Small and Medium Enterprises (SMEs) have been recognised as critical to economic growth and poverty reduction in developing countries. Shipping businesses represent significant portion of SMEs and have dominated the private sector investments in developed nations. Existing studies have identified funding as a major constraint to SMEs in developing countries. The banking institution statutorily positioned to assist in SMEs funding in these countries are constrained by a host of factors. This paper investigates the factors affecting banks financing and development of SMEs in the maritime shipping sector of Nigeria. Data for this study were obtained from Likert scaled questionnaires which were administered to a randomly selected sample of commercial banks with shipping portfolios. Evidence from data analysis using ordered logit regression model indicates that; risk perception attitude of banks, information constraints on SMEs, lack of skills in SMEs financing and unfavourable regulatory environment are significant factors affecting banks investments in SMEs in Nigeria’s shipping sector. Policy implications of the findings are discussed.