Nigerian SMEs urged to explore alternative financing beyond bank loans

Experts have highlighted the increasing availability of non-bank financing options aimed at helping small and medium-sized enterprises (SMEs) overcome barriers associated with traditional bank loans.

Speaking at the 2025 BusinessDay SME 100 Conference and Awards in Lagos, themed ‘Driving Nigeria’s Economy, Empowering SMEs for Global Competitiveness’, experts noted that the future of SME funding in Nigeria will depend less on conventional bank loans and more on alternative financing ecosystems, including crowdfunding, credit guarantees, factoring, leasing, venture capital, and targeted government funds.

Government-backed platforms and private mechanisms

Femi Egbesola, national president of the Association of Small Business Owners of Nigeria (ASBON), said that government-backed platforms and emerging private-sector mechanisms now offer more flexible funding than commercial banks.

He stated, “Crowdfunding, factoring, and credit guarantees are alternatives,” adding that Securities and Exchange Commission (SEC)-approved crowdfunding platforms allow businesses to raise capital from multiple investors without heavy documentation or high interest rates.

Egbesola highlighted the NSE Growth Board, which enables limited liability companies, not only public companies, to attract global investment. He also mentioned the National Credit Guarantee Company, launched this year, which guarantees up to 70 percent of SME loans, eliminating the need for landed collateral.

Factoring companies, he noted, pay suppliers immediately after invoicing large buyers, preventing cash-flow delays of 30–90 days. Leasing services are also expanding, allowing SMEs to acquire machinery and equipment through long-term payment plans.

“These options are easier and more cost-effective than bank loans,” Egbesola said, noting that many SMEs remain unaware of them.

He added that targeted national programmes such as the Rural Area Investment Fund (RAPIJO), Women GLOBE Loan, the Youth Entrepreneurship Fund, and the newly launched Agri-Fund provide single-digit interest loans for specific business categories.

Beyond funding, government initiatives include support for export-readiness through the African Continental Free Trade Area (AfCFTA) scheme, the National Single Window platform for easier documentation, and free Business Integrity Certification available until March 2025.

Egbesola urged SMEs to leverage these tools and to take trademark protection, technology adoption, and business structuring seriously to succeed globally.

Bank loans remain out of reach for many SMEs

Experts noted that bank loans remain inaccessible for most SMEs. Comfort Osemwegie, chief deal maker at Dealroom Nigeria, said, “Small businesses can’t access Bank of Industry funds because they don’t meet collateral requirements. What they need is more patient capital—angel investment, venture debt, and equity support.”

She added that venture debt provides a middle ground for startups and small enterprises before they are ready to give up equity.

Emmanuel Olujobi, founder of Jasper School of Data (UK), said Nigeria’s weak data infrastructure limits SME financing. “In the UK, access to reliable business data unlocks funding. Nigeria must decentralise information so investors can assess risk,” he stated.

Paul Olaloye, head of audit and compliance at IBILE Microfinance Bank, said poor transparency among SMEs also hinders access to formal loans. “Many medium-sized enterprises do not keep proper records, so their credit performance cannot be assessed. Policy reforms alone won’t work without better data and financial reporting,” he said.

Olaloye called on government to expand credit guarantee schemes and raise public awareness so SMEs can understand available options.

Zebulon Agomuo, editor of BD Sunday, representing Frank Aigbogun, publisher of BusinessDay, said that empowering SMEs is essential for building a globally competitive Nigerian economy.