Venture Capital and Equity Financing
In Barbados, access to venture capital is very limited. However, a few government-affiliated institutions and a handful of private firms have stepped in to try to fill the funding gap. These entities principally provide debt and equity financing to help launch micro-enterprises; fund the incubation of new businesses; and assist small businesses in expansionary efforts.
The terms of equity financing differ depending on the level of involvement of the venture capitalist, the size of the investment and the business’ prospects of success. With the exception of the Enterprise Growth Fund Limited which can provide financing in excess of BB$5 M to certain businesses in the tourism sector, lending limits generally range from BB$50,000 to BB$1 M, and tenors ranging from 5 to 10 years.
The major players in venture capital and equity financing in Barbados are:
The Enterprise Growth Fund Limited
Enterprise Growth Fund Limited (EGFL) provides small and medium-sized Barbadian companies in the productive sectors with debt and equity financing, business advisory services and technical assistance. EGFL serves as the Fund Manager offering for the following Funds which fall under its purview:
- Loans & Equity for Small & Medium-Sized Businesses
- Small Hotels Investment Fund
- Tourism Loan Fund
- Agricultural Development Fund
- Industrial, Investment and Employment Fund
- Innovation Fund
- Export Promotion and Marketing Fund
Further details about the products and services provided by the EGFL, may be found at the Enterprise’s website: www.egfl.bb
Barbados Business Enterprise Corp. (BBEC)
Barbados Business Enterprise Corporation (BBEC) is a partnership between the Caribbean Business Enterprise Trust (CBET), the Government of Barbados and the private sector. BBEC manages the Barbados Entrepreneurs’ Venture Capital Fund (BVCF) and the Barbados Quick Response Revolving Seed Capital Fund (BQRRSCF). These funds channel equity financing to recipients through BBEC, which also provides advisory and technical support to participants via the CBET’s proprietary shepherding model.
BBEC only provides equity financing to legal entities which have at least 51% Barbadian ownership. All BBEC equity agreements include a buy-back clause. The Corporation has indicated that the use of the shepherding model precludes the need for BBEC’s involvement in recipients’ boards of directors.
Presently, BBEC may invest up to BD$500,000 in equity financing to any venture. Through its mentorship programme the Corporation also works with funding recipients and lending institutions to secure debt financing. For more information on BBEC, CBET and its unique shepherding model please refer to the websites listed below:
Caribbean Financial Services Corporation
A private sector initiative, CFSC has a long track record of providing loans and equity financing to small and medium-sized businesses that have the potential to earn foreign exchange and create jobs. The Corporation sources funds from international development banks and agencies. Additionally, CFSC frequently acts as a catalyst in attracting additional financing from other institutions, including commercial banks.
CFSC also manages the Barbados Investment Fund (BIF), which is a facility that is co-funded by the Central Bank of Barbados. The BIF provides equity financing ranging from BD$100,000 – BD$1 M to small and medium-sized businesses in Barbados.
Government Sponsored Credit Facilities
The Central Bank of Barbados has set up several credit facilities that are designed to stimulate the growth of output, employment and foreign exchange.
One such facility is the Industrial Credit Fund (ICF) which was established by the Government of Barbados in September 1983 with funding from the International Bank for Reconstruction and Development (World Bank) and the Central Bank of Barbados. Since then additional funding has been provided by the World Bank under its Agricultural Development Project and by the European Investment Bank under its Global Loan Contract.
The ICF is administered by the Central Bank of Barbados with the objective of contributing to the development of the country by stimulating growth of output, employment and foreign exchange earnings. To this end, the ICF provides medium and long-term credit to productive enterprises operating mainly in the private sector. Funding is channelled to beneficiaries through qualified financial intermediaries operating in Barbados.
Potential beneficiaries first approach a financial intermediary with a project proposal. The intermediary in turn submits a proposal to the ICF for funding. The ICF may advance up to 90% of the requested loan amount; however, the commercial bank retains all of the credit risk of the loan.
The Fund’s resources may be used to finance:
- Fixed assets (excluding real estate purchases);
- Working capital (primarily raw material purchases); and
- Technical assistance.
Other funds administered by the Central Bank of Barbados include:
- Barbados Investment Fund
- Credit Guarantee Scheme for Small Businesses
- Enhanced Credit Guarantee Scheme
- Export Credit Insurance Scheme
- Export Finance Guarantee Scheme
- Export Re-discount Facility
In general, only Barbadian nationals whose primary residence is in Barbados may qualify for funding under government affiliated schemes. Corporate bodies, headquartered and operating in Barbados, must demonstrate the capacity to improve output and employment as well as earn foreign exchange.