Tax Clearance and Corporate Borrowing: A Win-Win Proposition for Nigerian Businesses.

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In the dynamic world of Nigerian business, access to credit is often the catalyst for growth, innovation and sustainability. However, what many businesses overlook is the symbiotic relationship between tax clearance and corporate borrowing. This article explores how tax clearance compliance can serve as a win-win proposition, benefitting both Nigerian businesses and lenders in the realm of corporate borrowing.

The Interplay of Corporate Borrowing and Tax Clearance:

Corporate borrowing, in the form of loans, lines of credit or bonds, is a common practice for businesses seeking financial support for various purposes, including expansion, working capital, and strategic investments. Lenders, whether banks, financial institutions or investors, play a pivotal role in providing businesses with the necessary funds.

Tax clearance compliance, on the other hand, is a demonstration of a company’s adherence to tax laws and regulations. It encompasses timely tax payments, transparent financial practices and ethical fiscal responsibility. The interplay between these two elements is where the win-win proposition emerges.

Benefits for Nigerian Businesses:

  1. Enhanced Creditworthiness: Maintaining a clean tax clearance record enhances a business’s creditworthiness. Lenders are more inclined to offer favorable borrowing terms, such as lower interest rates and higher credit limits, to businesses with a strong track record of tax compliance.
  2. Access to Diverse Financing: With a reputable tax clearance record, businesses can access a broader range of financing options, including commercial loans, revolving credit facilities and even bonds. This diversification of funding sources can better meet the business’s financial needs.
  3. Reduced Borrowing Costs: Favorable borrowing terms resulting from tax clearance compliance translate into lower borrowing costs. Reduced interest rates and fees allow businesses to allocate funds more efficiently and reinvest in growth opportunities.
  4. Credibility with Investors: Beyond traditional lenders, investors, and equity partners also value tax clearance compliance. It demonstrates a commitment to ethical financial practices, which can attract equity investments and partnerships for business expansion.

Benefits for Lenders and Investors:

  1. Reduced Default Risk: Lenders and investors face lower default risk when dealing with businesses that prioritize tax clearance. Compliance with tax regulations signifies a strong financial foundation and a reduced likelihood of financial instability.
  2. Enhanced Due Diligence: Tax clearance records simplify the due diligence process for lenders and investors. They provide a clear and transparent view of the business’s financial health and fiscal responsibility, streamlining the decision-making process.
  3. Confidence in Repayment: Lenders and investors have greater confidence in a business’s ability to repay borrowed funds when they observe tax compliance. This confidence can lead to more substantial financing opportunities and partnerships.


Tax clearance compliance is a powerful tool that benefits both Nigerian businesses and their financial partners. It enhances a company’s creditworthiness, grants access to diverse financing options, reduces borrowing costs and attracts investments. For lenders and investors, tax clearance records reduce default risk, simplify due diligence and instill confidence in repayment.

In the dynamic landscape of Nigerian business, where access to credit is often a determinant of success, the win-win proposition of tax clearance and corporate borrowing cannot be overstated. By prioritizing tax compliance and ethical fiscal responsibility, businesses can position themselves for growth and sustainability while simultaneously building trust and confidence with lenders and investors.

For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at Lagos, Ogun state Nigeria offices, You can also reach us via WhatsApp at +2348038460036.