I’m sure many of you will have heard the latest from Wonga, this week introducing a business loan service. The aim is to provide a fast alternative to traditional finance options for UK SMEs. Applications are said to take less than 15 minutes for a loan that lasts anywhere between two weeks and one year. I’m not surprised by Wonga’s decision to branch out into providing business loans, after seeing many businesses struggle to gain the funding they require to start or grow their business. Perhaps this merely highlights just how difficult it is to secure financial support from any of the UK’s leading banks. It could be hard to find a service that’s quicker and it seems many SMEs have already taken Wonga up on its latest offering.

Cash flow is one of the hardest aspects of business, particularly for SMEs during an era of economic uncertainty. I guess the trick here is to tread carefully; loans chosen in a hurry should always be approached with caution. An obvious point maybe, but something that rings true with this type of loan. Despite being clearly advertised as brief financial respite to only help with immediate cash flow problems, without being able to accurately predict business conditions, it is a very risky strategy for an SME to take.

Any decision with regards to finance requires serious consideration, and the temptation to rush into arranging a loan without mapping out exactly when and how it will be paid back, could prove too much for some SMEs. Although confidence in the sector is reported to be at a high level, a certain amount of conservativeness is required if you are to protect your business. Obtaining advice and having a conversation with someone who can get to know your business, and the risks associated with is likely to lead to a better, more informed decision when selecting financial support. It may be that a short-term loan is exactly what your business needs, but the analysis of its effects – both possible and actual – is a must.

Another important consideration is existing finance agreements. I would always advise SMEs to think carefully about any current loans before adding another or approaching a new provider. Businesses should consider looking at other ways to finance their business – eg negotiate extended credit terms with suppliers or move to a ‘pay as you go’ model offered by other suppliers. There are plenty of options so it’s important for SMEs not to feel pressurised into make rash decisions that could be costly to future business success. That’s not to say Wonga for business is a purely negative service. I have no doubt it will provide an element of hope to those businesses struggling to obtain finance using more traditional routes.

SMEs, by their very nature, are agile in their ability to adapt to changing economic conditions which would suggest they sit perfectly with this new loan service. Whilst I don’t disagree with providing another opportunity for SMEs to explore when it comes to accessing finance, I will be interested to see if the scheme continues to be so well received and, equally, how SMEs are using the extra cash.