Business Loans Are Sexy

Lending Is Easy™

Jan 30, 2026

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When you subscribe to Notadeepdive, you’re joining a few long-running, ~~slightly unhealthy~~ obsessions. Jumia is the most durable one. Lately, however, we’ve added a new one to the list: the hubris of the phrase “lending is easy.”

Welcome.

We broadly point out that lending is, theoretically, extremely simple. First, you find a source of cheap money. Then, you lend that money to people who need it and earn interest. For simplicity, we’ll ignore prudential guidelines and the inconvenient fact that depositors actually want their money back.

What complicates lending is the pesky business of repayments.

When you lend to individuals, a.k.a retail lending, you either perform sophistication (“big data,” “AI,” “proprietary decisioning”) or iteration (“we’ll lend small, learn fast, tighten the screws”).

The audience for this performance is rarely the borrower. It’s for investors, the media, your board, and a need to feel like you aren’t just doing boring, old-fashioned banking. Both approaches share a common destination: you will take losses. You will pay for lessons. To survive, your system needs to improve faster than your losses compound.

There’s an upside to the brutality of retail lending: you can’t pretend for long. When defaults stack up, it forces clarity.

Take Kuda’s early overdraft product. It paused months after launch~~—a sure sign it had chopped cane in the process~~. I haven’t used the new and improved version, but I’m certain it has better guardrails. Guardrails may not be fun, but they keep the business alive.

Business loans, on the other hand, enjoy a much sexier reputation.

Part of that is storytelling. Part of it is also visibility: retail lending failures are loud and constant; business lending failures tend to surface later, in court, when things have already gone spectacularly wrong.

And then there’s the Big Pitch.

When Paystack expanded into business lending, the narrative was glowing:

“Through its payment arm, Paystack already sees merchants’ revenue flows, allowing it to underwrite credit using live data rather than static statements, shortening approval times and tightening risk models.”

It is very easy to believe payment data is the silver bullet. The logic tracks: if your payments flows pass through my rails, I know your cash flow. If I know your cash flow, I can lend against it.

Payment data is genuinely useful, especially forjudging capacity to repay and velocity.

But the capacity to repay is only the front half of lending.

The back half is priority (will you repay me?), incentives (what changes under stress?), enforcement (what can I do when things go bad?), concentration (how much of my book is you?), and condition (what about the occasionally volatile economy?).

Payment data improves underwriting, but it does not cancel human behaviour.

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There are additional bits to consider:

The Incomplete Picture: Even as a payments partner, you only see what the merchant wants you to see. A business might route its inflows through your POS to secure a loan, while simultaneously routing aggressive expenses or debts through a different bank account you can’t see. They may very well not show you everything or have other payment channels you don’t have exposure to.
Adverse Selection: They’re incentivised to show you a picture good enough to get the loans they need. You need to remember that they have a lot of smart finance people sitting around. You can get played.
The Character and Governance Gap: Seeing their cashflows does not account for poor corporate governance or a shaky business model. Cashflow data is often a lagging indicator of character. Seeing money move doesn’t tell you if the founder is using the company as a personal piggy bank or if the business model is fundamentally fighting for oxygen.

Here’s from a Notadeepdive newsletter from December 21:

“Two weeks ago, Moniepoint’s microfinance went to court seeking an order restraining (practically) every bank from releasing or dealing with funds held by Retail Supermarkets Limited (owners of the ShopRite franchise in Nigeria) so it could recover a ₦2.4bn working capital facility owed to it.”

By Friday morning, one publication claimed that Moniepoint had sued B2B e-commerce startup Alerzo over a ₦4.3 billion working capital loan. It’s a massive figure that brings the ideas I glossed over before into focus.

If a borrower is under pressure, they prioritise other obligations, shift volume to other channels, or simply decide that your facility is something they’ll sort out later. The picture you relied on doesn’t have to be fake to become unhelpful. It just has to become incomplete at the wrong time.

Businesses have smart finance people who understand how credit decisioning works. They understand what to emphasise, what to downplay, what to time, and what to present as temporary.

Sometimes the tricks are crude; sometimes they’re sophisticated. In invoice-backed lending, for example, businesses can double-pledge an invoice, i.e., use the same invoice to secure multiple loans.

Additionally, revenue flows are not profit or margins. They don’t tell you whether working capital is behaving. They don’t tell you whether a business is one input shock away from turning strong turnover into struggle.

Ultimately, there’s no big moral lesson here. Oh, wait, there is. Lending is easy.

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