Funding for Startups and Entrepreneurs in Botswana

Botswana’s small business failure rate is estimated at around 80 percent. Youth-owned businesses are the major causalities, and lack of capital is a core factor.

Especially for small or new businesses, it’s not easy to secure funding. However, options do exist, with business funding available via both the public and private sectors.

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.

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

In any event, most commercial banks in Botswana do not finance startups. They rather 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.

In particular, the following three agencies offer support and potential funding for small businesses and entrepreneurs:

• the Citizen Entrepreneurial Development Agency (CEDA), a Gaborone-based parastatal that supports young Batswana entrepreneurs and business startups through a range of financing options
• the Young Farmers Fund (YFF), which provides working capital to youth-owned agribusiness, with interest rates subsidised by government
• the Youth Development Fund (YDF),  an empowerment project that’s mandated to finance young business people between the ages of 18 and 35 years.

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

Venture capital

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 do not 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.

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 – for example, equipment, property, accounts receivable, inventory, guarantors, an insurance policy, and so on.

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

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

Asset-based loan from lamna

A final, convenient alternative is to secure an asset-based loan, which is a form of secured loan, from lamna.

Because this type of loan is secured by an asset you supply, you don’t have to submit a business plan or financial statements to support your loan application – and your credit history won’t be checked or considered relevant.

As with all secured loans, you will have to repay the funds and agreed interest according to the loan terms. Once you’ve settled the debt in full, your asset is returned to you.

Currently, lamna Botswana is the only lender of this kind in Botswana. We offer fast, discreet loans against the value of a wide range of assets, from luxury watches and jewellery to vehicles or valuable works of art.

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.