By Ayoola Adeola, Managing Director, CardinalStone Finance
One of the most common challenges observed among Chief Financial Officers (CFOs) and business owners across Nigeria is not business performance, but misaligned financing. Many companies secure funding only to find that repayment begins before the underlying investment has had time to generate returns. A manufacturer that requires 9 months to ramp up a production line is financed with a 6-month facility. A logistics company expanding its fleet to service a major contract is expected to repay before contract revenues fully materialise. In these situations, capital is available, but the structure works against the business rather than supporting it.
This misalignment is more than an inconvenience. It compresses cash flow, forces premature refinancing, and often compels businesses to slow down growth in order to meet near-term obligations. In many cases, the underlying business remains fundamentally sound, the constraint lies in how the financing was structured.
This is the gap private debt is designed to address. 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. The tenor is typically structured to align with the borrower’s investment cycle and cash flow profile. Repayment aligns with cash flow rather than fixed timelines. Structures are built around how the business generates revenue, not just how credit is traditionally extended. For growth-stage Nigerian businesses operating in capital-intensive sectors, this distinction is critical, it determines whether financing accelerates growth or constrains it.
The businesses that benefit most are those within Nigeria’s “missing middle” — companies that are operationally mature and commercially viable, yet remain underserved by traditional capital providers. This includes manufacturers expanding production capacity, SMEs scaling operations, healthcare providers developing facilities and expanding service delivery, utility and infrastructure companies executing contract-backed projects, and FMCG distributors managing inventory at scale. These businesses share common characteristics: established operations, tangible assets, strong growth potential and financing requirements that often extend beyond the scope of conventional lending structures.
Private debt addresses these financing needs through a range of bespoke financing instruments. Structured financing and private notes provide the right-fit capital required for business expansion, while receivables and inventory financing facilities enhance working capital efficiency. Contract-backed and offtake-linked structures leverage predictable cash flows from credible counterparties, thereby strengthening repayment visibility. In addition, mezzanine capital offers flexible growth funding solutions for businesses seeking expansion capital while avoiding immediate equity dilution.
Ultimately, the most suitable financing structure depends on the intended use of funds, the visibility and stability of cash flows, and the level of risk the business can sustainably absorb.
Despite the availability of these financing options, several common funding mistakes persist. Many businesses finance long-cycle expansion projects with short-term debt, thereby creating unnecessary
refinancing pressure and liquidity strain. Others assume foreign currency obligations without adequate FX hedging or natural currency buffers, exposing themselves to exchange rate volatility.
In some cases, businesses layer multiple facilities without a coordinated financing structure, resulting in repayment obligations that underlying cash flows cannot sustainably support. Across these situations, the underlying issue remains the same: financing decisions are often driven by availability of capital rather than strategic alignment with the business’ cash flow realities.
For Lenders, borrower readiness is now as important as business performance. Companies that consistently access private debt are often those with clear use of funds, disciplined and accurate financial reporting, and a credible path to cash generation. Capital providers assess not only the strength of the business, but also the character of the promoter(s), sustainability and strategic fit of the financing structure.
As Nigerian businesses enter increasingly capital-intensive phases of growth, financing decisions will play a defining role in long-term outcomes. The objective is not merely to access capital, but to structure it to reflect operational realities, protect cash flow, and support sustained expansion without compromising strategic control. This requires more than access to funding; it requires a financing partner with the expertise to align capital structure with business strategy. For businesses seeking to better align financing structures with growth plans and funding needs, further discussions can be directed to financing@cardinalstone.com.
