A guide to borrowing from Development Bank of Namibia

The Development Bank of Namibia (DBN) lends to enterprises to develop Namibia and improve economic activity. A successful enterprise creates employment and income for its owners, employees and its community. It supports other enterprises through buying from them or selling to them.

For DBN to achieve its goals it must be certain that it lends to enterprises that succeed and that will operate for years to come. If it cannot do so, the money that it loaned will have been better allocated to another, more successful enterprise.

DBN considers the borrower’s interest when approving a loan. Because DBN has to preserve its capital and grow it to lend to other enterprises, borrowers have to repay the loans. If they cannot or will not repay, DBN has a duty to recover the capital so that it can lend to others. DBN is aware that this can cause an unfortunate situation for the financial wellbeing of the borrower, employees and the community.

Although borrowers approach DBN with confidence, the Bank has made loans to hundreds of enterprises and will not lend if it places the borrower at risk. With this in mind, the Bank requires borrowers to show that they are able to:

• start,
• operate and
• sustain a business.

Minimum loan amounts

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.

Business plan

All borrowers have confidence in their enterprise vision, but a business plan shows how the vision will be brought to life. The business plan must show the following at least:

• What products or services will be offered
• Who will buy products or services from the business
• Where the products or services will be sold
• Who the competitors are
• If the product or service is new in the footprint
• What the business strategy is
• What regulations apply to the business
• The necessary registrations
  • VAT
  • Company tax
  • Social security
  • Local authority / municipal registrations
  • A bank account
• Other lenders to the business and amounts borrowed
• Know-your-customer (KYC) documentation
    
•  Download the full DBN SME Business Plan Guide here…
• Download the KYC requirements here…

Cash flow projection and financial information

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 proof 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.

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.

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.

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)

What the Bank does not finance

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

Download the full list of exclusions here…

Time to process the application

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.

 Assistance with the application

 A DBN SME/Investment Analyst or SME/Investment  Manager will only 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 recognize the operating realities, capacity and capability of borrowers.

Find out more, here…