Payday lender launches loans service to help small companies

A PAYDAY lender has launched a service offering 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 per cent 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.

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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, which was set up by Errol Damelin in 2007, uses automated real-time technology which means the application process takes around 12 minutes.

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