Mountain Top University Library

ABSTRACT
Small and Medium Enterprises (SMEs) are regarded by many as the backbone of every
country’s economy. Most of the large corporations of today were developed from SMEs.
Small and Medium Enterprises do not only serve as the backbone of a county’s economy but
also support the larger corporations in a form of sub-contractors, suppliers of manufacturing
materials or customers. SMEs in Nigeria have a lot of difficulties when accessing loan from
financial institutions and financial institutions too have issues granting loan to SMEs.
The major objective of this study is to find out the numerous factors that affect availability of
loan and challenges faced by SMEs in accessing available loan from financial institutions.
For the purpose of this study, descriptive survey design was adopted with the use of
questionnaires as data collection tool. Data collected was analyzed through Person’s Moment
Correlation Coefficient with the aid of statistical package for social sciences (SPSS) version
22.0. Study showed that small and medium enterprises do face a lot of challenges when
accessing funds from the formal financial institutions in Nigeria. It is also revealed that
financial institutions consider the SME sector as a risky industry thereby offering them credit
facilities at a high interest rate as compared to the larger corporations. Finally the study
recommended SMEs should ensure that the enterprise is registered and that all registrations
and licenses are renewed periodically. They should incorporate good financial management
practices such as preparation and usage of financial information in their operations.
SMEs should participate actively in trade fairs and industry events for both showcasing their
products or services and for enhancing their financial awareness.