Wonga starts lending to businesses: the credit crunch is over!
WONGA is lending to businesses. Hurrah, Hurrah! It looks like the credit crunch is over, business will get all the loans it needs and things will be just perfect again, kittens will gambol in the sun and puppies chase balls once again:
British online payday loans provider Wonga.com launched a credit service for small businesses on Monday, aiming to fill a gap in the market left by banks who have been hamstrung by tight lending conditions imposed since the credit crunch.
Wonga, which has made 4 million short-term loans to consumers since its launch in 2007, will offer small businesses loans of 3,000 to 10,000 pounds ($4,800 to $16,200) for periods of between one and 52 weeks.
Interest rates will be fixed at between 0.3 and 2 percent per week, depending on how risky the loan is judged to be.
Well, OK, it’s not going to be quite that miraculous. The amounts they have available to lend really aren’t going to cover the entire gap. And those interest rates are a bit high for anything except the most short term of lending.
It’s also true that they’re not really lending to a business. They’re insisting that all directors sign on as personal guarantors of the loans. Something which rather obviates the point of being a company with limited liability in the first place.
One thing I did find interesting. One of the reasons Wonga can do this is because they have a consumer credit licence, not a banking licence. This means that they are not hit by hte new higher bank capital regulations that are coming in. Which leads to a thought. If it is those higher capital requirements which are restriciting lending (and they are, at least in part) then wouldn’t the solution to not enough lending be to loosen the capital requirements?