Private Credit vs Venture Capital: What African Entrepreneurs Need to Know

In Africa’s fast-growing business landscape, securing funding is both an opportunity and a challenge. For entrepreneurs looking to scale their businesses, two major financing paths stand out: Private Credit and Venture Capital (VC). Both can inject much-needed capital into your company, but they come with different expectations, structures, and long-term impacts.

This guide breaks it down, so you can make the best decision for your business today and in the future.

1. What is Private Credit?

Private Credit refers to loans provided by non-bank institutions,such as investment funds, private lenders, and development finance institutions (DFIs). Unlike traditional bank loans, private credit offers more flexibility but often at a slightly higher cost.

Why it’s gaining traction in Africa:

• Africa’s Credit Gap: According to the International Finance Corporation (IFC), Africa faces an annual credit funding gap exceeding $330 billion for small and medium-sized enterprises (SMEs). Banks remain conservative, leaving room for private lenders.
• Speed and Flexibility: Private credit can be structured to suit your cash flow, with tailored repayment schedules and fewer covenants compared to banks.

Example:

If you run an agribusiness needing $500,000 to purchase equipment before harvest season, private credit can provide a loan with a 2-3 year term, customized to your revenue cycles. You retain full ownership while repaying from your profits.

2. What is Venture Capital (VC)?

Venture Capital involves selling a stake (equity) in your business in exchange for funding from an investor who believes in your growth potential. This is popular among startups, particularly in tech-driven sectors.

Why VC is attractive:

• No Immediate Repayments: Unlike loans, VC doesn’t require monthly repayments. The investor gets paid when your business grows and they sell their stake (an exit).
• Access to Expertise: Many VC firms offer more than money — they provide mentorship, market connections, and strategic advice.

Example:

A fintech startup in Uganda raising $1 million from a VC fund will give up, say, 20% ownership. The founders keep operating the business, but now with board oversight and aggressive growth targets to reach a valuation that makes the investor’s stake profitable.

3. Key Differences Entrepreneurs Must Understand

Factor Private Credit Venture Capital

Ownership No dilution; you retain full control You sell a % of your company

Repayment Fixed repayment schedule No repayment; investor exits later

Risk Must service debt even if business slows Shared risk with investor

Use Cases SMEs with steady cash flows High-growth startups

Popular Sectors in Africa Agribusiness, manufacturing, transport Fintech, healthtech, edtech

4. Which Option Is Right for You?

Choose Private Credit if:

• Your business has predictable revenue and needs capital to expand operations.
• You want to retain full ownership and control.
• You’re in sectors like agriculture, logistics, or manufacturing where profit margins support debt service.

Choose Venture Capital if:

• You’re building a scalable, high-growth business — often in technology.
• You’re comfortable giving up equity in exchange for expert support and bigger funding rounds.
• You can handle the pressure of rapid scaling and meeting aggressive growth targets.

5. A Word on the Current African Landscape (2025)

• Private Credit is booming: With traditional banks pulling back and Africa’s SME sector expanding, private credit funds are stepping up. Uganda, Kenya, and Nigeria are seeing new private credit vehicles aimed at agriculture, health, and infrastructure businesses.
• VC Funding Has Softened: After record years in 2021 and 2022, African VC funding dipped slightly in 2023-2024 due to global market tightening. However, fintech and climate tech continue to attract strong interest.
• Blended Finance is emerging: Some entrepreneurs are creatively combining private credit and equity, using debt for working capital and VC for scaling.

6. Final Takeaway

Both Private Credit and Venture Capital have vital roles to play in Africa’s entrepreneurial ecosystem. Your decision should align with your business model, growth plans, and risk appetite.

At Ortus Africa Capital, we’ve worked with businesses on both sides — providing venture funding to tech startups and supporting SMEs with flexible credit solutions. If you’re unsure which path is right for you, our advisory team is ready to help you navigate the options.

Homework for Entrepreneurs:

1. Review your business cash flow — can you afford repayments? Or do you prefer sharing ownership?
2. Define your 3-year growth vision — steady expansion or rapid scaling?
3. Talk to both a credit provider and a VC to understand real-world terms.