Is Wonga for business a brilliant product or a rip off?

We have had decades of cheap or relatively cheap money. We have had a boom and a bust. In our view money is no longer a cheap or abundant product. And this could last 10 years or more.

In 1983 I had to wait 9 months to get on the list of applicants for a mortgage at my local building society, during which time I had to lodge my pay slips religiously every month. Then 4 months later the magic day came, yes you can have a mortgage!

Should we get used to rationed mortgages, more expensive loans and credit cards? Yes, and more expensive business loans and overdrafts.

Turning to the title of this blog, Wonga has a business product which is in my mind excellent. When visiting their site www.wongabusiness.com you simply enter how much money your company wants up to £15,000 and how long you want to take to pay it back - up to maximum of one year. A slider tool tells you how much you pay. Brilliantly simple.

Of course the whingeing journos in the Daily Mail bleat about 4200% APR for personal loans, which is categorically rubbish. On this page you can see the cost of the fees and interest and you get offered a simple monthly repayment. How easy is that? If you pay that back you can borrow more. Yes woe betide if you don't because personal guarantees (PGs) apply.

Compared to credit cards and credit card cheques (remember them) that I used to start some of my early business ventures, there is not a great deal of difference in cost. For example £15,000 will cost £19,350 to repay, a rate of near 30%.

But you know what? The monthly repayment is shown as 52 weekly repayments of £372.12. So that will seem affordable to many.

Remember a personal credit card is taken out at your personal risk, so what is the difference really to a PG for Wonga?

Whilst many people think the market is dysfunctional in lending to SME businesses I see more products like this coming to market for small companies whilst the old dinosaur banks concentrate on capital adequacy and compliance, not providing banking to small businesses.

How many small businesses will use this to cover emergency VAT payments, or meet rent or wages in a short term cashflow crisis? A lot is my guess.

Company Voluntary Arrangements in Action

Our director Keith Steven is off to Birmingham today to make a presentation to 60 people at the Turnaround Management Association gathering on CVAs in action! Thanks to Gateley for being hosts.

Keith will be presenting a live case study on a retailer KSA Group, our sister company,  turned around recently.

CVAs can help viable but struggling companies restructure debts, cut costs and survive. Long term growth may still be difficult without specialist turnaround advisors.

Rachael Campbell, Gateley LLP, a Turnaround Lawyer will be speaking on legal matters concerning CVAs.

Bryan Green, CEO & Principal, Tnui Ltd., Lawyer, Funder and current President, TMA-UK will speak on numerous aspects for funding distressed businesses and will present his view of CVAs from a funders perspective.

FSB says small companies struggling for finance

Small businesses struggling to raise finance - says FSB survey

 
A common theme in the press now is the inability of small to medium sized companies (SMEs) to raise overdrafts and bank loans. Given that almost all banks do not want any of their customers to have an overdraft for security reasons, this is not surprising. Overdrafts (and none EFG loans) are only covered by a floating charge at best.

Most banks want a fixed charge over property such as the debtor book, equipment or bricks and mortar. This lets them "rank" ahead of the preferential creditors and good old insolvency fees. In a  floating charge recovery, the bank ranks behind the prefs and fees, in addition unsecured creditors are often paid a very modest dividend under the prescribed part, i.e. before the floating charge.

So technical lesson to one side, if when we know banks don't like overdrafts and term loans why bother asking! Apart from EFG type loans the banks are not going to lend, Enterprise Finance Guarantee scheme loans can take 3-6 months, so don't hold your breath.

Asset based lending, private investors, family and friend loans, crowdfunding, new equity and possibly the best option - generation of working capital from PROFITS - are surely the way ahead for most SMEs.

Does this mean slower growth? Yes. Does it mean less business for the big banks? Yes. Does it mean opportunity for more flexible providers of finance, loans, lease finance and equity such as the above? Yes and just maybe that will be a good thing.

 

How to avoid a winding up threat

Call Cheswick Capital, then strategy is (if appropriate):

Business asset sale BEFORE the winding up petition arrives ACT QUICKLY.

Get assets valued, draw up a contract to sell assets for fair value. Sell to third party or your newco.

Experts ready to help in most of the UK

Fees paid by oldco, done properly it's fast, compliant and easy.

Easy process normally but only if you can act quickly. Avoid pre pack!