Challenges Faced by SMEs When Accessing Loans from Financial Institutions in Nigeria

Abstract

Small and Medium Enterprises (SMEs) are very important to the development of a country’s economy and have been known to play a very vital role in the reduction of unemployment in countries all over the world without the inclusion of Nigeria. Despite the importance of small and medium enterprises, over the years, they have had the continuous problem of lack of finance to grow the business which mostly leads to the death of the business due to small and medium enterprises (SMEs) difficulty accessing loans from financial institutions. The objective of this thesis was to find out the challenges that faced small and medium enterprises (SMEs) when accessing loans from banks. The population of the research included the SMEs in Lagos State. Non-probability sampling technique was used to select 50 SMEs in Lagos State to fill the questionnaire, the research instrument which was uploaded on Google Forms. The results of the research show that small and medium enterprises have their loans applications rejected by banks, the banks give very short loan maturity period and even though most of the SMEs have their business plan, they are still denied access to loans by the banks. SMEs are recommended to take care of their business accounting and try other sources of financing such as venture capitalist, angel investors and crowdfunding. The research also includes recommendations to Banks and the Government.