In the ever-evolving Nigerian business ecosystem, small businesses face numerous challenges in establishing themselves and achieving substantial and sustainable growth.
One of the most significant hurdles is access to funding, which is crucial for expansion, innovation, and staying competitive.
While traditional banking institutions have long been the go-to source for business loans, non-traditional lending companies are emerging as game-changers for small businesses in Nigeria.
Key takeaway(s) from this article:
- Non-traditional lenders offer faster loan approval processes,
- Less paperwork and bureaucracy involved,
- Intimate working relationships with borrowers,
- Flexible loan terms and repayment options,
- Focus on business potential rather than just credit history,
The Nigerian business landscape is notoriously competitive, with small businesses often struggling to secure the financial backing they need to thrive. Deposit Money Banks (DMBs) have historically been the primary source of business loans, but their stringent requirements and lengthy approval processes can be prohibitive, at best, particularly for many small enterprises. This is where non–traditional lending companies step in, offering a lifeline to businesses that might otherwise be left behind.
One of the most significant advantages of non-traditional lenders is their speed and efficiency. Unlike DMBs, which often require extensive documentation and can take weeks or even months to approve even a simple loan. Non-traditional lenders on the other hand, typically have streamlined processes that can result in approvals within days. This quick turnaround can be crucial for small businesses that need to act fast to capitalize on certain, or sudden business opportunities, or address urgent business needs.
Moreover, non-traditional lenders often take a more holistic approach to assessing a loan’s application. While DMBs tend to focus heavily on credit history and collateral, non-traditional lenders are more likely to consider a business’s potential overall visibility and future viability. This can be particularly beneficial for start-ups or businesses in emerging sectors that may not have an extensive credit history but show promise for exponential growth through innovation or potential high-demand products.
Key takeaways from this section:
- Personalized support, guidance and advice
- Flexible loan terms and repayment options
- Customized solutions aligned with business cash flow
Another significant advantage of non-traditional lenders is their willingness to work closely with borrowers. Many of these lenders offer personalized support and guidance, helping businesses not just secure needed funding but also how to make the most of it to their business’s benefit.
This can include advice on financial management, business strategy, process management, and even introductions to potential partners or other customers. Such support can be invaluable for small businesses, particularly those run by first-time entrepreneurs who may lack experience in certain areas of business management.
Flexibility is another hallmark of non-traditional lenders. While Deposit Money Banks often have rigid loan terms and repayment schedules, non-traditional lenders are more likely to offer customized solutions that align with a business’s cash flow and growth projections.
This can include options such as revenue-based repayment plans, which are adjustable based on the business’s performance, or even grace periods that allow businesses to establish themselves before beginning repayments.
Key takeaways from this section:
- Support for innovative and disruptive business models
- Driving economic growth and diversification in Nigeria
- Potential for higher interest rates balanced by other benefits
It’s important to note that while non-traditional lenders can offer significant advantages, they may come with higher interest rates compared to traditional banks. However, for many small businesses, the benefits of faster access to capital, more flexible terms, and personalized support can outweigh the additional cost.
Furthermore, non-traditional lenders, like venture capitalists, are often more willing to take risks on innovative ideas and disruptive business models. This can be particularly beneficial in a country like Nigeria, where there’s immense potential for technological and social innovation. By supporting businesses that are looking to modernize and revolutionize various sectors of the Nigerian economy, these lenders are playing a crucial role in driving economic growth and diversification.
Key takeaways from this section:
- Non-traditional lenders are becoming increasingly important in the Nigerian business landscape, offering faster loan approval processes and more flexible terms compared to other types of financial institutions.
- These lenders are helping to level the playing field for a start–ups and small businesses, thus creating new opportunities for entrepreneurial success in Nigeria.
- Nexus Integrated Global Services Limited, an Abuja-licensed Credit Lender, is specifically supporting Nigerian start-ups and SMEs with tailored credit facilities.
- By providing financial support to SMEs and start-ups, companies like Nexus are contributing to economic development and innovation in various sectors of the Nigerian economy.
As the Nigerian business landscape continues to evolve, the role of non-traditional lenders is likely to become increasingly important. These lenders are not just providing capital; they’re offering a pathway for small businesses to establish themselves, grow, and compete effectively in a challenging market.
For small businesses looking to gain a foothold in the competitive Nigerian business landscape, non-traditional lending companies offer a compelling alternative to traditional banking institutions. With their faster processes, flexible terms, and supportive approach, these lenders are helping to level the playing field and create new opportunities for entrepreneurial success in Nigeria.
McBrain & Company is a bespoke Business Consulting Services & Financial Advisory company specializing in Corporate/Management Advisory, Project Finance Advisory, Private Equity Intermediation, Business Plan Designs, Feasibility Studies & Report Presentations, Pitch Deck Designs, Financial Markets/Company Analysis Reporting & Presentations, Crowd Funding Advisory, Business Process Management, Investment Product Brokerages, & Content Marketing. mcbrainandcompany@gmail.com.