Peer to peer lending: Why FundingKnight is a mile away from payday loans

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Peer to peer lending, or P2P Lending as it’s sometimes know can easily be confused with other types of business funding or alternative finance.  Today’s blog explains why the small business loans offered by peer to business lenders like FundingKnight are very different from payday loans.

The news that Wonga is to extend its services to small businesses has, understandably, been met with some concern. reported the development saying:

As of today, a company boss can apply for a loan of up to £10,000 from Wonga for Business and receive the money as soon as 15 minutes later.

At FundingKnight we’re keen to see a growth in business loans.  A growth in business funding is essential to the future health of the British economy.

We don’t entirely agree with comments from Chuka Umunna, shadow Business Secretary, who said: “This is a damning indictment of our banks, and their failure to serve our businesses”. After all, banks are being forced to rebuild capital bases and it’s impossible to ‘have your cake and eat it’, but we do wholeheartedly agree with his later point that, “it is deeply worrying that our small and medium-sized businesses are driven into the hands of a company like Wonga to get access to the finance that they need.

It’s clear that British businesses need alternative sources of business funding.  We’re committed to helping the banks service the financial needs of small businesses, but we want to do so in a way that provides fair value for all.  We believe that peer to peer lending – or, in the case of FundingKnight, peer to business lending – improves things for both borrowers and lenders.  We’ll offer higher rate of interest than savers can typically find on the high street but we’ll offer competitive rates for business loans too.

The potential for extortionate interest rates is just one reason why we’ll campaign to see peer to peer lending regulated.  We want to ensure that all lenders and borrowers have adequate protection and benefit from the best – not the worst – that alternative finance has to offer.

EDIT: Thanks to @Zerocredit_UK for pointing out that although Wonga has been criticised for APRs of 4,000% on personal lending their business loans will be more competitively priced.  

From the Guardian:

“The high-cost lender Wonga is launching a business loans service, promising to make funds available within 15 minutes of an application.

Wonga was reluctant to quote a typical annual percentage rate, or APR, for loans, saying the measure was inappropriate as they could be taken out for as little as a week. The firm has been heavily criticised for lending to individuals at an APR of 4,214%, but claims business loans will be at rates starting at 17% APR.

Loans of £3,000 to £10,000 will be available for terms of between one and 52 weeks. The cost, including a variable application fee and interest, starts at 0.3% a week and the loans must be repaid in weekly instalments.”

(The Wonga business loans website did not quote typical rates at the time of writing, and a potential business borrower must apply before getting a quote.)

Photo used under creative commons licence

2 thoughts on “Peer to peer lending: Why FundingKnight is a mile away from payday loans

  1. Pingback: Business loans needs safeguards and restrictions too…. before it’s too late | FundingKnight: The Blog

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