SME Loan Agreement (Nigeria)
SME LOAN AGREEMENT
Banks and Other Financial Institutions Act 2020 (BOFIA 2020) | Companies and Allied Matters Act 2020 (CAMA 2020) | Collateral Registry Act 2017 | CBN Guidelines on SME Financing
THIS SME LOAN AGREEMENT is made this [Agreement Date]
BETWEEN:
(1) [Lender Name] (RC No. [Lender RC Number]) of [Lender Address] (hereinafter referred to as the "Lender"); AND
(2) [Borrower Name] (RC No. [Borrower RC Number]) of [Borrower Address] (hereinafter referred to as the "Borrower").
Where a personal guarantee is provided: (3) [Guarantor Name] of [Guarantor Address] (hereinafter referred to as the "Guarantor").
1. LOAN FACILITY
1.1 Subject to the terms of this Agreement, the Lender agrees to make available to the Borrower a term loan facility in the principal amount of [Loan Amount] (the "Loan").
1.2 The Loan shall be applied solely for the purpose of [Loan Purpose]. The Borrower shall not use the Loan for any other purpose without the prior written consent of the Lender.
1.3 The Loan shall be disbursed in a single tranche to the Borrower's account with the Lender upon satisfaction of the conditions precedent set out in Clause 5 of this Agreement.
2. INTEREST AND REPAYMENT
2.1 The Borrower shall pay interest on the outstanding principal balance at the rate of [Interest Rate] per annum, calculated on a 365-day year basis. The Lender shall disclose the effective annual rate (EAR) inclusive of all fees and charges as required by the CBN Guidelines on SME Financing.
2.2 The Loan shall be repaid over a period of [Loan Tenor] in [Repayment Frequency] instalments commencing on [First Repayment Date], as set out in the Repayment Schedule attached as Schedule 1 to this Agreement.
2.3 All payments shall be made in Nigerian Naira (NGN) to the Lender's designated account. The Borrower's account shall be domiciled with the Lender for the duration of this Agreement.
2.4 A management and processing fee of [Management Fee] is payable by the Borrower on or before disbursement. All fees and charges are subject to Value Added Tax at 7.5% under the Value Added Tax Act (Cap V1, LFN 2004) as amended by the Finance Act 2020.
2.5 If any scheduled repayment falls on a day that is not a Business Day, payment shall be made on the next succeeding Business Day. Late payments shall attract a penalty interest at 2% per annum above the applicable interest rate on the overdue amount.
3. SECURITY
3.1 As continuing security for all amounts owing under this Agreement, the Borrower shall provide the following security package: [Security Description].
3.2 All security shall be perfected prior to or contemporaneously with disbursement. Any charge over the Borrower's assets shall be registered at the Corporate Affairs Commission (CAC) under Section 204 of CAMA 2020 within 90 days of creation and on the National Collateral Registry (NCR) operated by the CBN under the Collateral Registry Act 2017.
3.3 The Guarantor, if any, unconditionally and irrevocably guarantees to the Lender the due payment of all amounts payable by the Borrower under this Agreement. The guarantee is a primary obligation and the Lender may enforce it against the Guarantor without first proceeding against the Borrower or any other security.
4. REPRESENTATIONS AND COVENANTS
4.1 The Borrower represents that: it is duly incorporated under CAMA 2020; it has the corporate power to enter into this Agreement; there are no undisclosed legal proceedings or material liabilities; and all financial statements provided to the Lender are true and accurate.
4.2 The Borrower covenants that throughout the Loan tenor it shall: maintain its corporate existence; provide the Lender with management accounts within 30 days of each quarter-end and audited accounts within 90 days of each financial year-end; not incur additional indebtedness above NGN 1,000,000 without the Lender's prior written consent; maintain the security in good standing; and comply with all applicable laws including tax obligations to the Federal Inland Revenue Service (FIRS).
5. CONDITIONS PRECEDENT
5.1 The Lender's obligation to disburse the Loan is subject to the satisfaction of the following conditions precedent on or before the disbursement date: [Conditions Precedent].
5.2 The Lender reserves the right to waive any condition precedent in writing.
6. EVENTS OF DEFAULT
6.1 Each of the following is an Event of Default: (a) failure by the Borrower to pay any amount due under this Agreement within 5 Business Days of the due date; (b) material breach of any representation, covenant, or condition that is not remedied within 21 days of written notice; (c) insolvency or the commencement of winding-up proceedings against the Borrower under Part F of CAMA 2020; (d) material adverse change in the Borrower's financial condition that, in the Lender's reasonable opinion, jeopardises repayment; (e) any cross-default under other financial obligations of the Borrower.
6.2 Upon the occurrence of an Event of Default, the Lender may, by written notice to the Borrower: (a) declare the entire outstanding principal, accrued interest, fees, and all other amounts immediately due and payable; (b) enforce any or all security; (c) appoint a receiver over the Borrower's assets under the debenture; or (d) exercise all rights and remedies available under Nigerian law.
6.3 A default by the Borrower will be reported to the Credit Risk Management System (CRMS) operated by the CBN and to licensed credit bureaus (CRC Credit Bureau, XDS Credit Bureau) as required by the CBN's Prudential Guidelines.
7. GOVERNING LAW AND DISPUTE RESOLUTION
7.1 This Agreement is governed by the laws of the Federal Republic of Nigeria, including BOFIA 2020, CAMA 2020, and all applicable CBN regulations. The parties submit to the jurisdiction of [Governing Law] for the resolution of any dispute arising out of or in connection with this Agreement.
8. GENERAL PROVISIONS
8.1 Entire Agreement. This Agreement, together with its Schedules and any security documents, constitutes the entire agreement between the parties with respect to the Loan and supersedes all prior negotiations and representations.
8.2 Amendments. No amendment to this Agreement is binding unless made in writing and signed by authorised representatives of both parties.
8.3 Severability. If any provision of this Agreement is held invalid or unenforceable, the remaining provisions continue in full force.
8.4 This Agreement is executed in duplicate, each copy being equally an original.
EXECUTED as an agreement:
SIGNED for and on behalf of the LENDER:
Name: _________________________ Designation: _________________________
Signature: _________________________ Date: _________________________
SIGNED for and on behalf of the BORROWER:
Name: _________________________ Designation: _________________________
Signature: _________________________ Date: _________________________
SIGNED by the GUARANTOR (if applicable):
Name: _________________________ Date: _________________________
Signature: _________________________
Lender (Authorised Signatory)
________________
Signature
Borrower (Director / CEO)
________________
Signature
Guarantor (if applicable)
________________
Signature
What Is a SME Loan Agreement (Nigeria)?
A SME Loan Agreement in Nigeria records the terms on which money is advanced and must be repaid, including default consequences.
The CBN defines SMEs in Nigeria by annual turnover and number of employees: micro enterprises have annual turnover below NGN 25 million; small enterprises have turnover between NGN 25 million and NGN 100 million; and medium enterprises have turnover between NGN 100 million and NGN 1 billion, under the CBN's Revised MSME Policy Framework. The CBN has issued several intervention funds and financing schemes for Nigerian SMEs — including the Agri-Business/Small and Medium Enterprise Investment Scheme (AGSMEIS), the Targeted Credit Facility (TCF), and the Creative Industry Financing Initiative (CIFI) — each with its own loan terms and eligibility criteria.
Nigerian commercial banks providing SME loans are required to comply with the CBN's Guidelines on SME Financing, which include minimum disclosure requirements in loan agreements, caps on certain charges, and restrictions on penalty interest. The Federal Competition and Consumer Protection Commission (FCCPC) issued the Limited Exemption Order 2021 regulating digital lending platforms, which are a major source of SME finance in Nigeria, requiring transparency in interest disclosure and prohibiting abusive collection practices.
A key feature of SME loan documentation in Nigeria is security: lenders typically require a combination of personal guarantees from the directors or principal shareholders, a debenture over the company's assets under CAMA 2020, a charge over specific assets (equipment, inventory, or receivables), and registration on the National Collateral Registry (NCR) operated by the CBN under the Collateral Registry Act 2017 to perfect the security interest.
The legal framework governing the SME Loan Agreement (Nigeria) in Nigeria draws on several key statutes and regulatory bodies. Under Nigerian law, the Companies and Allied Matters Act 2020 (CAMA) regulates corporate entities through the Corporate Affairs Commission (CAC). The Labour Act (Cap L1 LFN 2004) and the National Industrial Court of Nigeria (NICN) govern employment disputes. The Nigeria Data Protection Regulation (NDPR) 2019 and the Nigeria Data Protection Commission (NDPC) protect personal data. The Federal Inland Revenue Service (FIRS) administers tax obligations under the Companies Income Tax Act. The Federal High Court and state High Courts have jurisdiction over civil matters. Parties executing a SME Loan Agreement (Nigeria) in Nigeria should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Banks and Other Financial Institutions Act (BOFIA) 2020 sets the foundational requirements.
When Do You Need a SME Loan Agreement (Nigeria)?
An SME Loan Agreement in Nigeria is needed whenever a small or medium-sized business borrows money from a bank, microfinance institution, development finance institution, or private lender and requires a written record of the loan terms.
An SME Loan Agreement is required when a Nigerian small business applies for a term loan from a commercial bank or microfinance bank to finance working capital, equipment purchase, or business expansion, and the bank requires a signed agreement as a condition for disbursement.
An SME Loan Agreement is needed when an SME accesses a CBN intervention fund — such as the AGSMEIS fund administered through participating financial institutions — and must execute the fund-specific loan agreement that incorporates the CBN's terms and conditions for the intervention scheme.
An SME Loan Agreement is required when a fintech lender or digital lending platform regulated under the CBN's Regulatory Sandbox or licensed as an Other Financial Institution (OFI) extends a short-term credit facility to a Nigerian SME, in compliance with the FCCPC's Limited Exemption Order 2021 on digital lending.
An SME Loan Agreement is needed when the Bank of Industry (BOI), Development Bank of Nigeria (DBN), or Nigeria Export-Import Bank (NEXIM) provides a concessional loan to a Nigerian SME as part of targeted sectoral support — for example, for manufacturing, export promotion, or agricultural processing.
An SME Loan Agreement is required when private equity investors or angel investors in Nigeria provide bridge financing or shareholder loans to a portfolio SME pending a formal equity round, with the intention to convert the loan to equity at an agreed conversion price.
Parties in Nigeria should prepare a SME Loan Agreement (Nigeria) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under Nigerian law, the Companies and Allied Matters Act 2020 (CAMA) regulates corporate entities through the Corporate Affairs Commission (CAC). The Labour Act (Cap L1 LFN 2004) and the National Industrial Court of Nigeria (NICN) govern employment disputes. The Nigeria Data Protection Regulation (NDPR) 2019 and the Nigeria Data Protection Commission (NDPC) protect personal data. The Federal Inland Revenue Service (FIRS) administers tax obligations under the Companies Income Tax Act. The Federal High Court and state High Courts have jurisdiction over civil matters. Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.
What to Include in Your SME Loan Agreement (Nigeria)
A valid Nigeria SME Loan Agreement must contain the following essential elements to be legally enforceable and compliant with CBN regulations.
Parties: Full legal names of the lender and borrower (SME), with CAMA 2020 RC number for the borrower and CBN licence reference for the lender. Personal guarantors should be identified if required.
Loan amount and purpose: The principal amount in Nigerian Naira (NGN), the specific business purpose for which the loan is granted (CBN intervention funds require purpose limitation), and the disbursement mechanism.
Interest rate: The interest rate — expressed as a percentage per annum — whether fixed or variable (linked to the CBN Monetary Policy Rate), and the basis of calculation (simple or compound). CBN guidelines require disclosure of the effective annual rate (EAR) and all charges to the borrower.
Repayment schedule: The repayment start date, frequency of instalments (monthly, quarterly), the number of instalments, and the total amount repayable. A repayment schedule table attached as a schedule is best practice.
Charges and fees: All upfront and ongoing fees — management fees, processing fees, insurance premiums — expressed in NGN amounts or percentages. The FCCPC's consumer protection rules require full disclosure of all charges.
Security: The security package — personal guarantee, debenture over company assets, charge over specific property, or assignment of receivables — and the obligation to register security on the National Collateral Registry (NCR) under the Collateral Registry Act 2017 and, for company charges, at the Corporate Affairs Commission (CAC) under Section 204 of CAMA 2020.
Events of default: Defined events triggering the lender's right to accelerate repayment — including non-payment, breach of covenant, insolvency, material adverse change, and breach of CBN regulatory requirements.
Representations and covenants: The borrower's representations (capacity, no undisclosed liabilities, tax compliance with FIRS) and ongoing covenants (maintain financial ratios, provide management accounts, not incur additional debt without consent).
Governing law: Nigerian law and CBN regulations, with disputes before the Federal High Court or a relevant State High Court, or by arbitration.
Additional compliance elements for a SME Loan Agreement (Nigeria) used in Nigeria include: Under Nigerian law, the Companies and Allied Matters Act 2020 (CAMA) regulates corporate entities through the Corporate Affairs Commission (CAC). The Labour Act (Cap L1 LFN 2004) and the National Industrial Court of Nigeria (NICN) govern employment disputes. The Nigeria Data Protection Regulation (NDPR) 2019 and the Nigeria Data Protection Commission (NDPC) protect personal data. The Federal Inland Revenue Service (FIRS) administers tax obligations under the Companies Income Tax Act. The Federal High Court and state High Courts have jurisdiction over civil matters. Forms-legal.com provides this template as a starting point for Nigeria-compliant documentation.
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Forms Legal. (2026). SME Loan Agreement (Nigeria) (Nigeria) [Legal document template]. Forms Legal. https://forms-legal.com/nigeria/financial/loans/sme-loan-agreement-nigeria
"SME Loan Agreement (Nigeria) (Nigeria)." Forms Legal, 2026, https://forms-legal.com/nigeria/financial/loans/sme-loan-agreement-nigeria.
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year = {2026},
howpublished = {\url{https://forms-legal.com/nigeria/financial/loans/sme-loan-agreement-nigeria}},
note = {Free legal document template. Based on Banks and Other Financial Institutions Act (BOFIA) 2020}
}Frequently Asked Questions
Interest rates on SME loans in Nigeria vary significantly depending on the type of lender and the funding source. Commercial banks typically charge between 18% and 30% per annum for SME loans, reflecting the CBN Monetary Policy Rate (MPR) — which has been at elevated levels in 2024–2025 — plus a spread. CBN intervention funds such as the AGSMEIS and the Targeted Credit Facility (TCF) offer concessional rates of 5% to 9% per annum for eligible SMEs. The Bank of Industry (BOI) provides loans at single-digit rates (7% to 10% per annum) for manufacturing and industrial SMEs. Microfinance banks charge higher rates, often between 30% and 60% per annum, reflecting the higher risk profile and operational costs of microfinance lending. The CBN's Guidelines on SME Financing require lenders to disclose the effective annual rate (EAR) including all fees and charges. Under the FCCPC's Limited Exemption Order 2021, digital lenders are required to disclose the annual percentage rate (APR) in all loan communications.
A Nigerian SME can offer several forms of security for a bank loan. Personal guarantee: the directors or principal shareholders sign a personal guarantee making themselves personally liable for the loan if the SME defaults. Debenture: a fixed and floating charge over all the company's assets — including land, equipment, receivables, and stock — registered at the Corporate Affairs Commission (CAC) under Section 204 of CAMA 2020 within 90 days of creation. Specific asset charge: a fixed charge over a specific asset such as equipment, land, or a vehicle, registered on the National Collateral Registry (NCR) under the Collateral Registry Act 2017. Domiciliation of account: the borrower's sales receivables are directed into an account with the lending bank, giving the bank control over cash flow. Third-party property: a mortgage over property owned by a guarantor. For CBN intervention fund loans, the participating financial institution holds the security package on behalf of the CBN and must register all security on the NCR.
The Central Bank of Nigeria (CBN) has established several intervention funds specifically for Nigerian SMEs. The Agri-Business/Small and Medium Enterprise Investment Scheme (AGSMEIS) provides loans at 5% per annum for up to 7 years to businesses in agriculture and related sectors, administered through participating financial institutions. The Targeted Credit Facility (TCF) was introduced to provide affordable credit to SMEs and households affected by economic disruptions. The Creative Industry Financing Initiative (CIFI) supports businesses in the Nigerian creative sector (music, film, fashion, technology) at preferential rates through the Development Bank of Nigeria (DBN). The Bank of Industry (BOI) has multiple sector-specific funds for manufacturing, agribusiness, healthcare, and digital enterprises. The Nigeria Export-Import Bank (NEXIM) provides export-linked financing for SMEs accessing international markets. Eligibility criteria, interest rates, and maximum loan amounts differ for each scheme, and SMEs must apply through designated financial institutions.
If an SME defaults on a loan in Nigeria — by failing to make repayments, breaching a covenant, or becoming insolvent — the lender may exercise remedies specified in the loan agreement and permitted by Nigerian law. The lender may accelerate the entire outstanding balance, making it immediately due and payable. The lender may enforce security: calling on personal guarantors to pay; appointing a receiver over the company's assets under the debenture; exercising a power of sale over charged assets registered on the National Collateral Registry (NCR) under the Collateral Registry Act 2017; or filing a winding-up petition against the company at the Federal High Court under Part F of CAMA 2020. For regulated lenders, defaulted SME loans must be provisioned in accordance with the CBN's Prudential Guidelines for Licensed Banks, and non-performing loans (NPLs) are reported to the Credit Risk Management System (CRMS) operated by the CBN, affecting the borrower's credit bureau record with CRC Credit Bureau or XDS Credit Bureau.
Personal guarantees from directors or principal shareholders are commonly required by Nigerian commercial banks and other formal lenders as a condition for SME loans. Nigerian banks require personal guarantees because SME companies often have limited assets and track records, making the personal guarantee a critical risk mitigation mechanism. A personal guarantee in Nigeria is a contract under which the guarantor agrees to pay the lender if the borrower (the SME) fails to repay. Under Nigerian guarantee law, the guarantee must be in writing and signed by the guarantor to be enforceable. The guarantor can be required to pay the full outstanding balance, including principal, interest, penalties, and enforcement costs. Nigerian courts — including the Federal High Court and State High Courts — have enforced personal guarantees in bank lending contexts. Guarantors should be aware that signing a guarantee can result in personal liability that could extend to attachment of their personal assets by the judgment creditor under the Sheriffs and Civil Process Act (Cap S6, LFN 2004).
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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