Stage 3 · Choose and negotiate financing · Lesson 2 of 6
Loan, partner, grant: what each kind of money costs in the region
A loan is paid for in interest, a partner in a share of the company, a grant in time and conditions. This lesson sets those prices side by side, with the region’s figures as of October 2026, then helps you pick the one that suits what you are financing.
Three ways to pay
Over five years, which of these offers will cost you the most?
A bank is paid through interest, on fixed dates, whether the company does well or badly. A partner asks for nothing each month: they take a share of the company and are paid on the day they sell it. A funder giving a grant asks for neither interest nor a share. They ask for time, conditions and reports.
- AA loan of 400 million ariary at 18% over five years
- BA partner bringing 400 million ariary for 20% of the company
- CIt depends on what becomes of the company
See the answer
Answer C. It depends on what becomes of the company
The table
Eleven ways to finance a company, and what each one costs
Each row reads from left to right. The colour of the line on the left shows what you give back: blue for a loan (you repay), gold for a partner (you share), light blue for a mix, green for a gift.
| Kind of money | What you give in return | What it costs (2026 reference points) | Usual length | To finance what |
|---|---|---|---|---|
| MicrocreditMicrofinance institution | Repayments every week or every month | Madagascar: 1.5 to 2.5% a month, about 20 to 34% a year | 6 months to 2 years | Small amounts: stock, small equipment, without heavy security |
| Bank loanIn local currency: ariary, rupee, metical… | Fixed repayments, and security: land, a machine or a personal guarantee | Madagascar: around 18% on average, 15% for some well-secured SMEs · Mauritius: about 9% on average, from a 6.9% prime rate · Kenya: 14.4% on average · Mozambique: 15.5% plus 0 to 12 points | 1 to 7 years | A machine, a building, a vehicle, stock |
| Subsidised loanDevelopment bank, public scheme | Repayments, security, a longer application | Example in Mauritius: 3% a year from the Development Bank of Mauritius, for an SME, up to 10 million rupees over 7 years | 3 to 7 years | Companies that meet the scheme’s conditions |
| LeasingThe lessor buys, you rent | Rent; the equipment stays with the lessor until the end of the contract | Close to a bank loan; in Mauritius, a public scheme at 2.5% | 2 to 5 years | Vehicles and machines, when you have no other security |
| Foreign-currency loanIn euros or dollars, from a fund or a development bank | Repayments in foreign currency, and the risk that your currency falls | About 8 to 10% in hard currency for subsidised funds, 10 to 25% for commercial funds in Africa, plus the currency risk | 3 to 10 years | Large amounts and long terms; above all if you sell in foreign currency |
| MezzanineA loan repaid after the bank | Higher interest, and often a small share of sales or an option on shares | 2 to 3 points above a secured bank loan, plus 0.5 to 2% of revenue or an option on shares | 4 to 6 years, often with a grace period (months without repaying the capital) at the start | A company that already sells and has a bank, but not enough security |
| Revenue-based financingRepaid from sales | A percentage of your sales each month, up to a cap | 2 to 10% of monthly sales, until you have repaid 1.5 to 2 times the amount received | 1 to 5 years | Regular sales (subscriptions, distribution), with no security to offer |
| Partner: a fundPrivate equity, venture capital | A share of the company, often 10 to 30%, and a say in major decisions | No interest; the fund aims for about 15 to 20% a year in dollars, earned by selling its share | 5 to 7 years, usually, before it sells | Growing fast, opening a market: what does not repay straight away |
| Partner: a business angelA person investing their own money | A share of the company, sometimes priced later through an agreement called a SAFE | No interest; aims for a high gain, because many young companies fail | 5 years and more | Starting up, before regular sales |
| Guarantee fundIt does not lend: it reassures the bank | A fee, paid on the guaranteed amount | Often covers 50% of the bank’s loss; fee in the order of 0.5 to 2% a year | The length of the loan | Getting a loan when your security is not enough |
| GrantDonor, public scheme, foundation | No share, no repayment; time, conditions and reports | 0%; you often have to bring part of the budget yourself | Paid once, often in stages | A study, training, a certification, a public-interest project |
Orders of magnitude published between 2024 and October 2026, to situate, not to promise. Each figure is dated and sourced in the card “Sources and dates”. Your real price depends on your file, your security and the lender.
The price of the same bank loan varies a lot from one country to another: the next card gives the reference points, and the next lesson explains why. The table shows something else too: the money you do not repay, the partner’s, aims for the highest gain. That makes sense, since it takes the most risk.
- Reference points, country by country
- Loan or partner: the sum
- The monthly-rate trap
- Choosing by what you finance
- In your file
- Sources and dates
- One kind of money per line
The rest of the lesson
Keep reading with your free account
7 more parts, with the calculations on your own numbers and what to write in your file. The account is free, no commitment.
The words of this lesson
Each word links to its full definition in the glossary.
- Interest rate
- The price you pay each year to borrow, as a percentage of the amount lent. At 15%, 1,000,000 Ar costs 150,000 Ar a year.
- Real rate
- The interest rate minus the rise in prices (inflation). It is what money really costs once inflation is taken off.
- IRR
- What the investor hopes to earn each year, as a percentage of the money put in.
- Mezzanine
- A loan dearer than a bank loan, repaid after the bank. The lender often also asks for a small share of the company.
- Guarantee fund
- An institution that lends you nothing, but absorbs part of the bank's loss if you default.
- Repayment schedule
- The fixed dates and amounts on which you repay the loan, for example monthly, even in difficult months.
- Policy rate
- The rate at which the central bank lends to banks. It is a floor: banks always lend to you at more than this.
- Revenue-based financing
- You repay a fixed percentage of monthly revenue, up to a cap.
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