It is the dream of every entrepreneur to birth and nurture a business that can be either sold at a premium or handed down to future generations. However, experts put the failure rate of Small and Medium Enterprises (SMEs) and startups within the first five years of their existence at 50% or more. One of the top reasons for such business failure is lack of adequate capital or poor management of available ones. As I stated in  Effective Cash Flow Management: The lifeblood of any businessif your business does not have sufficient cash to meet its obligations as they fall due, the business is heading for collapse. Considering the fact that most entrepreneurs in Nigeria go into business with capital drawn from personal savings or assistance from family and friends, which is often not enough, I have decided to put together this piece as a guide to entrepreneur seeking to scale up their businesses with bank loans.

Though business owners can grow their businesses organically from retained earnings or further injection of equity, this route is usually unnecessarily slow, making it difficult for such businesses to keep pace with industry trends. This is of course with exception to big corporations that are capable of making and retaining so much profits that can be ploughed back into the business or easily go to the capital market to raise funds. Ordinarily, for Micro, Small and Medium Enterprises (MSMEs) and startups, the banks should be the bridge between the entrepreneur’s ideas and business reality. However, in Nigeria, there has been accusations and counter-accusations by both parties. Entrepreneurs usually would say Nigerian banks do not support ideas and small businesses. The banks on the other hand always put up a defence that most MSMEs and startups do not meet their minimum risk acceptance criteria, and a large percentage of those they took chances on almost certainly default in repayment in the long run.

Nevertheless, I can boldly tell you that Nigeria banks still fund small businesses. For instance, Guaranty Trust Bank alone has rolled out a number of MSME specific loans in the last few months. These include: Fashion Credit (for operators in the fashion industry), Food and Drinks Credits (for entrepreneurs in the food industry), Cash Flow Credit (for businesses in the education and healthcare sectors, for now), among others. Interestingly, the aforementioned loans are without collateral as you know it. That is, you are not required to pledge a landed property with a Certificate of Occupancy (C of O) as one of the conditions for accessing the loan. Loan extension to MSMEs in Nigeria may not have gotten to the desired level but it is getting better, thanks to several CBN intervention funds and adoption of the Bank Verification Number (BVN).

In order to access MSME loans without hassles, below are some of the things you need to know:

  • Register your business properly from the onset: Give your business a proper identity right from the start. Get your business registered with the Corporate Affairs Commission (CAC) and/or the appropriate regulatory authorities saddled with such responsibilities in your chosen sector(s). This is one of the basic requirements to establish a banking relationship.
  • Open an account for your business on time: For your business to enjoy any sort of assistance by way of loan from any bank, there must be an existing banking relationship. For example, to qualify for the Guaranty Trust Bank’s MSME loans listed above, you must have been operating your account with the bank for at least one year (twelve months), and what you will get as loan is largely dependent on your account turnover. Therefore, the need to open your business account on time and effectively operate it cannot be overemphasized.
  • Show yourself and business credit worthy: Again, using the Guaranty Trust Bank’s MSME loans as example, if for any reason your account is in debit (either with the bank or any other financial institution) or if you have any returned cheque within the last twelve months under review, you will not be able to access the loan. In other words, you should try as much as possible to meet your obligations as they fall due.
  • Discuss with your bank before you need the loan: Experience has shown that most business owners wait till they have a crisis situation before approaching the bank for assistance. Most often than not, at such a crisis, they may not be able to meet the bank’s conditions. However, proper planning and continuous engagement with your bankers and other financial and management experts can solve the problem.

Once you follow the above steps, you will discover that accessing a bank loan to scale up your business is not an uphill task as you must have been made to believe before now. All you need to do is, make hay while the sun shines.


Chris Emoghene can be reached via