A supplier or contractor who has already won a government or corporate purchase order can fund its execution without pledging collateral. LPO/Contract Financing advances working capital against the confirmed order itself, using domiciliation of the buyer's payment as security instead of a physical asset. This matters in Nigeria specifically, because government and large corporate buyers are widely known to not pay on time, even after a contract is signed and work has been approved. 

That is not an exaggeration. Nigeria's Minister of Finance, Taiwo Oyedele, told contractor representatives at a Ministry of Finance meeting in May 2026 that "resolving these obligations is important not just for contractors, but for confidence in government, jobs, business continuity, and economic stability," as reported by Premium Times on May 7, 2026. The scale of the backlog is significant: the Federal Government budgeted ₦1.7 trillion in the 2026 Appropriation Bill specifically to settle outstanding debts owed to contractors, according to Economic Confidential. If suppliers at that scale are waiting on government payment, a small or mid-sized contractor should expect the same delay, and plan financing around it rather than around it. 

Why Winning the Contract Is Only Half the Battle 

A signed local purchase order or awarded contract proves your business earned the work. It does not put cash in your account. Between winning the order and delivering it, you still need to buy materials, pay for labour, and move goods or complete work, all before you get your payment. For suppliers and contractors working with government agencies or large corporates, that gap is often measured in months, not weeks. 

This is the exact problem LPO and Contract Financing is built for. Instead of waiting on your own cash reserves or turning down orders you cannot afford to execute upfront, you borrow against the order itself and repay once your buyer pays. 

LPO Financing, Factoring, and Discounting: Getting the Terms Right 

Nigerian suppliers researching this space run into a mix of terms, factoring, discounting, LPO financing, contract financing, often used loosely. It helps to know what each actually means before you apply for anything. 

Invoice factoring: the financier takes over your sales ledger and collects payment directly from your buyer. Your buyer knows the arrangement exists. 

Invoice discounting: you keep managing collections yourself, and the arrangement is typically confidential from your buyer's side. As Trade Finance Global puts it, with invoice discounting "the business manages the sales ledger and collects payments as normal from the end customer," while factoring makes the financier "responsible for the business's sales ledger and collecting the debts off the customer." 

LPO/contract financing: a related but distinct structure. Instead of advancing against an invoice already raised, it advances against a confirmed purchase order or signed contract, before delivery is even complete. It borrows the same logic as factoring and discounting, get paid on the strength of a future receivable, but applies it earlier in the order cycle, at the point you win the work rather than the point you are expecting payment for the completed order or project. 

What "Domiciliation of Proceeds" Actually Means 

Domiciliation of proceeds is the mechanism that replaces collateral on this facility. Instead of pledging a fixed asset, you and your buyer agree that payment for the order is routed through a designated account tied to the financing, so the lender is repaid directly once your buyer settles. Nigerian finance companies operate this kind of security arrangement under the framework set out in the Central Bank of Nigeria's Revised Guidelines for Finance Companies in Nigeria, which governs how licensed finance companies structure and secure this type of lending. 

In practice, this means your day-to-day relationship with your buyer does not change. They pay as agreed. The difference is where that payment lands first. 

The Exact Process, Step by Step 

This is how LPO and Contract Financing works on Credit Direct Business, taken directly from the product's own application flow: 

1. Apply online and select LPO and Contract Financing. 

2. Upload your signed contract or purchase order, along with your cost breakdown and buyer domiciliation letter. 

3. Our team reviews the order or contract details and your business profile. 

4. Accept your offer and receive funds to execute, with repayment coming from your buyer's payment on delivery. 

What You'll Need to Apply 

• CAC certificate 

• Director's ID & BVN 

• Twelve months' bank statements 

• A recent utility bill 

• Your signed awarded contract or purchase order 

• An invoice for the goods and a cost breakdown 

• A buyer domiciliation letter 

Frequently Asked Questions 

Do I need collateral for LPO or contract financing? 

No. This facility uses domiciliation of proceeds as its primary control, meaning your buyer's payment routes to cover repayment, rather than requiring traditional collateral. 

What if my buyer, especially a government agency, pays late? 

Speak with your relationship manager as early as possible if a delay is expected, so your repayment plan can be adjusted accordingly. Given how common late payment is on government-linked contracts, as the ₦1.7 trillion 2026 budget allocation for contractor arrears makes clear, this is a conversation worth having proactively rather than after a due date has passed. 

Is LPO financing the same as invoice factoring? 

Not quite. Factoring and discounting both advance cash against an invoice you have already raised. LPO and contract financing advances cash against a confirmed order or contract, earlier in the cycle, before you have necessarily invoiced for the work. 

Can a small supplier use this, or only large contractors? 

Any business with a signed award, from a small supplier fulfilling a local purchase order to a contractor executing a larger project, can apply, provided the required documentation is in place. 

You Already Won the Order. Now Fund It 

A confirmed purchase order or signed contract is proof you can win the work. It should not also be the reason you cannot afford to deliver it. If you are holding an order and waiting on the capital to execute it, that gap has a direct fix. 

Apply for LPO/Contract Financing today, and for a full comparison of every business loan available to Nigerian SMEs, see our complete guide to business loans in Nigeria.