Cascador and Sterling Bank are seeking to unlock as much as $1 billion in loans for Nigerian startups and small businesses through a $200 million credit backstop fund, offering founders an alternative to selling equity to finance growth.

The fund will cover an agreed share of potential lender losses, encouraging banks to lend to businesses that lack conventional collateral. The partners plan to raise the backstop capital from impact investors, philanthropic organisations and development finance institutions.

Loans will initially be capped at $250,000 in local currency, with plans to increase the maximum to $1 million. Startups must be nominated by venture capital firms or startup studios, with artificial intelligence used to assess their readiness for debt financing. Sterling Bank will retain control of credit approval, disbursement and collections.

The initiative comes as African startups face a tighter equity funding environment and growing pressure to find alternatives to venture capital. In Nigeria, just 20% of businesses used a bank loan or credit line, compared with 36% globally, according to 2025 World Bank Enterprise Survey data cited by the partners.

The new facility expands a $2 million pilot launched by Cascador and Sterling Bank in 2025 to provide loans to companies in Cascador’s network. The programme included a $1.7 million debt facility for agritech startup Agriarche in June 2026.

Unlike the pilot, the new fund will accept referrals from external venture capital firms, potentially extending access to debt beyond Cascador’s alumni. Riverwell Platform Services Nigeria will manage borrower assessments and portfolio monitoring, while Sterling Bank remains responsible for lending operations.

The model seeks to use private and development capital to reduce banks’ exposure to startup lending, a segment where limited collateral and uncertain cash flows can make conventional credit difficult to obtain.