Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: May 9, 2012

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The renowned British payday loan lender, Wonga, launched a new service this week that is meant to provide short-term financing for businesses.

Payday lenders provide short-term loans that come with high fees without the need for a credit check. Available to virtually anybody with a checking account, these “cash advances,” as they’re often called, are usually taken out for two- to four-week periods, and require a post-dated check as collateral.

Wonga, who has made over 4 million payday loans to consumers since its creation in 2007, says that it is hoping to fill a void in the marketplace left by banks who are unwilling to lend to businesses, according to Reuters.

“What became clear to us a year or so ago was that small businesses had maybe even more need than individuals for solving short-term cash-flow problems,” said Errol Damelin, Wonga’s chief executive, to Reuters. “For the owner-operated business, capital is their oxygen. That’s what they live and breathe and that’s what gives them the opportunity to stay in business and grow their business and employ people and help the economy recover.”

Wonga’s typical payday loans permit a maximum of 1,000 pounds (the equivalent to $1,616) and are charged at a rate of roughly 1 percent per day.

These new small business payday loans will be originated under slightly different conditions. Each loan will be given for amounts of 3,000 to 10,000 pounds ($4,800 to $16,200), for durations of one to 52 weeks, and at 0.3 and 2 percent interest per week.

“We wanted to have all the characteristics that people positively associate with Wonga in terms of transparency, simplicity, ease of use, speed… and we wanted to bring that to small business,” said Damelin.

The British payday loan company has been long criticized for what’s been called “predatory” practices. Opponents claim their interest and fees are usurious, and that the company specifically targets the financially vulnerable. Wonga, however, disagrees.

They claim to use an automated risk-processing technology that gives almost instant approval or disapproval to online applicants. This technology is said to reject around two-thirds of all applications, according to Reuters.