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R3 urges caution on Wonga business loans 9 May 2012

Insolvency trade body R3 has urged businesses not to resort to taking out high interest loans.

It comes after payday loan provider Wonga confirmed it was launching an online cash loan service for UK businesses.

But R3 warned businesses could end up replicating indebted individuals by racking up multiple loans and rolling them over.

Instead the body insisted struggling companies should seek other avenues of help such as renegotiating terms with suppliers.

R3 president, Lee Manning said: “A high interest loan would therefore seem inadvisable and we would certainly caution company directors from signing personal guarantees, without first seeking independent legal advice.

“We would urge any business that is worried about its long term viability to consider all of their options or seek the advice of a regulated restructuring professional.”

It comes after Wonga confirmed it will offer short-term credit to firms from £3,000 to £10,000, initially in £50 increments, on terms between one and 52 weeks.

Errol Damelin, founder and CEO of Wonga, insisted: “Young, entrepreneurial companies represent our best hope of a recovery, yet many are struggling because they can’t get quick access to the credit that they need to cope with everyday challenges, such as late payment by partners or customers.”

 

 

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