Funding for Startups and Entrepreneurs in Botswana

funding for startups and entrepreneurs in botswana

Botswana’s small business failure rate is estimated at around 80%. Youth-owned businesses are the major casualties. Lack of capital is a core factor for their failure.

This is especially true for new businesses. They find it hard to secure funding. However, options do exist, with business funding available via both the public and private sectors.

In Botswana, lamna offers funding for startups and entrepreneurs in the form of short-term, asset-based loans.

Impact of the 2020/2021 pandemic

COVID-19 has added an untenable burden to the local fiscus. Protracted lockdowns resulted in a 7.9% contraction in GDP in 2020 and nominal growth in the first quarter of 2021. A battered Botswana economy precipitated a slew of business closures and mass layoffs across all economic sectors.

At the same time, large-scale changes accelerated by the pandemic have opened new doors for entrepreneurs. Digital shopping platforms, sanitising and cleaning services, PPE manufacturing and distribution, and food delivery services have taken off worldwide. They provide exciting business opportunities for entrepreneurial Batswana.

Bank finance

Bank finance is working capital provided by commercial banks in the form of overdraft facilities, lines of credit and business loans. This type of funding has to be repaid in fixed instalments within an agreed term. Interest is charged on the capital amount.

Financial statements, balance sheets, cash-flow projections, personal surety and at least six months of bank statements are required to qualify for bank finance, so it’s not a viable option for new businesses.

Most commercial banks in Botswana do not finance startups. They focus on funding expansion and acquisitions by existing businesses.

Government funding

The Botswana government has set up a number of initiatives designed to promote young entrepreneurship and small businesses in the country.

The following agencies offer support and potential funding for small businesses and entrepreneurs:

The Citizen Entrepreneurial Development Agency (CEDA), a Gaborone-based parastatal, supports young Batswana farmers, entrepreneurs and business startups through a range of financing options sourced from government, international agencies, venture capital funds and commercial banks.
The Youth Development Fund (YDF), an empowerment project that’s mandated to finance young business people between the ages of 18 and 35 years, provides funding on a 50/50 loan/grant basis.
COVID-19 relief funding, an interim measure, provides eligible businesses with access to credit.

If you need funding for a small-scale community-based project in Botswana, the U.S. Ambassador’s Self Help Fund and PEPFAR Small Grants Programme is a good place to start.

Venture capital in Botswana

Venture capital is a high-risk financing model designed to get startups off the ground. Investors gamble on a business’s long-term growth potential by exchanging funding for equity in the company.

This type of funding does not have to be paid back but, as shareholders in the nascent company, the investors have a say on how the business is run. Venture capital is the ideal solution for new businesses that don’t have the credit history or assets to qualify for a bank loan.

A key player in Botswana’s venture capital space is Peo Venture Capital, a successful SMME development initiative run by the Debswana Diamond Company.

Alternatively, the following companies provide venture capital in Botswana:

Debt finance

Debt finance is money that’s lent to you or your business in the form of a secured or unsecured loan. To obtain a secured loan, you provide some form of business collateral as security. This might be equipment, property, accounts receivable, inventory, guarantors or an insurance policy.

An unsecured loan, such as a bank loan, is granted based on the lender’s determination of your ability to repay the loan and agreed interest. This is determined based on factors like your credit score and the health of your business’s finances and assets. Unsecured loans can be difficult to obtain for startup businesses.

As a new or existing business owner in Botswana, you can approach the Botswana Development Corporation (BDC) for debt funding.

Crowdfunding

Crowdfunding uses small amounts of capital, donated by a large number of people, to finance a business.

It can be an affordable way of funding a business venture but it requires solid marketing and a carefully executed fundraising campaign, usually on social media platforms.

Crowdfunding platforms suitable for Batswana include:

Angel investing in Botswana

Angel investors are wealthy individuals who finance promising startups in exchange for a percentage of the business. This type of finance is especially helpful for new SMEs that don’t have access to capital through traditional funding channels.

One platform is the Angel Network Botswana (ANB). It connects entrepreneurs with potential funders in Botswana.

Asset-based loan from lamna

At lamna Botswana, we offer fast, discreet loans against the value of a wide range of assets, from luxury watches and jewellery to vehicles and valuable works of art.

This type of loan is secured by an asset that you provide as collateral. Because the loan is secured, you don’t have to submit a business plan or financial statements to support a loan application. Your credit history is also irrelevant.

Once you’ve repaid the loan amount and agreed interest according to the loan terms, the asset is returned to you, in its original condition.

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

Complete our Online Application Form