This study, Challenges of Financing Small and Medium Scale Enterprises (SMEs) in Nigeria was undertaken to find out the challenges that funding institutions encounter in their bid to extend credit facilities to the SME sub-sector of the in Nigerian economy. It is a general consensus that SMEs play a key role in transition and developing countries as they account for more than 90% of all firms outside the agricultural sector, constitute a major source of employment and generate significant domestic and export earnings. Studies however show that funding for small and medium enterprises (SMEs) has, for many years, been the bane of growth of this sector of the economy.Access to finance by SME has been a key topic of research by developmental finance organizations and current research in the developing world suggests that SMEs face greater obstacles to accessing finance than larger firms. The study thus identified the various challenges that funding institutions encounter in funding the SME sub-sector.