Partner Article

Wonga enters business loans market

Wonga, the high cost loan vendor, has announced plans for the launch of a new business loan service which will make funds available within 15 minutes of an application.

Loans worth between £3,000 and £10,000 will be available for between 1 and 52 weeks, and will include a variable application fee and interest starting at 0.3% a week.

While it is unclear how much the typical annual percentage rate (APR) will be, Wonga have received criticism for lending to individuals at an APR of 4,214%. They claim that business loans will have a starting rate of 17% APR.

Wonga’s entry into the business market is a controversial move at a time when thousands of businesses are struggling financially. Research by the Federation of Small Businesses indicated that between 2007 and 2010 there was a 24% fall in successful loan applications, and almost 1 in 6 had suffered due to late payments.

Almost half of firms applying for loans, and over half applying for an overdraft for the first time last year were rejected.

The Government has come under fire from the shadow business secretary Chuka Umunna, who has criticised the Government for failing to encourage banks to do more to encourage SME lending.

He commented: “That SMEs are being driven into the hands of Wonga is a damning indictment of the government’s failure to get finance to successful SMEs.”

The service will initially be available to limited liability companies and partnerships that have been established for 3 years or more, and have sales in excess of £20,00 per month. Wonga expects to broaden the application criteria and loan parameters in the future.

This was posted in Bdaily's Members' News section by Ruth Mitchell .