Wonga for Business: A Review

Last post: Mar 6, 2013

*** Please note: In October 2013, Wonga for Business rebranded as Everline.com The facts in this article remain correct for Everline.com even though they refer to Wonga for Business ****

*** Please note: In October 2013, Wonga for Business rebranded as Everline.com The facts in this article remain correct for Everline.com even though they refer to Wonga for Business ****

As banks continue to be reticent about lending to UK SMEs it is good to see that some companies are stepping up to fill this void with alternative sources of finance. Very often a business has a short term cash flow squeeze and they don't wish to apply for a formal loan and something quicker and more convenient is required. In this capacity we are pleased to be working with Wonga for Business.

 Rightly or wrongly, Wonga's personal payday loan business has been the kicking-boy for the payday loan industry in general. It therefore raised some eyebrows when they moved into the SME sector and announced they would be providing short term finance to this sector. But despite what the Boo-boys may think, we believe that the Wonga for Business offering has merit and, like all types of finance, if used appropriately it can be beneficial to a business.

First let's review what Wonga for Business offer: quite simply they will do loans of up to £50,000 for limited companies or LLPs or up to £10,000 for sole traders (min loan £3,000 for all) for terms up to 52 weeks and they charge 0.5% per week plus an application fee of 3%. The entire process happens online to enable a speedy service with payouts within 1 business day and there are also no Early Repayment Charges if you pay the loan off ahead of schedule. To be eligible for such a loan the business applying must meet the following criteria:

  • They must be an actively trading UK registered Limited Liability company (or Limited Liability partnership) trading for 2 years OR a sole trader that has been trading for at least 2 years and is listed in a business directory
  • All Directors/Partners must be over 18 and UK residents
  • The Directors/Partners of the business must be prepare to offer a personal guarantee on the debt
  • The business must have a debit card attached to the main business bank account (if you don't have one it takes just a few days to order one from your bank but it is a necessity for a loan)
  • All Directors/Partners must have access to the company's online bank account
  • All Directors/Partners must have an active UK bank account with a debit card attached to it
  • The company and its Directors/Partners must pass a credit check
  • The company must have sufficient cash flow/profit to meet the proposed monthly payments
  • The applicant cannot be a Not for Profit Organisation (NPO)

Repayments are made by calculating the total interest and fees chargeable, adding it to the loan and dividing this up in to equal weekly payments over the term requested. All repayments are made via direct debit from the business account and begin 7 days after the initial drawdown of the loan.

So is this a good service? The positives we thing are the speed and ease of the process - it's a few short forms taking no more than 15 minutes and you can have the money within 1 business day. Yes, there may be some unconventional criteria  (e.g. the requirement to have a debit card which, if you don't have one can be ordered from your bank in a couple of days and is used to collect payments) but it is important to remember that it is not unusual that an "alternative" source of finance comes with "alternative" rules and procedures. None of these requests are particularly onerous and to our minds seem worth it if it helps the business raise unsecured finance quickly.

And of course, when conducting a Wonga for Business review the main thing most people tend to look at is the interest rate: how does the headline rate of 0.5% per week (26% AER) compare with other forms of unsecured finance? To be fair, it's not cheap but it's also not ridiculously expensive as many critics of Wonga for Business would like to have us believe. For very short term loans of a few weeks where the application fee has a bigger impact it is expensive, yes, but extend the loan past 3-6 months and the rates are more comparable with other forms of unsecured finance such as credit cards (20-30% APR) and Merchant Cash Advances (25-35% per drawdown). The one notable form of unsecured finance that may be cheaper is a peer-to-peer commercial loan but this is usually for a minimum of 1 year, has a more intensive application procedure and may not suit for short term finance.

In summary then we'll go back to what we said at the start: like all forms of finance, if it is used responsibly then it can be beneficial. This is unsecured finance and people very often make the mistake of comparing unsecured finance with secured forms, such as mortgage rates, and incorrectly inferring the unsecured loan rates are high. In this Wonga for Business review we have looked at comparable forms of unsecured finance and found that the Wonga service is no more expensive (for longer loan periods) than many others. We therefore think it has its place as part of the finance available to UK SMEs.

If you have any further questions about Wonga for Business or about alternative options to finance your business you can call us on 01494 410125 or apply direct here Wonga for Business.