Financing Growth: Private Debt Options for Nigerian Businesses

Ayoola Adeola, Managing Director at CardinalStone Finance, highlights a pervasive challenge among Nigerian businesses: misaligned financing. Many companies secure capital, but the repayment schedules begin before the investments generate returns. This mismatch, Adeola explains, compresses cash flow, necessitates premature refinancing, and forces businesses to curb growth to meet immediate obligations.

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Many companies secure funding only to find that repayment begins before the underlying investment has had time to generate returns.

Adeola points to private debt as the solution to this structural gap. Unlike traditional bank lending, which often involves lengthy processes and standardized frameworks, private debt offers bespoke solutions. These are tailored to the borrower's specific realities, aligning repayment schedules with the business's actual cash flow generation and investment cycles, rather than fixed, often unrealistic, timelines.

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In these situations, capital is available, but the structure works against the business rather than supporting it.

This distinction is critical for growth-stage Nigerian businesses, especially those in capital-intensive sectors. Private debt financing can accelerate growth rather than constrain it. The primary beneficiaries are companies within Nigeria's "missing middle" – businesses that are operationally sound and commercially viable but remain underserved by conventional lenders. This includes manufacturers, SMEs, healthcare providers, infrastructure companies, and FMCG distributors.

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This is the gap private debt is designed to address.

These businesses typically possess established operations, tangible assets, and strong growth potential. Their financing needs often extend beyond what traditional structures can accommodate. Private debt instruments, such as structured financing, private notes, receivables financing, and inventory financing, provide the appropriate capital. Contract-backed and offtake-linked structures leverage predictable cash flows, enhancing repayment visibility. Mezzanine capital also offers flexible funding for expansion.

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Unlike conventional bank lending, which is often characterised by lengthy bureaucratic credit processes and standardised lending frameworks, private debt solutions are tailored to the specific realities and needs of the borrower.