The firm, which has been heavily criticised for lending to individuals at an APR of 4,214 per cent, claims business loans will be on offer at rates starting at 17 per cent APR.
Loans of £3,000 to £10,000 will be available for terms of between one and 52 weeks. The cost, including a variable application fee and interest, starts at 0.3 per cent a week and the loans must be repaid in weekly instalments.
Peter Ewen, managing director of ABN AMRO Commercial Finance says that while short-term loans can certainly plug funding gaps, they can also be unsustainable and expensive.
‘Wonga hopes to fill a gap in the funding market that may not even be there. Evidence suggests that businesses are wary of seeking additional borrowing and that it is demand rather than supply that has reduced. In that case, time will tell whether this new offering from Wonga will have much of an impact.’
Christopher Shaw, CEO of alternative finance specialists, Platform Black, adds that Wonga moving into business loans is a sign of ‘how desperate things have become for the UK’s SMEs’.
He says, ‘Taking on sky-high APRs in order to meet immediate cash flow requirements is about the worst thing you can do as a business.’
Shaw criticises Wonga’s position that it is inappropriate to look at the APR, as the loans are often taken out for as little as a week noting that the longest term is 52 weeks.
‘The UK’s SMEs need fuel to restart the economy, but not at these prices. Effective alternative finance channels exist already for SMEs without having to go to these extremes.’
