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While life is going back to normal, the economy in Nigeria is taking its time to build back its strength. This is understandable, as even those businesses that have been able to continue operating locally throughout the pandemic have struggled with international business. The global outlook is still uncertain, and individuals and businesses are still struggling.

Nigerian small business owners that are doing their best to keep the lights on may have turned to private lenders. These business loan companies operate independently from the banks and offer alternatives to the traditional financing options.

However, if you've been looking for loans, you may have noticed that some of the best-known business loan companies operating globally do not offer loans in Nigeria. This is strange, considering that Nigerian banks are renowned for their reluctance when it comes to providing business loans.

Why aren’t the best-known business loan companies available in Nigeria? Let’s take a look at how these companies function to get some context.

Private Business Loan Companies

Private business loan companies around the world provide loans without the strict conditions that banks require. While a business owner with no assets or co-signers will struggle to get a big loan from a bank, they can turn to private lenders.

These lenders are able to provide loans that the banks cannot because they are not bound by the same regulations. Governments regulate banks and public institutions, but private business loan companies get relatively free rein.

This benefits many new and struggling small businesses. However, this also leads to major problems. The lack of regulation on private lenders was a significant component in the 2008 financial collapse.

Small businesses can also be burnt by unregulated practices. Unlike traditional lenders, private loan companies can mislead borrowers into taking loans they will never be able to afford. This practice is called predatory lending, and it is the catalyst for many companies (and individuals) ending up in a cycle of debt that ultimately bankrupts them.

While the best-known loan companies offer some excellent products, even some of them engage in unscrupulous practices. Nonetheless, they provide a service that is essential to economies around the world.

Do regulatory measures keep these companies out of Nigeria?

Regulation in Nigeria

Traditionally, the private lending industry has been allowed to operate with little regulation in Nigeria. Lenders have provided quick, unsecured loans requiring little documentation. Many small businesses have taken out these kinds of loans from local companies, as well as the international companies that do operate in Nigeria.

We can see from this that regulation is probably not what has kept well-known business loan companies out of Nigeria. There are conditions businesses have to meet in order to operate in Nigeria, but this is true everywhere and the barriers to entry are not too significant.

In fact, with the collapse of a number of Nigerian banks in the 2010s, there is a lot of room for private lenders, both local and international. Many local fintech businesses have filled this void, but there is always room for more. It is more likely that foreign lenders have avoided branching out to Nigeria due to fears over a lack of opportunity for growth and the economic strife the country has faced.

Interestingly, as of 2021, new regulations now govern financial services providers in Nigeria. This is due to the significant issues banks have faced and the economic pressure this has put on individuals and small businesses. These new regulations are intended to deter unsecured lending and could well keep the best-known business loan companies from trying to break ground here.

Can I Get a Small Business Loan in Nigeria?

The absence of foreign business lenders in Nigeria has not traditionally been a problem for local small businesses. After all, there are many companies providing unsecured loans here which can be sourced with very little documentation.

However, since the new regulations have been put in place, business loan companies have an upward battle, and this could well make it more difficult for small businesses. In some cases, this will be for the best, as desperate business owners cannot take out loans that will end up bankrupting them.

It is important that Nigeria’s banks step up and start offering better loan options to small business owners. They won’t be able to provide the range of offerings unregulated private lenders once could, but they may come up with products that better serve the businesses they target.

Are There Alternatives?

If you are unable to get a loan for your small business, what are your alternatives?

There is no simple answer to this question, and it ultimately depends on the type of business as well as other factors. The fintech and medtech industries are still popular among investors. If your company operates in one of these sectors, you may be able to find an angel investor or equity investment.

There are other industries in which investment is common, so be sure to do your research to find out whether you can get investors interested.

Otherwise, you can try speaking to a financial planner or bank about the options they recommend. It is possible to use personal loans for your business in certain cases, and this may be an additional option for you.

The best-known business loan companies don’t operate in Nigeria and are unlikely to come anytime soon. However, there are alternatives for small businesses looking for unsecured loans.