Cascador and Sterling launch $200 million fund to derisk startup loans

Nigeria's Cascador platform and Sterling Bank have created a $200 million fund to assist small businesses and startups by sharing the risk of loan defaults. The SME Credit Backstop can secure up to $1 billion in loans at any given time. Instead of directly lending, the fund will guarantee part of the bank's potential losses if a borrower fails to repay, making it easier for lenders to offer credit to potentially risky companies.

Businesses can be nominated by venture capital firms or studios that already support them. The fund uses AI-powered underwriting to assess a business's readiness for debt. If approved, the fund will cover a portion of the bank's potential loss if the loan defaults. According to World Bank data, only about one in five Nigerian businesses had a bank loan in 2025, compared to 22% across Sub-Saharan Africa and 36% globally.

Banks often view small businesses and startups as risky due to lack of collateral, making it difficult for them to access the necessary funding to scale and create jobs. With this new fund, lenders can share the risk and use community trust as a signal to lend to these businesses. Sterling Bank will decide whether to lend after conducting its own checks, while the bank will disburse approved loans, collect repayments, and pursue defaulted borrowers.

The fund targets borrowers with up to $250,000 in local currency loans, with the potential to expand to $1 million. The partners plan to raise the backstop capital from philanthropic funders, impact investors, and development finance institutions. The $200 million stated size represents the fund's size, while $1 billion signifies the lending capacity it aims to support.