Trade body warn businesses about taking out Wonga loans

The North East trade body, R3, have warned that there could be serious consequences, both long and short term, for any firms that take out loans with Wonga after their move into the business market. Wonga are one of Britain’s best known payday loan companies and they recently launched a loan offer for small businesses.

However, Steve Ross, the chairman of R3, is worried that small businesses, that may be struggling, could just be compounding their problems. He is concerned that, as attractive as the offer may seem, it may not solve their problems and potentially could make them a lot worse because the interest charges rise pretty rapidly.

Businesses can apply for the loan online and the money can be in their account within 15 minutes. Yes, this is an attractive thought but if a firm is already struggling financially then the idea of a payday loan is not a great one because of the high and rapidly mounting interest rates.

Individuals who have taken out payday loans have often experienced difficulties if they are just compounding their debts and it would be the same with a company in the same position. Steve Ross advises against company directors from taking out such a loan or signing personal guarantees without getting independent legal advice first.

He thinks a better idea for firms that are struggling is to try and negotiate with suppliers. He also suggests that if a firm is in financial difficulty, then they should take advice from a qualified professional and look at the solutions that might be available to the firm.

In fact, he goes as far as to say that firms should exhaust every other option before going down the road of a short term payday loan which should be a very last resort.