Working Capital Loans: The Fuel Nigerian Small Businesses Run On

A business can be profitable on paper and still run out of cash. You pay your supplier today, but your customers pay you in three weeks. That gap - between money going out and money coming in - is where many Nigerian small businesses stall. Working capital finance exists to bridge exactly this gap.

What is a working capital loan?

Working capital is the money that keeps day-to-day operations running: buying stock, paying staff, covering rent and utilities, and funding orders before customers settle their invoices. A working capital loan is short-term finance - typically repaid within 1 to 12 months - used to cover these running costs rather than long-term investments like property or heavy equipment.

When it makes sense to borrow

• ✓Restocking ahead of a busy season - the festive period, back-to-school, or a local event.
• ✓Fulfilling a large order that requires buying materials before you get paid.
• ✓Bridging a slow month so you can still pay staff and suppliers on time.
• ✓Taking advantage of a bulk-purchase discount that pays for itself.

When to think twice

Working capital loans are for temporary, revenue-generating needs - not for covering a business that consistently loses money, and not for personal expenses dressed up as business costs. If a loan will not help you earn more than it costs, it is the wrong tool. The right question is always: will this money generate more than the repayment?

Match the tenor to your cash cycle

Borrow over a period that matches how quickly the money will come back. If you are buying stock you expect to sell within a month, a one-month loan keeps interest costs low. If you are funding a project that pays out over a quarter, a three to six month tenor smooths the repayment. Prodigy Bank lets you choose your tenor and shows the full repayment schedule before you accept, so you can pick the option your cash flow can comfortably carry.