Controversial pay day loans company Wonga is targeting Britain's small business with the launch of a new service to give companies "an instant cash flow solution."
Wonga for Business will offer online loans to small businesses struggling to find cash elsewhere. The service is launching on bank holiday Monday, when they point out "high street banks are all closed for business."
The company, which offers representative APR of 4,214% for loans (and says its annual interest rate is 360%), claimed they were offering companies a real alternative.
CEO Errol Damelin said: “We are now ‘open for business’ and offering companies a fast, flexible and short-term alternative. The same technology that has already provided millions of small loans to individuals allows us to do this 24/7, on weekdays, weekends and even Bank Holidays."
According to Bank of England figures, lending to businesses fell by £4bn in February 2012, the biggest drop in nearly two years. Figures from the federation of Small Business from November 2011 show over half of small businesses believe credit is unaffordable.
Aiming to plug the gap in the market for small business lending, Wonga says companies can access loans within 12 minutes for between £3,000 and £10,000 - with weekly interest rates starting at 0.3%.
Labour MP Stella Creasy told The Huffington Post UK on Monday that the news was a "damning indictment" of the government's failure to help small businesses.
"We know project Merlin has failed to deliver support to them - and we know the numbers of company insolvencies have gone up 10% this year which is just the tip of the iceberg of the debt problems UK businesses struggling in this economy face.
"The idea high cost loans are the solution for firms - especially when it isn't clear what the rates will be- beggars belief. Caps on the total cost of credit wouldn't just protect consumers from these companies, they'd help our small businesses to manage their own finances - in two weeks time the government has the opportunity to do something about this and back my proposed amendment to their financial services bill.
"If they're serious about helping small businesses and families struggling with the costs of payday loans then I urge them to stop opposing these measures and instead give British consumers the same protection others across the world enjoy from these practices."
Citizens Advice chief executive Gillian Guy has previously warned on short-term and payday loans, saying there was been a four-fold increase in the number of Brits seeking advice on them in the first quarter of 2011, and the industry was “inadequately regulated”.
RBS chief Stephen Hester told The Sun on Saturday that banks would lend when the economy begins to grow again. “If the economy is not growing, then businesses are not going to want to take on more debt."