SME Loans without Collateral in Nigeria

One of the major factors affecting the thriving of SMEs is the availability of resources, particularly financial resources. Let’s take a look at some institutions that offers SME Loans without Collateral in Nigeria

Many independent entrepreneurs are reluctant to establish their businesses.

The first reason is that independent entrepreneurs do not have the resources that organizations have. The second reason is that independent entrepreneurs will have to channel all their resources into establishing one business. 

They do not have the required luxury to establish their businesses. A single attempt to establish any business can make or mar their already existing resources. 

Why SME Loan?

Instead of investing all their resources in one business, they seek better alternatives. It is on this note that independent entrepreneurs have sought for SME loans without collateral.

While obtaining a loan without collateral may seem a brilliant idea, it also has its cons. Although it may be easy to have access to finance, the loan amount may under certain circumstances be limited due to the absence of collateral. 

This limited amount is for the purpose of risk mitigation. As compared to loans with collateral, loans without an asset given as security tend to have shorter repayment term which results in higher monthly repayment plan.

Let’s explore various means of obtaining SME loans without collateral in Nigeria:

1. Government Intervention Programs: 

The Federal government of Nigeria (FGN) has implemented certain intervention programs to aid the expansion of SMEs. 

Some are in the form of collateral-free loans, while others come in the form of grants. These programs are often targeted towards specific purposes, hence, each with specific criteria for obtaining funds associated with it.

2. Microfinance Banks (MFBs): 

Microfinance Banks provide financial services to individuals who do not have the chance or requirements to interact with conventional commercial Banks. 

Some of these commercial banks provide loans to owners of small businesses without collateral in order to foster growth in certain sectors of the economy.

3. Commercial Banks:

 In conjunction with CBN, commercial banks provide collateral free loans to SMEs in order to foster growth in different sectors of the economy.

4. Online Lenders and FinTech Companies: 

With the growth and change in technology, there are a lot of online lenders and FinTech companies that issue loans without an asset given as security in Nigeria.

These lenders evaluate the financial or business performance of these borrowers before giving them loans.

5. Credit Unions and Cooperative Societies: 

Some credit unions and cooperative societies have been licensed by the Central Bank of Nigeria to issue loans to startups and SMEs. 

These unions have little or no collateral requirements and are mostly focused on helping their members. Hence, it is advised that individuals search and join unions that are related to their businesses.

Let’s take a look at some of the Financial Institutions that issue SME Loans Without Collateral.

1. Carbon: 

Carbon’s SME loan is one of Carbon’s products where owners of small businesses can have up to a million Naira collateral free loan. It requires no guarantors or paper work.

2. Specta:

Specta4Business is a product of Specta where owners of small and medium enterprises can access up to 5 million Naira  loan without an asset given as security or paperwork.

3. FastCredit:

Businesses that fit the requirements can apply for collateral-free loans from FastCredit, which have a maximum duration of six months and frequently have backing by the surety.

4. Paylater:

Paylater provides up to N500,000 loan to owners of small businesses on a short term basis, to meet their immediate cash needs. This loan is usually disbursed within 3 working days upon approval.

5. First Bank Nigeria PLC: 

First Bank issues unsecured loans to entrepreneurs irrespective of their business type.

To qualify for such a loan, the entrepreneurs are subjected to a psychometric test (an assessment to indicate the potential of a business) and then asked to provide a business plan.

Upon approval by the bank, the loan is disbursed to the individual.

6. Heritage Bank: 

The Youth Innovative Entrepreneurship Development Program (YIEDP) is a major program of Heritage Bank committed to providing funds for small and medium enterprises and for youth development. 

They provide timely and low end loans to help individuals expand their businesses.

7. Guaranty Trust Bank PLC: 

GT Bank has so many SME loan packages suitable for different kinds of businesses. 

Aside from providing loans, they also provide financing options that allow organizations to build on the growth of their businesses.

8. Access Bank Nigeria PLC: 

This is one commercial bank that can offer from N100,000 to N1,000,000 loan without an asset given as security. 

The eligibility criteria will be to open a corporate account and carry out steady transactions for at least 6 months.

Conclusively, having taken a look at this topic, you do not have any reason not to embark on that business. However, it is advised that individuals carry out thorough research on such loans before embarking on getting SME Loans without Collateral in Nigeria.