The minimum loan amount is N$150,000, with the exception of minimum loan amounts of N$50,000 for young artisans and young professionals.

A DBN SME/Investment Analyst or SME/Investment  Manager will assist with documentation requirements for the application, but cannot assist with the content of the application.

Find contact details, here…

The Bank does not recommend ‘ready made’ business plans offered by external consultants as these seldom recognise the operating realities, capacity and capability of borrowers.

The time to process the application depends on providing complete documentation. If some documents are missing, the application cannot be processed until the missing items are provided. In the case of an application for SME finance, the time to process an application will be approximately four weeks.

• Download the application checklist here…
• Download the KYC requirements here…

Consult a Business Analyst to make sure that you understand what document is needed.

The Development Bank cautions potential applicants on use of ‘instant business plans’ promoted by external consultants for SMEs and skills-based youth finance.

The Development Bank of Namibia protects the confidentiality of applications and business plans in its policies and practices.

The Bank also keeps confidential all aspects of intellectual property IP presented to it, including:

• Industrial designs
• Copyright
• Traditional knowledge and cultural expressions
• Geographical indications
• Trademarks
• Patents

The Bank urges registration of IP rights with BIPA.

In the event of breaches of application confidentiality or misappropriation of IP rights attributable to the Bank, please report the matter anonymously for investigation.

The Development Bank cautions potential applicants on use of ‘instant business plans’ promoted by external consultants for SMEs and skills-based youth finance.

The cash flow projection must show that the enterprise will be able to sustain itself financially. To do this, the potential borrower must show:

• • Estimated revenue or sales

• Costs (fixed and variable costs)
  • Operating costs
  • Salaries (including PAYE and salaries for owners)
  • Input costs (from suppliers)
  • Insurance
• Profit
• Expected taxation
• Loan repayment

The cash flow projection must be for at least 36 months.

The Bank will also need:

• financial statements of an existing business,
• the balance sheet of the owner(s) and / or the business, and
• the names of other sources of finance and amounts.

Find the full scope of financial information in the DBN SME Business Plan Guide, here…

Proof of capability and capacity

The Bank requires CVs to show that the people involved in the day-to-day running of the business have the necessary experience and skills to run the business. In addition, the Bank needs an organogram that will show how the different functions will relate to one another, and how they will contribute to the business.

Credit Guarantee Scheme

The Credit Guarantee Scheme for SMEs provides collateral cover of 60% for qualifying SMEs applying for finance from participating commercial finance institutions.

Commercial finance institutions require the security of collateral to ensure that their capital is preserved in the event of an SME being unable to repay their loans. By insuring credit granted to qualifying SMEs, the Scheme substantially reduces the collateral requirement for qualifying SMEs.

SMEs will have to apply for business loans at participating financial institutions. Upon being assessed as bankable and only lacking collateral, the SME can be considered for collateral cover of 60% of the principal loan amount.

The scheme is available from

• First National Bank of Namibia (FNB), and
• Standard Bank of Namibia.

More financial institutions are expected to adopt the Credit Guarantee Scheme in the near future, once they have more fully considered their participation in the scheme.

The scheme is not offered through DBN, as the Bank already offers relaxed collateral requirements, and a wider spread of financial institutions offering the scheme will enable the smart partnership to reach more SMEs.

The scheme is underwritten by NASRIA Ltd., a key partner for the participating financial institutions while DBN provides expert support during the adjudication of claims.

Collateral

The Bank requires collateral to secure its loans, although it does accept lower levels of collateral on a case-by-case basis.

Collateral can consist of:

• Liquid investments (cash investments)
• Fixed property
• Movable assets
• Equipment
• Third-party guarantees

In some instances, assets financed by the Bank can be used as collateral.

In the case of contract-based finance, income from the contract can be ceded to the Bank, and assets financed for servicing the contract can be used as collateral.

Young artisans and young professionals can apply without collateral, but assets financed must be provided as collateral once financed.

No collateral or no collateral

At its own discretion, the Bank may accept lower levels of collateral on a case-by-case basis.

It may accept third-party guarantees.

In some instances, assets financed by the Bank can be used as collateral.

In the case of contract-based finance, income from the contract can be ceded to the Bank, and assets financed for servicing the contract can be used as collateral.

Young artisans and young professionals can apply without collateral, but assets financed must be provided as collateral once financed.

Owner’s contribution

Owner’s contribution is value that the owner puts into the business. A contribution by the owner shows that the owner is backing the business, is sharing the risk in starting the business and is confident that the business will succeed.

Owner’s contribution for existing businesses is determined by the value of the business. For a new business the owner contribute own funds towards starting the business, but this may also include the value of work done towards starting the business.

Owner’s contribution is considered on a case-by-case basis.

KYC requirements

As part of the Government’s efforts to combat and prevent illegal financial activities, the Financial Intelligence Act and Prevention of Organised Crime Act were enacted. These laws introduced measures to combat organized crime, prevent money laundering and to combat terrorist funding.

Money laundering is cleansing of dirty money from illegitimate activities with the intention of hiding its source and rendering it in legally usable form. Money laundering is an evil that cuts into the finances of the country / government, depletes revenues and / or paralyses infrastructure development. It damages availability of valuable resources needed for primary healthcare, education and installation of socio-economic safeguards.

The Prevention of Organised Crime Act 29 of 2004 imposes obligations on firms and individuals to report suspicions of money laundering or terrorist financing.

Laws require the Bank to identify borrowers, and ensure that finance it advances is used for legitimate purposes. This is known as Know-Your-Customer (KYC). KYC includes the duties to identify and verify customers, and keep records of the verified documents and other details.

If KYC requirements are not met applications for finance may be delayed until the requirements are met, or the application may be declined.

Download a guide to KYC requirements here...

Environment and Social Management Plan (ESMP)

The Environmental and Social Management Plan (ESMP) is a detailed report that provides a consolidated summary of all the health, safety, environmental and social hazards and aspects relevant to any business or project.

The purpose of the ESMP is to ensure that promoters are aware of and effectively manage the health, safety, environmental and social impacts of businesses/projects financed by the Development Bank of Namibia (DBN) during any stage from construction, operation and closure of a business.

The ESMP must specify the mitigation measures of risks and aspects for which the Promoter must show how the business/project will mobilise organisational capacity and resources to implement these measures.

Guidelines

Download: ESMP Guideline

Download: Environmental and Social Management

Insurance

If the borrower is incapacitated or dies, or if an asset is damaged in a way that stops the business from operating, the debt will remain. This affects the borrower, next-of-kin and persons providing third party guarantees. For this reason, insurance that is ceded to the Bank for the duration of the loan is mandatory, and will include:

• Life insurance
• Asset insurance (including the building)
• Liability cover
• Professional liability (where applicable)

Exclusions

Due to potential negative environmental and social impacts, and in terms of Namibian legislation and regulations, the Development Bank of Namibia does not finance certain products, services and types of trading.

The Development Bank of Namibia generally does not finance:

• Refinancing or consolidation of existing debt
• Speculative activities with little or no value addition
• Specialised equipment not essential to the business
• Socially undesirable investments such as gambling
• Reimbursement for unrelated expenditure prior to loan approval

Accounting?

Rigorous accounting will help you keep track of your expenses and debts and will assist you to keep up with them. If debts and expenses are not paid, the business will fail.

Drawings 

Owner salaries must be budgeted. Drawings made from business profits reduce the cash reserves of the business. Cash reserves are important to cover lean periods or times when the business may run into difficulties.

Risk planning

Identify possible risks and plan for them in advance. Show them in your business plan and how you intend to deal with them. Some of the best ways to reduce risks are to plan for more than one market, to develop cash reserves (savings) for lean times and to have access to multiple suppliers so that if one supplier fails, you can turn to another.

Challenges or failure

Contact the Bank immediately. The Bank wants to preserve your business and will try, at its own discretion, to assist. This may include restructuring of debt and / or mentoring and coaching to build capacity and knowledge.

Partners

A partner can have many benefits.

A silent partner who brings cash to the business can reduce the amount you need to borrow and that reduces the amount of the loan, so the business has a lower amount to repay. This means that the business can grow faster.

A partner can also add working capacity, enabling the business to do more.

Finally a partner with different skills to the other partner may secure the business. A partner with business skills but limited experience in the field of the business can benefit from a partner with skills in the field, but limited business skills, and vice versa.

Business savings?

Savings or cash reserves are important to cover lean periods or times when the business may run into difficulties. Cash reserves can also be used to pay for new opportunities that the business sees.

Declined applications

At its own discretion the Bank declines applications that may put the financial wellbeing of borrowers at risk. Reasons may include unsustainable business plans and unreasonable cash flow projections, as well as insufficient skills to run the business. Other reasons include lack of key documents.

The Bank is an ethical lender. If a business fails the Bank has to take possession of collateral and this creates financial difficulties for the borrower, the borrower’s family and employees.

If your loan application is declined, please ask your analyst for an explanation.

Borrowing economy

The rule of thumb is to borrow as little as possible. The more you borrow, the higher the repayment of capital and interest. If you borrow too much, you may spend a significant portion of your earnings on repayment at the expense of operating capital, earnings and business savings. You will also have to pay a larger owner’s contribution if you borrow more.

The Bank is an ethical lender and recommends economical borrowing. There are several methods to economise. Firstly, economise on new assets. If a new asset is needed, seek the best quote or an alternative asset that costs less. Secondly, reduce all unnecessary spending in your cash flow projection. Thirdly, request a range of quotations from various suppliers to ensure that you have the best possible costing.

Based on its extensive experience, the Bank may flag excessive borrowing and ask for a reduction in the amount requested. If the requested amount is too low, the Bank may ask for an increase in borrowing to cover the shortfall.

Additional fees

Development Bank of Namibia charges certain fees on approval and may charge additional fees under certain circumstances. These fees are added to the capital amount and do not have to be paid as a lump sum.

1. On initial approval, front-end fees are payable, as a percentage of the loan amount. This is determined on a case-by-case basis.
2. For any variation that you may request, a variation fee, as a percentage of the loan amount may be charged. This is determined on a case-by-case basis.
3. For any rescheduling (i.e. extension of a loan tenure) of the loan account, a percentage of the loan amount may be charged. This is determined on a case-by-case basis.
4. For any restructuring of the loan account, a fee as a percentage of the loan amount may be charged. This is determined on a case-by-case basis.
5. Guarantee fees are charged at 1.5% of the guarantee amount per quarter. This is applicable to clients who obtain performance guarantees from the Bank.
6. In certain instances, where property is offered as collateral, valuation fees will also be charged based on the type and location of a property.

Check with your Analyst on the applicable fees.

Disbursements

Amounts for assets, equipment and stock will be paid directly to the approved supplier. Amounts for working capital will be paid into the business account monthly, depending on cash flow projections, not as a lump sum. Loan amounts will not be paid into personal accounts.

Personal expenses

Development Bank of Namibia loans must not be used for personal expenses. In the Bank’s experience, owners who use working capital for personal expenses (drawings) will not be able to cover budgeted business expenses and are likely to have failed enterprises.

Loans for working capital are paid into business accounts. An owner’s salary must be budgeted in terms of the cash flow projection in the application for working capital. The salary must be paid from the business account into the owner’s personal account.