Have you noticed that everyone has a small or micro business now? From the Iya Bobo that sells drinks to Abdullahi’s provision store, small and micro businesses are constantly popping up everywhere, even on Instagram. That’s why it’s no surprise that there are over 37 million MSMEs and SMEs in Nigeria
The Nigeria bureau of statistics has stated that these MSMEs and SMEs contribute to over 50% of the country’s GDP employing about 80% of the country’s workforce. Despite this, MSMEs and SMEs still struggle to access adequate credit, with only about 5% of these businesses having access to funding and credit.
These statistics are probably not so far-fetched as you may know a few yourself that haven’t been able to get credit. For this reason, many business owners have had to squeeze themselves dry to get started. They used their savings, borrowed money from family and friends, and even sold properties just to get some capital. Truth be told, finding credit can seem like looking for a needle in a haystack, but it doesn’t have to be.
In this post, we’ll teach you how to get a small business loan in Nigeria, so your small business can expand and truly reach its potential. If you are new to the business world, we will also talk about ways to obtain a loan for startup business in Nigeria.
Ways to procure loans for small businesses in Nigeria
Access to small business loans, especially business loans without collateral is not as common as most would think, but there are still a few safe and secure ways to get loans. We’ve outlined the main ones below.
Loan Apps
This is the fastest and most common way of getting a loan for start-up businesses in Nigeria. Loan apps usually take about 5 – 10 minutes to decide on your loan package and if you should be given a loan. Loan amounts range from ₦250,000- ₦10,000,000. Majority of the time, these apps don’t require collateral & offer collateral free loans for business. They only use your credit score to determine if you are likely to pay back.
Pros of loan apps
They are fast
They give substantial amounts of money
No collateral needed
No need to go to a branch. You only have to download an app
Cons of loan apps
They often have only one physical branch
You may not get the amount you want. The app decides the amount it can trust you with.
Even though loan apps give some of the best small business loans, you still need to do your due diligence. Do not download just any app on the app store instead, check out this list we’ve compiled on the top loan apps in Nigeria and pick a loan app partner based on your needs.
Banks
Before loan apps, banks were the number one place small business owners who wanted to grow their businesses go to get loans. Although they are trustworthy, loans from banks usually come with high-interest rates and a request for collateral. This often discourages startups from getting loans. However, start-ups can request business loans from banks, if the owners have a good track record and can provide sufficient collateral.
Pros of banks
Trustworthy
You may get more loans as you build credit with them.
Even though loan apps give some of the best small business loans, you still need to do your due diligence. Do not download just any app on the app store instead, check out this list we’ve compiled on the top loan apps in Nigeria and pick a loan app partner based on your needs.
Banks
Before loan apps, banks were the number one place small business owners who wanted to grow their businesses go to get loans. Although they are trustworthy, loans from banks usually come with high-interest rates and a request for collateral. This often discourages startups from getting loans. However, start-ups can request business loans from banks, if the owners have a good track record and can provide sufficient collateral.
Pros of banks
Trustworthy
You may get more loans as you build credit with them.
Cons of banks
High-interest rates
Lots of documentation and need for collateral
Long processing time
Government loan schemes
The Nigerian government has established a few bodies to help MSMEs and SMEs. Examples of these bodies are the Bank of Industry (BOI), Bank of Agriculture (BOA), Development Bank of Nigeria (DBN), Nigerian Export-Import Bank (NEXIM), and Small and Medium Enterprises Development Agency of Nigeria (SMEDAN).
They were established to give grants, and low-interest loans to MSMEs and SMEs in Nigeria. Here are their pros and cons.
Pros of Government loan schemes
They offer grants or low-interest loans
They focus on MSMEs and SMEs
They sometimes offer collateral-free loans for business
Cons of Government loan schemes
Competition is high, so they are difficult to get
High-interest rates
Lots of documentation and need for collateral
Long processing time
Government loan schemes
The Nigerian government has established a few bodies to help MSMEs and SMEs. Examples of these bodies are the Bank of Industry (BOI), Bank of Agriculture (BOA), Development Bank of Nigeria (DBN), Nigerian Export-Import Bank (NEXIM), and Small and Medium Enterprises Development Agency of Nigeria (SMEDAN).
They were established to give grants, and low-interest loans to MSMEs and SMEs in Nigeria. Here are their pros and cons.
Pros of Government loan schemes
They offer grants or low-interest loans
They focus on MSMEs and SMEs
They sometimes offer collateral-free loans for business
Cons of Government loan schemes
Competition is high, so they are difficult to get
Online apps for small business loans
Loan apps in Nigeria are known for their speed when it comes to loan approval and disbursal. They don’t require you to go to a place or present numerous documents. All you need to do is download the app, sign up and request a loan.
This is especially good for small businesses that need money to sort out business emergencies or for businesses just starting out with no social proof and no collateral.
Here is a list of the top loan apps that give loans without collateral:
FairMoney MFB: FairMoney’s main appeal is that it is a full-fledged digital bank that gives loans of up to ₦3,000,000. This means you can sign up to get a loan on the FairMoney app in under 5 minutes and increase your chances of getting a higher amount by banking with FairMoney and enjoying other benefits. Here is a detailed review of FairMoney. Check out more details about FairMoney loans here.
Branch: Branch prides itself on offering quick collateral-free loans. They have over 10 million downloads and their loans require no documentation.
Kuda: They offer loans called “overdrafts”. They can only be given to people who have been using Kuda for a while. The overdrafts typically accumulate a 0.3% interest daily.
RenMoney: They offer loans to both individuals and start-up businesses in Nigeria. Their loan offer is currently maxed out at ₦6,000,000
Carbon: Carbon typically helps customers buy commodities and allows payback in instalments at a later date. The repayment period is usually 3-6 months.
These apps have made it possible for the average credit-worthy Nigerian to start and grow business/businesses in Nigeria.
Loan apps in Nigeria are known for their speed when it comes to loan approval and disbursal. They don’t require you to go to a place or present numerous documents. All you need to do is download the app, sign up and request a loan.
This is especially good for small businesses that need money to sort out business emergencies or for businesses just starting out with no social proof and no collateral.
Here is a list of the top loan apps that give loans without collateral:
FairMoney MFB: FairMoney’s main appeal is that it is a full-fledged digital bank that gives loans of up to ₦3,000,000. This means you can sign up to get a loan on the FairMoney app in under 5 minutes and increase your chances of getting a higher amount by banking with FairMoney and enjoying other benefits. Here is a detailed review of FairMoney. Check out more details about FairMoney loans here.
Branch: Branch prides itself on offering quick collateral-free loans. They have over 10 million downloads and their loans require no documentation.
Kuda: They offer loans called “overdrafts”. They can only be given to people who have been using Kuda for a while. The overdrafts typically accumulate a 0.3% interest daily.
RenMoney: They offer loans to both individuals and start-up businesses in Nigeria. Their loan offer is currently maxed out at ₦6,000,000
Carbon: Carbon typically helps customers buy commodities and allows payback in instalments at a later date. The repayment period is usually 3-6 months.
These apps have made it possible for the average credit-worthy Nigerian to start and grow business/businesses in Nigeria.
These institutions have made it far easier for citizens to access startup business loans with no collateral in Nigeria. If you intend to start a business, you should surely look to one of them for their services.
