AI agents for business finance: what they can and can't do
What AI agents can do in bookkeeping, close, collections and compliance today, where a person must stay in charge, and how to judge a product.
The short answer
Contract finance is a short-term facility that pays part of the cost of carrying out a signed contract or purchase order, repaid when the client pays. Lenders usually require the contract proceeds to be domiciled, meaning the client pays into an account at the lender, and they check the client's ability to pay. Banks may pair it with an advance payment guarantee or performance bond.
Many Nigerian contractors and suppliers win work they cannot afford to start. The client pays on completion or in stages, but materials, labour and transport must be paid for first. Contract finance exists to bridge that gap. It is offered by commercial banks, some microfinance banks and specialist finance companies, and is sometimes called LPO financing when it is based on a local purchase order.
How contract finance works
- You win a contract or receive a purchase order from a client.
- You apply to a lender with the contract and a cost breakdown.
- The lender checks the client, the contract terms and your record of delivery.
- The client confirms the contract and agrees, usually in writing, to pay into an account at the lender. This is domiciliation of proceeds.
- The lender pays part of the cost, often directly to your suppliers rather than to you.
- You deliver. The client pays into the domiciled account, the lender deducts its loan, interest and fees, and releases the balance to you.
Why domiciliation matters so much
The lender's real security in contract finance is the client's payment, not your assets. Domiciliation makes sure that payment passes through the lender first. Lenders usually want a letter from the client, signed by an authorised officer, acknowledging that payment will go only to the stated account and cannot be redirected without the lender's consent. Government clients and large companies are preferred because their payment risk is easier to judge. A contract with a small client who pays late is hard to finance.
How banks combine guarantees with contract finance
Clients often release an advance only against a bank guarantee. Access Bank, for example, describes its advance payment guarantee as a way for contractors, suppliers and developers to secure release of an advance payment of the contract value, in part or full (as at Oct 2026). It also issues bid bonds and performance bonds. A typical structure is: a bid bond to tender, a performance bond on award, an advance payment guarantee to release the advance, and contract finance for the rest of the cost. See bank guarantees in Nigeria.
Documents lenders usually ask for
- The signed contract, award letter or purchase order.
- A domiciliation letter or acknowledgement from the client.
- A cost breakdown, supplier quotations or pro forma invoices.
- CAC documents, a board resolution and directors' IDs and BVNs.
- Business bank statements and recent accounts.
- Evidence of similar contracts completed.
- For some lenders, a personal guarantee or additional collateral.
What lenders look at in the client
Because repayment depends on the client, lenders often spend more time assessing the client than the borrower. They look at:
- The client's payment record. Does it pay on time, and has the lender financed contracts with it before?
- Funding. For government work, whether the contract is in an approved budget and whether funds have been released.
- Contract terms. Payment milestones, retention, penalties for late delivery and whether the contract can be assigned.
- Your capacity. Whether you have delivered contracts of this size and type before, and whether your suppliers are reliable.
A strong client can make a small, young supplier financeable; a weak client can make even an established supplier unattractive.
Worked example (illustrative)
A supplier wins a ₦12,000,000 order with delivery costs of ₦8,000,000. A lender agrees to fund 70% of the cost, ₦5,600,000, for 90 days at an example rate of 3% a month on the amount drawn, plus a 1% fee. These are example figures, not any lender's terms.
- Interest for 90 days
- ₦5,600,000 x 3% x 3 = ₦504,000
- Fee at 1%
- ₦56,000
- Total finance cost
- ₦560,000
- Supplier's own cash contribution
- ₦2,400,000
- Margin before finance
- ₦4,000,000
- Margin after finance
- ₦3,440,000
If the client pays at day 150 instead of day 90, extra interest at the same rate is ₦336,000 for two more months. Late payment by the client is the biggest risk in contract finance, so price it into your bid. Ask the lender whether the rate steps up after the agreed tenure, and build a cushion of at least a month into your own cash plan.
Fintech and specialist lenders
Outside the banks, some finance companies and fintech lenders offer purchase order and invoice finance, often faster and with less paperwork but at a higher monthly price. The same checks apply: who regulates the lender, how interest is charged, and whether payment must be domiciled with them.
What to check first
- Is the client likely to sign a domiciliation letter? If not, most lenders will not proceed.
- What share of cost will the lender fund, and will it pay your suppliers directly?
- How is interest charged if the client pays late?
- Can the contract be assigned or domiciled under its own terms?
Related: LPO financing and invoice discounting.
Where Pryme fits
Pryme does not provide contract finance. Contractors can track contract receipts and supplier payments in a Pryme Business Account, raise invoices with Invoicing, and have the Finance agent prepare a cost summary for review.
Questions people ask
What is contract financing in Nigeria?
A short-term facility that pays part of the cost of delivering a signed contract or purchase order, repaid from the client's payment, which is usually domiciled with the lender.
What is domiciliation of contract proceeds?
An arrangement, usually confirmed in writing by your client, that payment for the contract will be made only into a named account at the lender, so the lender is repaid first.
Can I get a loan with a government contract award letter?
Some lenders finance government contracts, but they usually want the full contract, evidence of funding or budget, and a domiciliation arrangement, not just an award letter.
Do banks give contract finance to new businesses?
It is harder. Lenders look for a record of similar contracts. A new business may need more equity, a guarantee or collateral.
Sources
- Access Bank: Bonds and Guarantees · accessed Oct 2026
- Access Bank: Vehicle Finance · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.