Let us start with what “Business Finance” is. Business Finance is or can be referred to as the money you use to start, run, or grow a business, and also the way in which you get, manage, and pay back such money. All that deals with internal funds like owners’ savings, retained earnings, etc, short-term working capital eg to buy stock or pay staff, and longer-term funds eg to buy equipment, new premises, or expand. Good business finance practice deals with those three questions; Where will the money come from? How much do I need and when? How will I pay it back or generate returns?
Why Business Finance matters is that SMEs are the engine of Nigeria’s economy but they frequently have challenges with access to capital and credit affordability. Federal and state interventions, development banks, and private players have opened avenues for financing but with requirements to meet and trade-offs. You should be aware of what source is appropriate for your stage and risk level because that is what distinguishes a loan that grows your business from one that stifles it.
For example, Nigeria’s Bank of Industry and Central Bank run targeted facilities for MSMEs, and new national initiatives are trying to expand credit guarantees and reduce bank risk for lenders. There is the N75 billion federal government MSME intervention scheme that was established to assist and support Micro, Small, and Medium Enterprises (MSMEs) across the country. The scheme was established on August 15, 2013, in view of the important role being played by the Micro, Small, and Medium Enterprises (MSMEs) sub-sector in the economy.
This fund offers a 50:50 ratio for on-lending to SMEs and micro enterprises respectively in participating financial institutions (PFIs). Also, the commercial components constitute 90% of the fund and are given as wholesale funding in the ratio of 60% women and 40% to other citizens.
Main Sources of Business Finance in Nigeria
The primary sources are categorized into two, which are the internal and external sources that have advantages and disadvantages and for whom they are most appropriate.
Internal Sources
Owner’s Capital or savings: This is the fastest, cheapest, no-debt option, and has no dilution. Its disadvantages are that it has a low amount and high personal risk. This is most suitable for micro-starts and pilot tests.
Family and Friends: This involves borrowing or receiving assistance from family, relatives, or people you know. This provides flexible repayment and low or no interest but can destroy relationships if anything goes amiss. This is best for early-stage businesses that involve trust.
Retained Earnings or profit reinvestment involves using profits earned from the business to grow the business. It is possible but gradual, it has no debt and it allows sustainable growth. It is best for established firms that are already making profits.
External Sources
Commercial Bank Loans that already exist but require documentation, collateral, and most often a high rate of interest. Ideal for already established SMEs with a good credit record. This offers a high amount and has organized plans.
Microfinance and Microloans that are tailored for small traders and small businesses. This micro loan is offered in smaller ticket sizes, easier repayment but a higher APR at times depending on the policy and regulations.
Development Bank Facilities and intervention funds: This scheme subsidizes rates and also has longer tenors. Key examples include the Bank of Industry (BOI) MSME interventions and CBN’s MSME Development Fund. These schemes typically have application requirements and sectoral focus. These schemes also enhance access to finance, improve productivity and output, create job opportunities, and engender inclusive growth particularly amongst the youth, women, and persons with disabilities (PWD).
Grant Programs and Competitions: It has non-reimbursable funds from government programs, corporates, and foundations. It is highly competitive but ideal for startups that are not yet able to service debt. There are more than a dozen grant programs in 2025, some of which include the SME Mall (women in business), Tony Elumelu Foundation (TEF), Bank of Industry (BOI), SARA by Wema Bank, Central Bank of Nigeria (CBN), etc.
Equity or Angel investors or VCs: This is a trade of ownership for capital and best for high-growth startups with scalable business models.
Trade credit, Leasing, and factoring which are also known as non-banking options to manage cash flow such as supplier credit, equipment leasing, or selling receivables.
Crowdfunding or Fintech lending is growing in Nigeria due to platforms and fintech lenders that offer quick disbursal with which their terms vary widely.
For you to know what source to select from, you should have:
- Idea or pre-revenue startup e.g grants, founders’ capital, competitions, incubators, etc.
- Early revenue or pilot.
- A growing SME that has repeatable revenue.
- Scale, export, tech growth that is a large development finance, partnerships, or syndicated debt.
How to Access Funding in Nigeria
You can utilize the steps in the practical sequence to access funds.
1. You should tidy up your Financials: This involves preparing a basic profit and loss and cash flow for the subsequent 12 months since banks and funders will definitely request this. Then retain copies of identification, business registration (CAC), tax clearance if available, and a professional one-page business plan.
2. You need to choose the right product: This means that if you need to run for at least 3-6 months, you need to start with trade finance, factoring, or supplier credit. Then for growth capital expenditure (van, machine), you need to look at BOI, Development Bank of Nigeria (DBN) linked facilities, or leasing because DBN intermediates finance to partner banks to offload their risk. DBN also helps to fill financing gaps faced by MSMEs and small corporations in Nigeria through making provisions.
3. Apply to Schemes that fit your profile: Schemes like CBN MSME Development Fund that are meant for micro and small enterprises through participating financial institutions which on-lend at subsidized rates. You have to apply through PFIs (partner banks). The other program can be the BOI MSME Intervention programs where you need to search for themed calls i.e. manufacturing agri, creative industries, etc, and application guidelines on the BOI websites. There are Grants and Competitions like the Tony Elumelu, sector-specific corporate grants you can apply for as well.
4. Have Leverage intermediaries: Go through business incubators, industry associations (SMEDAN), or fintech partners because they would help with paperwork, pitch decks, and might have priority access to lendable funds.
5. You must also prepare a short pitch like a one-page summary that should include problems, solutions, unit economics (revenue per customer), how much you require, how you will use it, and how you will repay (or return). This is simply because funders require clarity and not all those wide and long essays.
6. You should consider guarantees and risk-sharing: This is because some schemes offer partial credit guarantees to reduce lender collateral requirements like the National Credit Guarantee Company announcement being part of a broader push to expand such mechanisms. Use guaranteed products where available.
You should avoid:
- Taking loans for personal consumption.
- Ignoring foreign exchange risk that is if your revenues are in Naira but you took a loan in USD, you have now introduced FX risk.
- Over-borrowing.
- Applying for every grant or loan without tailoring proposals.
Conclusion
Finance access in Nigeria is challenging but improving because of the reality that there are now subsidized government windows, active development bank intermediaries, growing fintech lenders, and a growing pool of grants and equity. The best thing to do is to match the type of finance to the stage of your business, put together crisp financials, and use intermediaries to remove friction and improve the performance of your business.
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