Wonga.com launches new loans service for small businesses

A payday lender today launched a service that will offer small businesses access to loans of between £3,000 and £10,000 in as little as 15 minutes.

Wonga.com said its entry into the business market will help those companies waiting for longer-term funding or if big invoices have been paid late.

Loans will be for a term of between one and 52 weeks, with borrowings repaid on a weekly basis on interest starting from 0.3% a week.

It is the latest growth in a short-term loans sector that has mushroomed since the arrival of new players from the United States.

However, the industry has been accused of preying on those in financial trouble, prompting the Office of Fair Trading to investigate whether some firms target people unsuitable for credit and are rolling over loans so that the charges escalate and they become unaffordable.

Payday lenders argue that customers are happy with the service and that they fill a gap in a market left by Britain's mainstream banks.

Wonga said recent statistics showed 55% of small businesses which applied for an overdraft for the first time last year were turned down while 43% of first-time loan applications were also rejected.

Errol Damelin, who set up Wonga in 2007, said: "All our research and speaking to other entrepreneurs tells us that small business lending is broken and we intend to use our platform to offer a real alternative."

Wonga uses automated real-time technology which means the application process takes around 12 minutes.

Mr Damelin added: "Money will be in approved firms' account as fast as their banks will allow, typically between 15 minutes and 24 hours, although we'll only be helping companies that our technology identifies as being able to afford the loan they are applying for."

PA