Pay day loans have been sought by many people struggling to pay bills and debts until their wages are credited. Now, businesses that are struggling financially can apply for a loan of up to £10,000 that can be in their bank account within 15 minutes.
All sounds great, doesn’t it – instant cash in your bank account to pay wages, buy more stock and also treat the Mrs to those new shoes she has been after for a while! But the money will need paying back at some point within a year, depending on the terms of your loan, and Wonga is famous for its stratospherically high interest rates.
For example, if a business borrowed money on Wonga’s pay day loan rate of 4,200 per cent, then the commercial property company would owe thousands of pounds in interest alone. How is an already struggling company likely to pay that amount of debt off within a year? They would be lucky to scratch the surface.
Speaking of the Wonga for business loans, Errol Damelin, Founder and Chief Executive Officer, stated: “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.”
However, according to Wonga, the terms for the business loans will be different from the loans to individuals. Re-payments by firms will be paid weekly and interest will be calculated depending on the risk involved. Wonga state that weekly interest can start from 0.3 per cent.
With the announcement of two banks refusing to lend to commercial property businesses, it is no wonder that people turn to companies like Wonga and loan sharks to gain access to desperately needed cash to try and make their business a success.
Speaking of the lending issue, Errol added: “Having been involved in building a number of companies, I have first-hand experience of how important access to credit can be in staying afloat and growing.
“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.”
To help ensure that a business can pay back the loan, initially loans will only be made available to companies that have been trading for over three years and have sales of over £20,000.
Would you use Wonga’s business loan service for an instant loan if you could not get a loan from a bank?
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