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| Wonga launches business loans service | Wonga launches business loans service |
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| The high-cost lender Wonga has launched a business loans service, promising to make funds available within 15 minutes of an application. | The high-cost lender Wonga has launched a business loans service, promising to make funds available within 15 minutes of an application. |
| The company has been heavily criticised for lending to individuals at an APR of 4,214%, but claims business loans will be at rates closer to 17%. | The company has been heavily criticised for lending to individuals at an APR of 4,214%, but claims business loans will be at rates closer to 17%. |
| Loans of between £3,000 and £10,000 will be available for terms of between one and 52 weeks. The cost, including a variable application fee and interest, will start at 0.3% a week and the loans will have to be repaid in weekly instalments. | Loans of between £3,000 and £10,000 will be available for terms of between one and 52 weeks. The cost, including a variable application fee and interest, will start at 0.3% a week and the loans will have to be repaid in weekly instalments. |
| Wonga is entering the business loan market at a time when firms are struggling to raise funding. Research in November by the Federation of Small Business showed that 57% of firms suffered late payment by clients but between 2007 and 2010 there was a 24% fall in successful loan applications. | Wonga is entering the business loan market at a time when firms are struggling to raise funding. Research in November by the Federation of Small Business showed that 57% of firms suffered late payment by clients but between 2007 and 2010 there was a 24% fall in successful loan applications. |
| More than half of small businesses that applied for an overdraft and 43% of those that applied for a loan for the first time last year were rejected. | More than half of small businesses that applied for an overdraft and 43% of those that applied for a loan for the first time last year were rejected. |
| Russell Gould, head of Wonga for business, said: "The product is targeted at businesses which have cash coming in every week, rather than two or three times a year." | Russell Gould, head of Wonga for business, said: "The product is targeted at businesses which have cash coming in every week, rather than two or three times a year." |
| Wonga said its short-term loans were different to those provided by mainstream banks, and were expected to sit alongside traditional bank overdrafts, bank loans and invoice discounting products, providing alternative or additional funding. | |
| "Young, entrepreneurial companies represent our best hope of a recovery, yet many are struggling because they can't get quick access to the credit that they need to cope with everyday challenges, such as late payment by partners or customers. Others can use funds for great opportunities like getting a discount by paying cash, or buying in bulk, and then repaying early when the goods are sold," said Errol Damelin, Wonga's founder and chief executive. | "Young, entrepreneurial companies represent our best hope of a recovery, yet many are struggling because they can't get quick access to the credit that they need to cope with everyday challenges, such as late payment by partners or customers. Others can use funds for great opportunities like getting a discount by paying cash, or buying in bulk, and then repaying early when the goods are sold," said Errol Damelin, Wonga's founder and chief executive. |
| The service will initially be available to limited liability companies and limited liability partnerships that have been established for three years or more and have sales in excess of £20,000 a month, and Wonga said it expected to broaden the application criteria and the loan parameters over time. | The service will initially be available to limited liability companies and limited liability partnerships that have been established for three years or more and have sales in excess of £20,000 a month, and Wonga said it expected to broaden the application criteria and the loan parameters over time. |
| It said a clear cost of repayment would be calculated for approved applicants before they committed. In one example it provided, a company is lent £7,500 for 16 weeks, paying £360 in interest, equivalent to 0.3% a week, and an application fee of £75, or 1%. The weekly repayments are £495.94, with a total repayable of £7,935. | |
| A company that is deemed more risky will pay more. In a second example, a company borrows £6,000 for 12 weeks, paying interest at 0.8% a week and an application fee of £120. The weekly repayment is £558 and the total repayable £6,696. | A company that is deemed more risky will pay more. In a second example, a company borrows £6,000 for 12 weeks, paying interest at 0.8% a week and an application fee of £120. The weekly repayment is £558 and the total repayable £6,696. |