Controversial “payday loan” company Wonga.com has started to offer loans to small businesses. Wonga will lend small business up to £10k for between a week and a year. The sum borrowed and the duration of the loan will determine the interest rate and terms. It is understood that interest rates will start at 17% APR.
Payday Loan companies such as Wonga have been criticised for profiting from vulnerable people in dire straits with reported APR rates as high as 4214%. Among the critics are Labour MP Stella Creasy who is seeking parliamentary approval to cap the interest rates they charge.
Wonga’s move into the SME market highlights the ongoing difficulties many businesses are still having in finding finance from traditional sources like banks. For many small businesses, cashflow remains the most critical operational problem.
