all sizes commonly borrow funds at certain points. This may be to survive temporary cash flow issues, take advantage of potentially lucrative opportunities or fuel business growth.

Here we consider different types of short-term loans in Botswana, along with their pros and cons.

What is a short-term loan?

A short-term loan is typically paid off in a short time frame – generally a year or less. This makes it different to loan types such as bonds, which are paid off over a number of years.

A benefit of short-term loans, especially for businesses, is that they are usually granted and processed faster than traditional bank loans.

This is useful when funds are needed quickly.  For example, small businesses may need fast access to funds to cover salaries and other expenses.

Consider these examples of situations where small business loans may save the day:

  • more than one key client unexpectedly fails to make payment for services your business has already provided
  • unforeseen breakage or stock loss leaves you liable for the cost of replacements
  • due to unexpected expenses, you don’t have enough funds to cover staff salaries for the month.

Types of short-term loans

Short-term loans are either secured or, more commonly, unsecured.

A secured loan is backed by some kind of collateral. The lender has the security of knowing that if your business doesn’t pay back the loan and interest, the collateral can be sold to recover the debt.

An unsecured loan is granted without the borrower providing any collateral. A traditional bank loan is an example. It’s granted on the basis of an “informed guess” about whether the borrower will pay back the loan. This “guess” is based on things like credit ratings and the borrower’s current financial status.

Typically, it’s harder to qualify for an unsecured loan – and the loan terms may be less favourable than for a secured loan.

Types of small business loans in Botswana

These are a few of the short-term loan options that are suitable for small businesses.

Merchant cash advances

A merchant cash advance is a type of cash advance that acts like a loan. It is paid back to the lender via a percentage taken from each sale made by the merchant who is also the borrower.

Line of credit

A line of credit loan acts a lot like a credit card. There is a credit facility available to the business and the limit on this credit is calculated the same way as a credit card limit would be. The loan is also paid back monthly based on how much of the credit is used.

Invoice financing

This type of loan is based on outstanding invoices or, to put it another way, capital that the company is expecting but doesn’t have access to yet. The lender bases the loan amount and interest on how long until the invoices will be settled.

Bank overdraft

An overdraft facility on a bank account allows the account holder to make payments even with insufficient funds in their account. The overdrawn amount is usually then deducted from the next payment into the account. These facilities incur bank charges.

Payday loans

This loan is a very short-term type of cash advance that is based on the borrower’s expected next income. The loan and the interest become due as soon as the borrower gets the income, for example, when a client pays their invoice.

Asset-based loan

Asset-based loans are based on the value of a business asset, such as a company vehicle or a commercial property. As surety, the lender takes possession of the asset or deed until the loan and the interest are repaid.

Short-term loans with lamna, Botswana

lamna is a reputable, well-established financial services provider, offering asset-based loans in Botswana.

Some benefits of a Botswana small business loan from lamna:

  • our loans are fully compliant with the NBFIRA
  • interest rates are competitive
  • our process is confidential and transparent
  • we don’t charge any hidden fees or penalties
  • you can expect funds on the same day you apply.

We accept a wide range of assets as collateral for short-term loans. Some examples are bakkies, cars and other vehicles; luxury watches or jewellery; and high-value artwork.

For more information about using an asset to secure a short-term loan for your business, contact us on 71 388 088 or simply complete and submit our online application form.

Complete our Online Application Form